System: set of 2+ interrelated components that interact to achieve a goal
Data: facts that are recorded and stored insufficient for decision making
Information: processed data to provide meaning & improve decision-making process
Characteristics of useful information
Relevant –  uncertainty, decision making, confirms/corrects prior expectations
Reliable – free from error or bias, accurate rep of facts
Complete – imp facts not omitted
Timely
Understandable – presented in useful & intelligible format
Verifiable – two indep, knowledgeable people produce same info
Accessible – avail when needed in useable format
Business process: set of related, coordinated and structured activities and tasks performed by person or computer, helping accomplish specific org goal
Transaction: agreement btwn two entities to exchange goods/services or any other event that can be measured in econ terms by an org
Business activity: events involved in give-get exchange, supported by business activities
“Send approp info to other cycle” is last activity for all
General ledger and reporting system: used to generate info for both management and externally Cycles interface with it
5 major business processes
Revenue cycle
Sales order – takes customer order
Delivery ticket – deliver service
Remittance advice – receive cash
Deposit slip – deposit cash receipts
Credit memo – adjust customer account
Expenditure cycle
Purchase requisition – request items
Purchase order – order items
Receiving report – receive items
Check / EFT – pay for items
Production/Conversion cycle: RM FG
HR/payroll cycle
Financing cycle
Accounting information system (AIS): information providing vehicle of accounting
Org’s primary info system that provides users w/ info needed to perform jobs
*Accountants must be able to clearly convey their data needs and actively participate in systems development projects to ensure approp design
Accounting fxn is responsible for conceptual system to determine the nature of the info require, its sources, its destination and accounting rules to be applied
5 Components of an AIS:
People using system
Procedures and instructions for collect, process, store data
Data about org and business activities
Information technology infrastructure
Software used to process data
Internal controls and security measures to safeguard AIS datMajor AIS Systems:
TPS - supports daily business ops, excel and access used to analyze TPS data
GL/ FRS – produces FS and reports
Mgmt Reporting – produces special-purpose reports for internal use
AIS fulfills 3 imp business functions impacts business strategy
Collect & store data bout org activities, resources & personnel
Transform data into info so management can plan, execute, control and evaluate
Provide adequate controls to safeguard org’s assets and data
How an AIS adds value to an org:
Improving quality and reducing costs of products
Sharing knowledge
Improving efficiency and effectiveness of supply chain
Improving internal control structure
Improving decision making
AIS can influence org culture by controlling flow of info w/in org
Affects business strategy giving an opportunity for competitive advantage
Transaction Processing: Imp AIS fxn to process company transaction efficiently and effectively
Data processing cycle: ops performed on data to generate meaningful & relevant info
Data Collection
Capture transaction data and enter them into system
Each activity of interest
Resources affected
People participating (internal and external)
Ensure data is accurate & complete with automation, data entry screens, well designed docs
The Accounting Cycle: Data capture and collection is very imp b/c errors at beginning impact end
Must reconcile subsidiary ledger to GL periodically for review
Ensure company policies are followed (e.g. approve or verify transaction)
Source docs: collect data about bus activities
Turnaround docs: company