Accounting Information Systems 1

Inputs & Outputs of Accounting

Input: Transactions (numbers & data)

Output: Financial statements

Traditional Accounting Cycle

1. Transaction occurs (input)

2. Analyse transactions

3. Journalise transaction

4. Post journal to ledger

5. Prepare trial balance

6. Adjust entries

7. Adjust trial balance

8. Close entries

9. Prepare FS (output)

Data & Information

Data:

• raw facts relating to/describing an event

• gathered and recorded in an AIS (journals and ledgers)

Information:

• used in decision making

• information is data converted/summarised

• must be relevant and necessary

What Is A System?

Organised set of principles/procedures created & used to carry out a specific activity

Data Manipulation

Act of performing calculations & adjusting data inputs

(Unit sales price * units sold = total price)

3 Main Steps/Functions of a Business

1. Data (input)

2. Processing

3. Information (output)

Controls

Controls System: set of checks & balances to ensure:

• System is running as expected

• No data errors/exceptional circumstances

System Scope

A domain that a system addresses

(one system cannot do everything, must have defined task/domain)

Accounting Information System Definition

the application of technology to the capturing, verifying, storing & reporting of data relating to an organisation’s activities

Data Management

Process of attaining, storing and controlling data (in an AIS)

(fundamental process that drives… the alignment of information to best address business needs)

Functional Organisation

Functional perspective is one where there are clear organisational structures in place, including functional divisions and reporting responsibilities within

5 Functional Business Areas

1. Logistics

2. Production

3. Accounting

4. Sales

5. Human Resources

Functional Organisations get Divided into 3 Areas

1. Strategic Management

2. Management Control

3. Operational Control

Advantages & Disadvantages of Functional Organisation

Advantages:

• Control & co-ordination - organisational control

• Clear responsibility & reporting lines

Disadvantages:

• Departments may operate in silos (isolation)

• Information/communication problems

• Can lead to delays and duplicated work

Process Driven Organisation

Organisation that prioritises an end goal (usually to meet consumer needs), favours the complete business process rather than individual departments

3 Characteristics of Process Driven Organisation

1. Cross functional teams

2. Collaboration

3. Customer value

Advantages & Disadvantages of Process Driven Organisation

Advantages:

• Faster processing

• Improved customer service

• Reduced costs

• Higher quality

Disadvantages:

• Can require organisational change

• Employees may need broader skills

Mission Statement vs Organisational Strategy

Mission Statement: Usually contains an expression of their vision, domain, compentencies & values

Strategy: Means of putting a mission statement into practice (the how)

Cost Leadership

Organisations need to carry out their activities cheaper than competitors, using technology etc. (Kmart)

Differentiation

Involves creating a business that adds a bit extra for customers, offers unique products targeted to the customer’s needs

Porter’s 5 Forces Model

1. Rivalry among existing competitors

2. Threat of substitute products/services

3. Bargaining power of suppliers

4. Bargaining power of buyers

5. Threat of new entrants

2 Business Process Within the Organisation

Sale:

• Aim- to sell goods & collect cash

• Particiapnts - sales staff, customer, billing staff, warehouse

• Inputs - sales order

• Outputs - invoice, receipt, shipping document

Purchasing:

• Aim - to acquire goods from suppliers and manage stock

• Participants - slaes staff, customer, billing staff, warehouse

• Inputs - purchase requisition

• Ouputs - invoice, receipt, shipping document

ERP

Enterprise Resource Planning - set of computer program modules that aim to integrate the different functional areas of the organisation

TQM - 4 Concepts

Total Quality Management

1. Quality

2. People

3. Organisations

4. Management

Business Process Re-Engineering

Fundamental rethinking and radical redesign of current business processes to achieve large improvements in critical contemporary measures of performance

4 Key Components of Business Process Re-Engineering

1. Fundamental Aspect

2. Radical Component

3. Dramatic

4. Process

7 Steps to Approach BPR

1. Establish sense of urgency

2. Form leadership team

3. Create & communicate a vision

4. Empower others to meet a vision

5. Plan for & create short term wins

6. Consolidate improvements & encourage further change

7. Institutionalise the new approaches

Systems Development

Aims to create a system that allows an organisation to function more effectively

3 Reasons for System Development

• Outdated current system

• Improve strategic position

• A new business has no systems in place

Business Size & Complexity

• Small

• Medium

• Large

Systems Development Life Cycle Theory

Represents a structured and methodical way of doing development projects

Systems Development Lifecycle 5 Steps

1. Investigation

2. Analyse

3. Design

4. Implementation

5. Review & Maintenance

Step 1: Investigation Theory

• Identifying any problems/opportunities within the current systems & identifying the feasibility of responding to these problems/opportunities

• Need to assess organisational fit (how well the technology aligns with the overall strategy & strategic position)

3 Main Phases of Investigation

1. Problem Identification

Involves those working on the system development and a user representative group

2. Problem Scope

Identify problems/opportunities in the existing system

3. Feasibility of Fixing the Problem

Evaluation of alternatives

(Financial - economic costs & benefits)

(Legal - legal environment)

(Schedule - time period, PERT, and Gantt charts)

(Technical - evaluate existing infrastructure)

(Strategic - goodness of fit)

Step 2: Analysis 2 Parts

1. System Analysis

2. Requirement Analysis

System Analysis

Understanding what the current system does, and how it operates

Method: Analyse System Documentation

• Process map

• Logical and physical dataflow diagram

• Systems flowchart

Requirement Analysis

Specifying what the new system will need to do

Techniques for Aquiring Information

• Questionnaire

• Observation

• Interviews

• Prototyping

Step 3: Design

Systems design needs 2 perspectives:

• Logical - concerned with a design that is independent of the actual technology required for its implementation

• Physical - requires the specification of the technical aspects

Design Outputs/Inputs

Determine Outputs: Be familiar with the outputs different users require to complete daily tasks

Determine Inputs: Work backwards from outputs to decide what inputs will be required to product specified outputs

Design: Storage Mechanism - 2 Designs

Database Design

Logical Design:

• Business process map

• Data flow diagrams

• Conceptual design

Technical Design

• Hardware and technical resources

• User interface

Design Approval

Its vital designers & users agree on the design

After approval, a RFP (request for proposal) is sent to vendors

Step 4: Implementation Definition & Activites

Involves getting the system set up & running within the organisation

Activities:

• Build physical environment required for new system

• Data storage facilities

• Any required programming must be completed

• System may need to be installed

• Thorough testing of system

Implementation - Network and Database

• Starting point for implementation

• Technical specified for the network come from specificaitons

Implementation: Programs, 2 Forms

1. Modified existing programs

2. In-house develoepd programs

3 Implementation Approaches

1. Direct Conversion: Switching off old system today and switching on new system tomorrow

2. Parallel Conversion: Running the new and old system together for a period of time

3. Phased-In Conversion: Gradual implementation

Step 5: Maintenance & Review (maintenance)

General aim of keeping the new system runnning & supporting users in their interactions with the systems

3 Stages of Maintenance

1. System Improvement - adding new features or functions

2. System Modification - changing an existing feature

3. Bug Correction - fixing any errors

Step 5: Maintenance & Review (review)

• Completed the systems development lifeycle

• Ex-Post analysis on the systems development project

• Conducted after a settling down period

• Evaluates performance of the new system

• Considerations

Project team’s performance

New system’s performance

Accounting Objective

To provide financial information

Alternative Methodologies

Prototyping: Involves the progressive building of models and allowing users to experience these models and provide feedback on their operation and suitability

Agile/Adaptive Methods: Involves a short team-based efforts whereby a small amount of functionality is built, designed, and tested.

Typical Problems of Systems Development (6)

1. Conflict

• Users and designers approach the project from different perspectives

• Project must successfully unite these perspectives

2. Escalation

Project Goal Issues

Project Goal Issues

Technical Skills

Interpersonal Skills