Comprehensive Guide to Data, Information, and AIS Functions in Business Cycles

Data

Facts that are collected, recorded, stored, and processed by an information system.

Information

Data that have been organized and processed to provide meaning and context that can improve the decision-making process.

Input

Data is input.

Output

Information is output.

Value of Information

The benefit produced by the information minus the cost of producing it.

Benefits of Information

Includes reduced uncertainty and improved ability to plan and schedule activities.

Costs of Information

Includes the time and resources spent to produce and distribute the information.

Qualities of Useful Information

Relevant, reliable, complete, verifiable, timely, accurate, etc.

Access restricted

able to limit access to authorized parties

Accurate

correct; free of error; accurately represents events and activities

Available

available to users when needed; in a format that can be easily and quickly used

Complete

does not omit aspects of events or activities; of enough breadth and depth

Concise

clear, succinct; appropriate volume presented briefly but comprehensively

Consistent

presented in same format over time

Current

includes event and activity data to the present date and time

Objective

unbiased; unprejudiced; impartial

Relevant

reduces uncertainty; improves decision making; applicable and helpful

Reputable

received as true and credible due to highly regarded source or content

Timely

provided in time for decision makers to make decisions

Understandable

presented in a useful and intelligible format; easily comprehended and interpreted

Useable

easy to use for different tasks; human and machine readable

Verifiable

same information produced by two independent, knowledgeable people

the five transaction cycle

revenue, expenditure cycle, production cycle, human resources/payroll cycle, and financing cycle

Revenue cycle

where goods and services are sold for cash or a future promise to receive cash

Expenditure cycle

where companies purchase inventory for resale or raw materials to use in producing products in exchange for cash or a future promise to pay cash

Production cycle

or conversion cycle, where raw materials are transformed into finished goods

Human resources/payroll cycle

where employees are hired, trained, compensated, evaluated, promoted, and terminated

Financing cycle

The process where companies sell shares to investors, borrow money, and pay dividends.

What tasks must an AIS be able to perform?

Collects, enters, processes, stores, and reports data and information.

Must AIS do

• Collect and store data about organizational activities, resources, and personnel. Organizations have a number of business process such as making a sale or prucashing raw materials that are repeated frequently

• Transform data into information so management can plan, execute, control, and evaluate activities, resources and personnel,

• Provide adequate controls to safeguard the organization's assets and data

Six components of AIS

People, procedures and instructions, data, software, information technology infrastructure, and internal control

how can AIS add value to an organization

Improve:

the quality and reducing the costs of products or services, efficiency, sharing knowledge, the efficiency and effectiveness of its supply chain, internal control structure, and decision making 

Know common activities in an AIS?

Includes six components: People, Procedures and instructions, The data, The software, Information technology infrastructure, Internal controls.

Data collection and recording

AIS captures and records financial and operational transactions, such as sales, purchases, payroll, and inventory movements. These activities ensure that all relevant organizational events are systematically documented and available for further processing.

Data storage and management

Information collected in the AIS is stored securely in databases. Internal controls and security measures protect these records from unauthorized access, errors, or fraud. This ensures the reliability and integrity of the organization’s data.

Data processing and transformation

Raw data is transformed into meaningful information. For example, sales transactions are aggregated into revenue reports, and payroll entries are used to calculate employee costs. AIS performs computations, reconciliations, and summaries to support planning, execution, control, and evaluation of activities.

Financial reporting and analysis

AIS generates reports for management, investors, auditors, and regulatory agencies. These include income statements, balance sheets, cash flow statements, and performance dashboards. Analytical tools within AIS can identify trends, forecast outcomes, and highlight operational inefficiencies.

Decision support and business intelligence

By integrating artificial intelligence (AI) and data analytics, an AIS can support strategic and operational decision-making. For instance, predictive analytics can help management anticipate sales trends, optimize inventory, or detect fraud. Dashboards and visualizations provide real-time insights for faster, better-informed decisions.

Internal controls and compliance

AIS enforces policies and procedures to safeguard assets, ensure accuracy, and maintain regulatory compliance. Activities include monitoring transactions for anomalies, maintaining audit trails, and validating data integrity.

Supply chain and operational integration

AIS supports the broader value chain by linking internal activities (operations, marketing, logistics) with suppliers and distributors. Integrated systems enable just-in-time inventory, track materials, and optimize resource allocation, reducing costs and improving efficiency.

Primary activities

inbound logistics, operation activities, marketing and sales, and service activities

Inbound logistics

Consists of receiving, storing, and distributing materials an organization uses to create services and products it sells.

Operations activities

Transform input into final products.

Outbound logistics

Distribute finished goods to consumers.

Marketing and sales

Activities that help customers buy the organization's products or services.

Service activities

Provide post-sale support to customers.

Support Activities

Include firm infrastructure, human resources, technology, and purchasing.

Factors influencing AIS design

Organizational culture, business strategy, and information technology

Emerging technologies integration

Modern AIS often integrates blockchain for secure, transparent transaction recording, cloud computing for remote accessibility, virtualization for resource efficiency, and IoT devices for real-time monitoring. These technologies extend the AIS beyond traditional accounting into a strategic organizational tool.

Blockchain

Digital records, called blocks, linked together using cryptography in a single list; decentralized database.

Knowledge sharing and collaboration

Beyond numbers, an AIS can facilitate organizational learning by centralizing best practices, procedures, and historical data. Employees and departments can collaborate effectively, leveraging expertise across locations.

Steps in data processing cycle

data input, data storage, data processing, and information output

Data input step 1

is to capture transaction data 

• Attributes of the activity of interest

• The resources affected by the activity

• The people who participate in the activity

Data input step 2

• Ensure captured data are accurate and complete.

• Enhanced by data automation, well-designed turnaround documents, and data entry screens 

Data input step 3

• Ensure company policies are followed such as approving or veryfing a transation

• Uses source documents: sales orders, invoices, purchase orders and automation tools

Data storage

Includes ledgers (permanent general and subsidiary ledger) and coding techniques, COAS, journals, audit trail, computer based storage concepts

Journals

Temporary recording of transactions (sales journal, cash receipts journal) providing an audit trail.

Computer based storage concepts

Data are stored in master files (permanent, cumulative) and transaction files (temporary, for individual transactions).

Coding systems

Techniques like sequence, block, group, and mnemonic help organize and classify data.

Audit trail

A record that allows tracking of transactions through the accounting system.

Data automation

The use of technology to perform tasks with reduced human intervention, enhancing accuracy and efficiency.

Validation of data integrity

The process of ensuring that data is accurate and reliable.

Transaction data attributes

Include the activity of interest, resources affected, and people who participate in the activity.

Data processing

Creating new data records such as adding a newly hired employee to the payroll database.

Reading data

Retrieving or viewing existing data.

Batch processing

Updating data in groups.

Real-time processing

Updating data immediately.

Information output

Documents are records of transactions, include reports, and APIS

Reports

Used by employees to control operational activities and by managers to make decisions and formulate business strategies.

External users of reports

Need reports to evaluate company profitability, judge creditworthiness, and comply with regulatory requirements.

APIs (Application Programming Interfaces)

Allow advanced system-to-system integrations and provide a structured interface for data access.

Source documents

Documents used to capture transaction data at its source when translation takes place.

Revenue source documents

Sales order, delivery ticket or bill of lading, remittance advice or remittance list, deposit slip, credit memo.

Expenditure cycle source documents

Purchase requisition, purchase order, receiving report, check or electronic funds transfers.

Human resource cycle source documents

W-4, time cards, job time tickets, or time sheets.

Transaction processing cycle

Includes data input, data storage, data processing, information output.

ERP system

system that integrates all aspects of a company’s operations with a traditional AIS and collects, processes, and stores data and provides the information needed my managers throughout company

Advantage of ERP

Provides an integrated, enterprise-wide, single view of the organization's data and financial situation.

Data captured once, management gains greater visibility (fast access), organizations gain better access control, procedures and reports are standardized across business units, customer service improves because employees quickly access, and manufacturers receive new orders

Disadvantages of ERP

Costs, amount of time required, changes to business processes, complexity, and resistance from employees.