The Business Environment and The AIS
Rujukan: Wilkinson Ch 2
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SUMMARY OF CHAPTER 2 THE BUSINESS ENVIRONMENT AND THE AIS
Systems characteristic of business firms:
1. Objectives. For example maximizing sales and the profits of computer related the products, as well as gaining the greatest market share.
2. Environment. For example the customers, suppliers, competitors, government agencies, and the market for computers.
3. Constraints. The constraints are the internal or external restrictions that define the configuration and capabilities of the system.
4. Input-process-output. The inputs to a business firm include the resources needed to conduct operations and produce outputs. The process consists of all the procedures to convert the inputs into outputs. The outputs include tangible results and information.
5. Feedback as a means of increasing the degree of control.
6. Controls. The controls are the means of regulation to monitor operation and processes.
7. Subsystems
Organizational structure in business firms
Organizational structure is how the tasks are divided, grouped and coordinated. An organization chart is a diagram that depicts an organizational structure. It contains boxes, or nodes, representing responsibility centers where the responsibility managers reside, as well as lines that relate the responsibility centers to each other.
1. Hierarchical structure (traditional)
2. Matrix structure blends functional and project oriented structure.
3. Decentralized structure.
4. Network structure
In functional structures the managers perform specialized activities, such as marketing, manufacturing, or accounting. They need information to aid them in planning and controlling such activities. the operational systems of a firm is its of primary physical processes, can be called a value chain.
The organization has significant impacts on the information system and its component the AIS. The relationship between the organization and AIS are the organizational structure dictates of the key flows of information generated by the AIS. These vertical flows carry information needed by managers to carry out their responsibility and the horizontal flows of transaction data that the AIS personnel handle in the various processing steps.
Business events and transactions cycles
Business events, also called transactions, are the steps within the physical and financial processes of firm. Examples of business events are ordering, receiving, storing, and paying for merchandise.
1. Transaction cycles. The sequence of events that begins with ordering merchandise and ends with paying for the merchandise is an example of a basic transaction cycle.
2. General ledger and financial reporting cycle. The cycle encompasses the non-routine and adjustment type transactions that occur during or at the end of each accounting period.
3. The revenue cycles encompasses three key business events or transaction: solicitation of projects, project execution and delivery (sales), and cash receipts.
4. The expenditure Cycle encompasses two key business events or transaction: purchases and cash disbursements.
5. The resources management cycle consists of all the activities related to the physical resources of a firm. Thus it includes such business events as the following:
a. Acquiring fund from all sources, investing the funds, and disbursing funds to recipients.
b. Acquiring, maintaining, and disposing of facilities (fixed assets).
c. Acquiring, storing, and selling inventory (merchandise).
d. Acquiring, maintaining, and paying personnel (such as employee, managers, consultants, and other outside parties).
Basic rules of flowchart:
a. The flows begin at the upper left hand corner of the sheet and generally move from left to right and from top to bottom.
b. All steps are clearly presented in sequence, or a series of sequence.
c. Symbols are used consistently throughout.
d. The dispositions of all the documents and report are shown.
e. The “sandwich” rule is consistently applied.
f. When a document crosses an organization line within the flowchart.
g. All symbols contain a brief but specific label written inside the symbols.
h. Multiple copies of document are drawn as an overlapping group and are numbered in the upper right hand corners, these numbers remain with the copies during their flows through the procedure.
i. Added comments are included within annotation symbols and are attached to appropriate symbols, such as the processing symbols to which the comments are related.
j. Ample connections are provided.
k. Exceptional occurrences, such as back orders are clearly noted.
Summary of CHAPTER II
THE BUSINESS ENVIROMENT AND THE AIS
SYSTEMS CHARACTERISTICS OF BUSINESS FIRMS
• Objectives. A firm has such primary objectives as maximizing its sales and the profits of computer-related products, as well as gaining the greatest market share within the Seattle area.
• Environment. It encompasses customers, suppliers, competitors, government agencies, and the market for computers.
• Constraints. The constraints are the internal or external restrictions that define the configuration and capabilities of the system. One type of constraints is the boundary that separates the system, such as firm, from its environment.
• Input-Process-Output. The inputs to a business firm include the resources needed to conduct operations and produce outputs.
• Feedback. The information outputs are reentered or fed back as inputs; that is, a firm may employ feedback as a means of increasing the degree of control.
• Controls. The controls are the means of regulation. They enable a system such as a firm to monitor operations and processes, so as to identify and correct deviations from plans.
• Subsystems. Every system has interdependent subsystems. Subsystems, which have all the characteristics of systems, are linked to each other through couplings or shared boundaries called interfaces.
ENVIRONMENT BEYOND BUSINESS FIRMS
Beyond any firm lies an environment that is economic, social, technical, and political. It contains the sources of resources and various data as well as facilities and funds. For example, one type of data received by a firm consists of disposable income statistics from governmental sources. These provide useful information to anticipate changes in demand for personal computers.
The environment beyond a firm is extremely influential. It’s not only presents problems and challenges but also provides opportunities.
MAJOR SUBSYSTEMS OF FIRMS
Every business firm fits into a framework called a systems hierarchy. The firm in turn is made up of several subsystems, such as the organizational structure, information system, and operational system.
The information system can be depicted as a group of related subsystems, such as the production information system, the accounting information system, and the marketing information system.
ORGANIZATIONAL STRUCTURES IN BUSINESS FIRMS
The organizational structure is the means by which the managers of a firm direct and coordinate the set of activities and operations.
An organization chart is a diagram that depicts an organizational structure. It contains boxes, or nodes, representing responsibility centers where the responsible managers reside, as well as the lines that relate the responsibility centers to each other. There are kind of structures. They are hierarchical structures, matrix structures, decentralized structures, and networked structures.
RELATIONSHIPS BETWEEN THE ORGANIZATION AND AIS
• The organizational structure dictates many of the key flows of information generated by the AIS (and MIS). These vertical flows carry information needed by managers to carry out their responsibilities.
• The organizational structure determines the horizontal flows of transaction data that the AIS personnel handle in the various processing steps.
• The social counterpart of the formal organizational structure interacts with and closely resembles the informal information system, also known as the “grapevine”.
AN OVERVIEW OF ACCOUNTING SYSTEMS
DATA COLLECTION
Transaction codes
DATA MANAGEMENT
Record and Files
Data Maintenance
Chart of Accounts. It is a set of codes assigned to general ledger accounts in an AIS. These codes allow easy reference to the ledger account either for retrieving information from the account or for updating data maintained in the account.
Data Classification and Coding
DATA PROCEDURES
Data collection
Data Maintenance
Information Generation
CONTROL
Information systems can provide inaccurate information if the inputs are incorrect or incomplete, or if the inputs are not completely processed or are processes inaccurately.
THE LANGUAGE AND DESCRIPTION OF AIS
The language of communication yielding consistent interpretations of what data are stored, how data are acquired, stored, and retrieved, what instructions a procedure contains, and so forth. Descriptions take time to read and interpret and may result in different interpretations by different people who use such documentation. Therefore, much system documentation is in the form of chart, such as flowchart or a data-flow diagram.
BASIC RULES OF FLOWCHARTING
a. The flows begin at the upper left-hand corner of the sheet and generally move from left to right and from top to bottom.
b. All steps are clearly presented in a sequence, or a series of sequences. No obvious gaps in the procedure should be present.
c. Symbols are used consistently. Thus the symbol for manual processing (an inverted trapezoid) should appear each time a clerk performs a step in the procedure. Five symbols used in this figure are reproduced below.
d. The dispositions of all documents and reports are shown. In fact, the final ”resting place” of every copy prepared document should be specified.
e. The “sandwich” rule is consistently applied. This rule states that a processing symbol should be sandwhiched between an input symbol and an outpit symbol, in the manner shown in this diagram.
f. When a document crosses an organizational line within the flowchart, the document is normally pictured again in the new organizational unit.
g. All symbols contain a brief but specific label written inside the symbols.
h. Multiple copies of documents are drawn as an overlapping and are numbered in the upper right-hand corners; these numbers remain with the copies during their flows through the procedure.
i. Added comments are included within annotation symbols and are attached to appropriate symbols, such as the processing symbols to which the comments are related.
j. Ample connections (cross-references) are provided. The symbols used in forming the connections depend on the situation.
From prior
processing
k. Exceptional occurrences, such as back orders, are clearly noted.
Chapter 2
An overview of the business firm as a system are organization related with organization’s function, information system related with AIS’s transaction cycles, and operational system related with business events from operations.
Organizational structure in business firms are hierarchical structure (spans of management), matrix structure, decentralized structure, and network structure.
Relationship between the organization and AIS are vertical flow carry information needed by managers to carry out their responsibilities, horizontal flow of transaction data that the AIS personnel handle in the various processing steps, and the social counterpart of the formal organizational structure interact with and closely resembles the informal information system, also known as the grapevine.
There is an overview of accounting system, Data collection AIS’s collect, process, and store data. Fresh data are captured into the system using new transactions. A transaction journal is often the first file in which received transaction data are recorded. In data collection usually used transaction codes which is in manual AIS, it may not be difficult to differentiate one type of transaction from another. Data management, data are raw fact that provide information resources. This is because data can be used to generate the information. Include record and files, data maintenance which is includes data update and data modification, chart of account which is a set of codes assigned to general ledger account in AIS, data classifying and coding which is capture, record, manipulate, retrieve, and summarize data using different types of codes. Procedure, to capture and use data, we need procedures and logical steps. There are three categories of procedures are: data collection, data maintenance, information generation. And the last is control, information system can be provide inaccurate information if the inputs are incorrect or incomplete, or if the input are not completely processed or are process inaccurately so the reliability and accuracy output should be controls.
Created by: Fransiska Indah Pramudita; 023.06.0296; KU
There are seven characteristics of business firms. There are objectives, environment, constraints, input- process – output, feedback, controls, and subsystems.
Since an organization is expressed primarily in the form of organizational structures, the discussion of the organization subsystem focuses on organizational structures and their impact on the AIS.
The organizational structure is the means by which the managers of a firm direct and the coordinate the set of activities and operations. It specifies the relationships among the tasks to be performed; it also distributes the degrees of authority and responsibility assigned to the various managers.
Traditionally, organizations have been structured in a hierarchical manner. Under this type arrangement, the activities and the operations of a firm are subdivided, with the levels of management being arrayed vertically. Although hierarchical structures can represent any form of organizational hierarchy, many of these structures are found to be functional or product line hierarchies.
The organizational structure has significant impacts on the information system and its component, the AIS. First, the organizational structure dictates many of key flows of information generated by the AIS. Second, the organizational structure determines the horizontal flows of transaction data that the AIS personnel handle in the various processing step. And last, the social counterpart of the formal organizational structure interacts with and closely resembles the informal information system.
In functional structures the managers perform specialized activities, such as marketing, manufacturing, or accounting. They need information to aid them in planning and controlling such activities. Alternative organizational structures emphasize other information needs. When product-oriented structures are employed, for example, detailed information concerning product is particularly critical. Product information might range from sales and profits for each product to its life cycle and activity based costs. With matrix structures, more detailed and cross functional information would be necessary for each group or team, and such information should be available by project, event or task on hand. Decentralized structures suggest “pushing down” relevant detailed information to lower levels where decisions are made. Networked structures, much like matrix structures, would require cross-functional information for managers to look at a decision from their functional perspective and from the interdisciplinary perspective as well.
THE BUSINESS ENVIRONMENT AND THE AIS
Business Firms as Systems
As a system, a business firm exhibits several systems characteristics :
• Objectives The objective are the goals or motivating forces.
• Environment The surroundings that lie beyond a firm’s boundary compose its environment.
• Constraints The constraints are the internal or external restrictions that define the configuration and capabilities of the system.
• Input-Process-Output The inputs to a business firm include the resources needed to conduct operations and produce outputs.
• Feedback Often the information outputs are reentered or fed back as inputs: that is, a firm may employ feedback as means of increasing the degree of control.
• Controls The controls are the means of regulation. They enable a system such as a firm to monitor operations and processes, so as to identify and correct deviations from plans.
• Sub-systems Every system has interdependent sub-systems.
Environments beyond Business Firms
Beyond any firm lies an environment that is economic, social, technical, and political. It contains the sources of resources and various data as well as facilities and funds. The environment also encompasses all of the external users of information, as well as the products and/or services provided. The environment beyond a firm is extremely influential. It not only presents problems and challenges but also provides opportunities. Environmental differences can be at least as significant to firms as their organizational structures and operations. Firms must therefore align their strategies and resource level to cope with these differences.
Organizational Structures in Business Firms
The organizational structure is the means by which the managers of firm direct and coordinate the set of activities and operations.
Hierarchical Structures Under this type of arrangement, the activities and operations of a firm are subdivided, with the levels of management being arrayed vertically, much firm are subdivided, with the levels of management being arrayed vertically, much like silos.
Matrix Structures The matrix organizational structure blends functional and project-oriented structures. Organization using matrix structures must align information flows accordingly. This means that project-related information should be available to each team. For each function, appropriate views of such information should be possible.
Decentralized Structures In decentralized organizational structure, a considerable degree of authority is delegated to middle-level and lower-level managers within the structures.
Networked Structures An increasing number of firms recognize that they face changeable processes and environments. A firm can better cope with these ever-changing conditions and processes by adopting a flexible structure. A networked structure represents an interconnected but non-hierarchical structure that is both flexible and fluid.
Operational System
The operational system of a firm is it collection of primary physical processes. These processes (also called business processes, operations, or activities) form a chain through which resources are transformed into the products and/or services provided. Since the processes are interdependent and integrated, they may be viewed as subsystems can be subdivided if desired. The organization is also closely related to the operational system, since the employees and managers of the organization conduct and supervise the physical activities. In addition, they make the myriad of decisions affecting all the processes and related resources. In doing so, the employees and managers are aided by information captured by and stored in the AIS.
Business Events and Transaction Cycles
Business events, also called transactions, are the steps within the physical and financial processes of firms.
Transaction cycles, we may group the business events of a firm into process sequences called transaction cycles (or transaction processing cycles).
General ledger and financial reporting cycle, at the center of the aforementioned cycles is the general ledger and financial reporting cycle. This cycle is unique in that the processing of individual transaction is not its sole or even its important unction.
Revenue cycle, the revenue cycle encompasses three key business events or transactions: solicitation of projects, project execution and delivery (sales), and cash receipts.
Expenditure cycle, the expenditure cycle encompasses two key business events or transactions: purchases and cash disbursements. The purchase transaction consists of acquiring resources or service (e,g supplies, utility services). In the disbursement transaction, a check payment is prepared and delivered to the supplier.
Resources management cycle, the resources management cycle consists of all the activities related to the physical resources of a firm.
Other transaction cycles, The set transaction cycles just described is modified for firms that do not merchandise products.
An overview of accounting systems
Data collection
AISs collect, process and store data. Fresh data are captured into the system using new transactions. A transaction journal is often the first file in which received transaction data are recorded. In the language of information systems, a journal is a file containing similar transaction, or transaction log. The unit of record in a journal is a transaction.
Transaction codes, in automated procedures, the processing logic needs to differentiate between types of transaction. This is through the use of transaction codes
Data management
Data are raw facts that provide a valuable information resource. This is because data can be used to generate information. Since data are valuable resource, managing data is a central activity of an AIS. Accounting data can be found in various files: however, two types of files are predominant in AISs, Transaction files (journals)and master files(ledgers). A ledger-a master file-represents a collection of similar or related accounts.
Each record in a master file includes relevant data elements
Record and files, typically, data in AIS are stored in the forms of records: similar records are stored together as a file. The records in turn are a collection of data elements pertaining to an entity.
Data maintenance
Data maintenance includes data update and data modification. An activity called “posting” of transactions from a journal to an appropriate ledgers updates data in the ledger. Thus data update typically involves at least one transaction file (sales journal in the example) and one master file (account receivable subsidiary ledger). Data modification refers to non-transaction changes that do not always recur in a cycle.
Chart of account, a chart of accounts is a set of codes assigned to general ledger accounts in an AIS. These codes allow easy reference to the ledger account either for retrieving information from the account or for updating data maintained in the account. A chart of account is like a backbone of the AIS. Without it, it would be very difficult to provide a structure for accounting information.
Data classification and coding, AISs capture, record, manipulate, retrieve, and summarize data using types if codes. Codes serve many purposes. For example, an account code would permit you to retrieve the ledger account, and a transaction code, such as for withdrawal or deposit by a bank customer, permits the system to process each transaction accurately.
Procedures
To capture and use data, we need procedures, or logical steps. The series of steps that allow us ton accomplish a procedure, such as posting general journal entries to the general ledger, can be written in a computer language to create a computer program or can be followed manually.
Controls
Information systems can provide inaccurate information if the inputs are incorrect or incomplete, or the inputs are not completely or are processed inaccurately. Similarly, the reliability and accuracy of output, as well as its distribution to authorized receivers, should also be controlled. Various control measures are employed within procedures and in managing data to achieve desired control objectives.
The language and descriptions of AIS
Information systems, including AIS, need to be developed before they can be used. In modifying existing systems and developing new ones, the systems go trough a life cycle of development phases: planning, analysis, design, selection, implementation, and operation. Throughout these phases, everyone concerned with the AIS should understand the same thing in the same sense. The language of communication should be precise, yielding consistent interpretations of what data are stored, how data are acquired, stored, and retrieved, what instructions a procedure contains, and so forth. Therefore, much system documentation is in the form of charts, such as a flowchart or a data-flow diagram. It is necessary for us to understand the “language” of system documentation. Knowing them makes it easier for us to understand, use, and evaluate a system properly. A document flowchart emphasizes the hard-copy inputs and outputs and their flows through organizational units.
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Chapter II Accounting Information System
The business environment and the AIS
Introduction
We begin with the discussion of the firm as a business system. First, we look as it’s environment and how its impacts the AIS of the firm. Next, we take closer look at the business system and identify three subsystems of the firm: organizational, operational, and information. Three subsystems are interlinked. To understand AIS within the information system, we must understand the organization and it’s structured to comprehend their relationship with an AIS. Through an understanding of the operational subsystem and it’s business events, we can comprehend the operational subsystem relationship with AIS.
Business Firm as System
System characteristics of business firms
Objectives: objective is the goal or motivating force
Environment: Environment is the surrounding that lie beyond a firm boundary
Constraints: constraints are internal or external restrictions that define the configuration and capability of the system.
Input-process-output
Feedback
Controls means a regulation
Subsystem
Environment beyond business firms
Economic
Social
Technical
Political
Major subsystem of firms
Every business firms fit into a framework called a system hierarchy. A information system designed to serve the needs of a firm has to align well with the firm’s other subsystems. In the absence such as alignment the information system will not meet criteria of producing relevant information and may in fact be counterproductive.
Organizational structure in business firms
Hierarchical structures traditionally organization have been structured in hierarchical manner. The activities and operations of a time are subdivided, with the level of management being arrayed vertically, much like silos.
Matrix structures blends functional an project-oriented-structures
Decentralized structures; In a decentralized organizational structures a considerable degree of authority is delegated for middle-level and lower-level managers in this structures.
Network structures; represent an interconnected but non hierarchical structure that is both flexibility and fluid.
Relationship between organization and AIS
The organizational structure dictates many of the key flows of an information generated by the AIS and MIS.
The organizational structured determines the horizontal flows of transactions data that the AIS personnel handle in the various processing steps.
The social counterpart of the informal organization structure interacts with and closely. The information system also known as grapevine.
Systems characteristic of business firms:
1. Objectives (goals or motivating forces).
2. Environment (The surroundings that lie beyond a firm’s boundary compose it’s environment. For example the customers, suppliers, competitors, government agencies, and the market for computers).
3. Constraints (The internal or external restrictions that define the configuration and capabilities of the system).
4. Input-process-output (The inputs to a business firm include the resources needed to conduct operations and produce outputs. The process consists of all the procedures to convert the inputs into outputs. The outputs include tangible results and information).
5. Feedback (as a means of increasing the degree of control).
6. Controls (The means of regulation to monitor operation and processes).
7. Subsystems.
Beyond a business firm lies an environment that is economic, social, technical and political.
3 major subsystem of a firm:
1. Organizational structure (The means by which the managers of a firm direct and coordinate the set of activities and operations)
alternative organizational structure: hierarchical, matrix, decentralized and networked structures.
2. Operational system (it’s collection of primary physical processes. these processes form a chain through which resources are transformed into the products and/or services).
3. Informational system.
Relationship between organization and AIS:
1. The organizational structure dictates many of the key flows of information generated by AIS (and MIS).
2. The organizational structure determines the horizontal flows of transaction data that the AIS personnel handle in the various processing steps.
3. The social counter part of the fomal organizational structure interacts with and closely resembles the informal system also known as “Grapevine”.
Describing and documenting information system, including AIS, requires a precise language, offered by flowcharts and other diagrams. A document flowchart emphasizes the hard-copy input and output as well as their flows through organizational units, from “Inception to final disposition”.
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Chapter 2
organization are related with organization’s function, information system related with AIS’s transaction cycles, and operational system related with business events from operations.
System characteristics of business firms:
Objective
Environment
Constrain
Input-processed-output
Feedback
Controls
Subsystem
Organizational structure in business firms are hierarchical structure (spans of management), matrix structure, decentralized structure, and network structure.
Relationship between the organization and AIS are vertical flow carry information needed by managers to carry out their responsibilities, horizontal flow of transaction data that the AIS personnel handle in the various processing steps, and the social counterpart of the formal organizational structure interact with and closely resembles the informal information system, also known as the grapevine.
There is an overview of accounting system, Data collection AIS’s collect, process, and store data. Fresh data are captured into the system using new transactions. A transaction journal is often the first file in which received transaction data are recorded. In data collection usually used transaction codes which is in manual AIS, it may not be difficult to differentiate one type of transaction from another. Data management, data are raw fact that provide information resources. This is because data can be used to generate the information. Include record and files, data maintenance which is includes data update and data modification, chart of account which is a set of codes assigned to general ledger account in AIS, data classifying and coding which is capture, record, manipulate, retrieve, and summarize data using different types of codes. Procedure, to capture and use data, we need procedures and logical steps. There are three categories of procedures are: data collection, data maintenance, information generation. And the last is control, information system can be provide inaccurate information if the inputs are incorrect or incomplete, or if the input are not completely processed or are process inaccurately so the reliability and accuracy output should be controls.
Business firms is a system that has objectives, constraints, controls, input, processes outputs and environment, and interdependent subsystems. Environment beyond business firms that is economic, social;, technical, and political. It contains the sources of resources and various data as well as facilities and funds.
Organizational structure in business firms, are : (1) The organizations structure is the means by which the managers of a firm direct and coordinate the set of activities and operations.(2)Hierarchical Structure, its mean the activities and operations of a firm are subdivided, with the managers at each subordinate responsibility center reporting to one designated superior center.(3)The matrix organizational structure blends functional and project-oriented structure.(4)Decentralized Structure, is a considerable degree of authority is delegated to middle-level and lower-level managers within the structure.(5)Networked Structure represents an interconnected but nonhierarchical structure that is both flexible and fluid.
The operational system is its collection of primary processes form a chain through which resources are transformed into the products and/or services that a firm provides.
The example of transaction cycles, these are, (1) transaction cycle is a make a group the business events of a firm into process sequence (2) General Ledger and Financial Reporting Cycle,(3)Revenue Cycle is a encompasses 3 keys business transactions, there are solicitation of projects, projects execution, and delivery/sales, and cash receipts, (4) Expenditure cycle encompasses purchases and cash disbursements, (5)Resource Management Cycle. Describing and documenting information can offered by flowcharts and other diagrams. A document flowchart emphasizes the hard copy inputs and outputs as well as their flows through organizational units.
Ch 2
The business environment and the AIS
Beyond any firm lies an environment that is economic, social, technical, and political. It contains the sources of resources and various data as well as facilities and funds. The environment beyond a firm is extremely influential. It not only presents problems and challenges but also provides opportunities. There are three major subsystems of firms, and they are the organizational structure, the information system, and the operational system.
The organizational structure is the means by which the managers of a firm direct and coordinate the set of activities and operations. In hierarchical structures, the activities and operations of a firm are subdivided. Because of its flat structure (small span of management), it has considerable flexibility. Matrix structures blend functional and project-oriented structures. Employee reports to two or more superiors. The matrix organization penetrates the silos and creates a more responsive structure necessary for dynamic organization. In decentralized structures, a considerable degree of authority is delegated to middle-level and lower-level managers within the structure. Because the decision making authority is delegated to lower levels, decisions can be made and responses taken in a more timely and effective manner. Networked structures represent an interconnected but non hierarchical structure that is both flexible and fluid. This structure enables projects and tasks to be completed faster and more economically.
Relationship between the organization and AIS: (1) the organizational structure dictates many of the key flows of information generated by the AIS, (2) the organizational structure determines the horizontal flows of transaction data that the AIS personnel handle in the various processing steps, and (3) the social counterpart of the formal organizational structure interacts with and closely resembles the informal information system, also known as the grapevine.
The operational system of a firm is its collection of primary physical processes. These processes form a chain through which resources are transformed into the products and/or services that a firm provides. Business events are the steps within the physical and financial process of firms.
To capture and use data, we need procedures or logical steps. The series of steps that allow us to accomplish a procedure, such as posting general journal entries to the general ledger, can be written in computer language to create a computer program or can be followed manually. Information system can provide inaccurate if the inputs are incorrect or incomplete. Similarly, the reliability and accuracy of output, as well as its distribution to authorized receivers, should also be controlled.
Chapter II Accounting Information System
The business environment and the AIS
Introduction
We begin with the discussion of the firm as a business system. First, we look as it’s environment and how its impacts the AIS of the firm. Next, we take closer look at the business system and identify three subsystems of the firm: organizational, operational, and information. Three subsystems are interlinked. To understand AIS within the information system, we must understand the organization and it’s structured to comprehend their relationship with an AIS. Through an understanding of the operational subsystem and it’s business events, we can comprehend the operational subsystem relationship with AIS.
Business Firm as System
System characteristics of business firms
Objectives: objective is the goal or motivating force
Environment: Environment is the surrounding that lie beyond a firm boundary
Constraints: constraints are internal or external restrictions that define the configuration and capability of the system.
Input-process-output
Feedback
Controls means a regulation
Subsystem
Environment beyond business firms
Economic
Social
Technical
Political
Major subsystem of firms
Every business firms fit into a framework called a system hierarchy. A information system designed to serve the needs of a firm has to align well with the firm’s other subsystems. In the absence such as alignment the information system will not meet criteria of producing relevant information and may in fact be counterproductive.
Organizational structure in business firms
Hierarchical structures traditionally organization have been structured in hierarchical manner. The activities and operations of a time are subdivided, with the level of management being arrayed vertically, much like silos.
Matrix structures blends functional an project-oriented-structures
Decentralized structures; In a decentralized organizational structures a considerable degree of authority is delegated for middle-level and lower-level managers in this structures.
Network structures; represent an interconnected but non hierarchical structure that is both flexibility and fluid.
Relationship between organization and AIS
The organizational structure dictates many of the key flows of an information generated by the AIS and MIS.
The organizational structured determines the horizontal flows of transactions data that the AIS personnel handle in the various processing steps.
The social counterpart of the informal organization structure interacts with and closely. The information system also known as grapevine.
System Characteristics of business firms:
- Objectives.
A firm has such primary objectives as maximizing its sales and the profits of computer-related products, as well as gaining the greatest market share within the Seattle area.
- Environment.
It encompasses customers, suppliers, competitors, government agencies, and the market for computers.
- Constraints.
The constraints are the internal or external restrictions that define the configuration and capabilities of the system. One type of constraints is the boundary that separates the system, such as firm, from its environment.
- Input-Process-Output.
The inputs to a business firm include the resources needed to conduct operations and produce outputs.
- Feedback.
The information outputs are reentered or fed back as inputs; that is, a firm may employ feedback as a means of increasing the degree of control.
- Controls.
The controls are the means of regulation. They enable a system such as a firm to monitor operations and processes, so as to identify and correct deviations from plans.
- Subsystems.
Every system has interdependent subsystems. Subsystems, which have all the characteristics of systems, are linked to each other through couplings or shared boundaries called interfaces.
Environment beyond business firms:
- Economic
- Social
- Technical
- Political
Major subsystem of a firm:
1. Organizational structure (The means by which the managers of a firm direct and coordinate the set of activities and operations)
alternative organizational structure: hierarchical, matrix, decentralized and networked structures.
2. Operational system (it’s collection of primary physical processes. these processes form a chain through which resources are transformed into the products and/or services).
3. Informational system.
Organizational structures in business firm:
The organizational structure is the means by which the managers of a firm direct and coordinate the set of activities and operations. An organization chart is a diagram that depicts an organizational structure. It contains boxes, or nodes, representing responsibility centers where the responsible managers reside, as well as the lines that relate the responsibility centers to each other. There are kind of structures. They are hierarchical structures, matrix structures, decentralized structures, and networked structures.
Business events and transactions cycles:
Business events, also called transactions, are the steps within the physical and financial processes of firms.
1. Transaction cycle
The sequence of events that begins with ordering merchandise and ends with paying for the merchandise is an example of a basic transaction cycle.
2. General ledger and financial reporting cycle
The cycle encompasses the non-routine and adjustment type transactions that occur during or at the end of each accounting period.
3. The revenue cycle
Encompasses three key business events or transaction: solicitation of projects, project execution and delivery (sales), and cash receipts.
4. The expenditure cycle
Encompasses two key business events or transaction: purchases and cash disbursements.
5. The resources management cycle
consists of all the activities related to the physical resources of a firm. Thus it includes such business events as the following:
a. Acquiring fund from all sources, investing the funds, and disbursing funds to recipients.
b. Acquiring, maintaining, and disposing of facilities (fixed assets).
c. Acquiring, storing, and selling inventory (merchandise).
d. Acquiring, maintaining, and paying personnel (such as employee, managers, consultants, and other outside parties).
Relationships between organization and AIS:
- The organizational structure dictates many of the key flows of information generated by the AIS (and MIS). These vertical flows carry information needed by managers to carry out their responsibilities.
- The organizational structure determines the horizontal flows of transaction data that the AIS personnel handle in the various processing steps.
- The social counterpart of the formal organizational structure interacts with and closely resembles the informal information system, also known as the “grapevine”.
Basic rules of flowchart:
a. The flows begin at the upper left hand corner of the sheet and generally move from left to right and from top to bottom.
b. All steps are clearly presented in sequence, or a series of sequence.
c. Symbols are used consistently throughout.
d. The dispositions of all the documents and report are shown.
e. The “sandwich” rule is consistently applied.
f. When a document crosses an organization line within the flowchart.
g. All symbols contain a brief but specific label written inside the symbols.
h. Multiple copies of document are drawn as an overlapping group and are numbered in the upper right hand corners, these numbers remain with the copies during their flows through the procedure.
i. Added comments are included within annotation symbols and are attached to appropriate symbols, such as the processing symbols to which the comments are related.
j. Ample connections are provided.
k. Exceptional occurrences, such as back orders are clearly noted.
CHAPTER II
THE BUSSINESS ENVIRONMENT AND THE AIS
I. Systems Charecteristics of Business Firm
1. Objectives : are the goals or motivating forces.
2. Environment : eksternal party to support a firm.
3. Input-process-output : resources-all procedures to convert-tangible result and information.
4. Feedback : the informaton outputs are rentered or fed back as outputs.
5. Controls : means of regulations. To monitoring operations and processes.
6. Subsystems : every system has interdependent subsystems.
II. Major Subsystems of Firms
1. Organizational structure
Managers a firm direct and coordinate the set of activities and operations. It also distributes the degrees of authority and responsbility.
a. Hierarchical Structures : the activites and operations of a firm are subdivided, with the levels of management being arrayed vertically, much like silos.
b. Matrix Structures : blends functional and project-oriented structures.
c. Decentralized Structures : a considerable degree of authority is delegated to middle-level and lower-level managers wthin structure.
d. Network Structures : represents an interconnected but nonhierarchical structure that is both flexible and fluid.
Relationships between the organization and AIS
a. the organizational strucure dictates many of the key flows(vertical) of information generated by the AIS (and MIS).
b. the oganizational structure determines the horizontal flows of transaction data that the AIS personal handle in the various processing steps.
c. the social counterpart of the formal organizational structure interacts with and closely resembles the information system, also known as the “grapevine”
2. Infomation system : Can be depicited as a group of related subsystems.
3. Operational System : articulated by business events on the firms, which relate to accounting information cycle. Its collection of primary physical process.
Business events and transaction cycle
a. Business events : also called transactions.
b. Transaction Cycles : for convience of analysis, we may group the business events af a firm into process sequences.
c. general ledger and financial reporting cycle : at the center of the aforementioned cycles.
d. Revenue cycle : encompasses three key business events ; solication projects, project execution and delvery (sales), and cash receipts.
e.expenditure cycles : two key business events ; purchases and disbursements.
f. resource-management cycle : consistsof all the activitie related to the physical resources of a firm.
g. other transaction cycle : the set of tranaction cycles just described is modified for firms that don’t merchandise products.
III. An Overview Of AIS
1. Data Collection, AISs collect, process, and store data
a. transaction journal : is often the first file in which received transaction data are recorded.
b. transaction codes.
2. Data Management, data are raw facts that provide a valuable information resource.
a. transaction files (journal)
b. Master files (ledgers)
c. data elements ( each record in a master file )
d. Records and files, typically data in AIS are stored in the form of records.
e. Data maintenance
o Data update : typically involves at least one transaction file (sales journal) and one master file (Accounts Receivable Subsidary Ledger).
o data modification : refers to nontransaction changes that don’t always recur in a cycle.
f. Chart of Accounts, is a set of codes assigned to general ledger in an AIS.
g. Data Classification and Coding, AISs capture, record, manipulate, retrieve, and sumarize.
3. Procedurs, to capture and use data.
4. Controls, the reliability and accuracy of output.
CHAPTER II
THE BUSSINESS ENVIRONMENT AND THE AIS
A. As a system, a business firm exhibits several systems characteristics :
• Objectives The objective are the goals or motivating forces.
• Environment The surroundings that lie beyond a firm’s boundary compose its environment.
• Constraints The constraints are the internal or external restrictions that define the configuration and capabilities of the system.
• Input-Process-Output The inputs to a business firm include the resources needed to conduct operations and produce outputs.
• Feedback Often the information outputs are reentered or fed back as inputs: that is, a firm may employ feedback as means of increasing the degree of control.
• Controls The controls are the means of regulation. They enable a system such as a firm to monitor operations and processes, so as to identify and correct deviations from plans.
• Sub-systems Every system has interdependent sub-systems.
B. Major subsystem of firms
Every business firms fit into a framework called a system hierarchy. A information system designed to serve the needs of a firm has to align well with the firm’s other subsystems. In the absence such as alignment the information system will not meet criteria of producing relevant information and may in fact be counterproductive.
C. Business events and transactions cycles:
Business events, also called transactions, are the steps within the physical and financial processes of firms.
1. Transaction cycle
The sequence of events that begins with ordering merchandise and ends with paying for the merchandise is an example of a basic transaction cycle.
2. General ledger and financial reporting cycle
The cycle encompasses the non-routine and adjustment type transactions that occur during or at the end of each accounting period.
3. The revenue cycle
Encompasses three key business events or transaction: solicitation of projects, project execution and delivery (sales), and cash receipts.
4. The expenditure cycle
Encompasses two key business events or transaction: purchases and cash disbursements.
5. The resources management cycle
consists of all the activities related to the physical resources of a firm. Thus it includes such business events as the following:
a. Acquiring fund from all sources, investing the funds, and disbursing funds to recipients.
b. Acquiring, maintaining, and disposing of facilities (fixed assets).
c. Acquiring, storing, and selling inventory (merchandise).
d. Acquiring, maintaining, and paying personnel (such as employee, managers, consultants, and other outside parties).
D. Relationships between organization and AIS:
- The organizational structure dictates many of the key flows of information generated by the AIS (and MIS). These vertical flows carry information needed by managers to carry out their responsibilities.
- The organizational structure determines the horizontal flows of transaction data that the AIS personnel handle in the various processing steps.
- The social counterpart of the formal organizational structure interacts with and closely resembles the informal information system, also known as the “grapevine”.
E. Basic rules of flowchart:
a. The flows begin at the upper left hand corner of the sheet and generally move from left to right and from top to bottom.
b. All steps are clearly presented in sequence, or a series of sequence.
c. Symbols are used consistently throughout.
d. The dispositions of all the documents and report are shown.
e. The “sandwich” rule is consistently applied.
f. When a document crosses an organization line within the flowchart.
g. All symbols contain a brief but specific label written inside the symbols.
h. Multiple copies of document are drawn as an overlapping group and are numbered in the upper right hand corners, these numbers remain with the copies during their flows through the procedure.
i. Added comments are included within annotation symbols and are attached to appropriate symbols, such as the processing symbols to which the comments are related.
j. Ample connections are provided.
k. Exceptional occurrences, such as back orders are clearly noted.
F. An Overview Of AIS
1. Data Collection, AISs collect, process, and store data
a. transaction journal : is often the first file in which received transaction data are recorded.
b. transaction codes.
2. Data Management, data are raw facts that provide a valuable information resource.
a. transaction files (journal)
b. Master files (ledgers)
c. data elements ( each record in a master file )
d. Records and files, typically data in AIS are stored in the form of records.
e. Data maintenance
o Data update : typically involves at least one transaction file (sales journal) and one master file (Accounts Receivable Subsidary Ledger).
o data modification : refers to nontransaction changes that don’t always recur in a cycle.
f. Chart of Accounts, is a set of codes assigned to general ledger in an AIS.
g. Data Classification and Coding, AISs capture, record, manipulate, retrieve, and sumarize.
3. Procedurs, to capture and use data.
4. Controls, the reliability and accuracy of output.