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What is accounting data?

Individual facts or fields collected about a business transaction or event.

What are examples of accounting data?

Customer name, transaction date, item description, quantity, and unit price.

Does accounting data have to be numeric?

No. Names, descriptions, and other nonnumeric facts are also accounting data.

What is accounting information?

Multiple data fields combined into something useful for making a decision.

What is the difference between accounting data and accounting information?

Data are individual facts; information combines those facts to help a user make a decision.

A company collects quantities and prices from receipts and creates a monthly sales report. Which part is information?

The monthly sales report, because it combines data into something useful for decisions.

What are three uses of accounting information?

Helping management make decisions, meeting external parties' needs, and communicating among parties in a business transaction.

How can accounting information be expressed?

In dollars, ratios, percentages, or units.

Who are internal users of accounting information?

Management and employees within the organization.

What does high-level management use accounting information for?

Strategic and tactical decisions, such as whether to expand into a new region.

What do lower-level and middle-level managers use accounting information for?

Daily and periodic decisions, such as inventory availability and staffing needs.

A manager checks whether enough inventory is available for an upcoming sale. What type of user is this?

An internal user making a daily or periodic operating decision.

How do employees use accounting information in their specific jobs?

They use relevant reports to complete job duties, such as reviewing aged accounts receivable to estimate doubtful accounts.

Do internal users have unrestricted access to all accounting information?

No. Access is restricted according to each employee's role.

Who are external users of accounting information?

Creditors, investors, labor unions, suppliers, customers, government agencies, and other approved outside parties.

What do creditors want to know from accounting information?

Whether the organization can repay money they lend.

What do investors want to know from accounting information?

Whether the organization is a worthwhile investment.

What do suppliers want to know from accounting information?

Whether the organization is performing well and will pay amounts owed.

What do customers want to know from accounting information?

Whether the organization is performing well and is expected to continue operating.

What do labor unions use accounting information to evaluate?

The organization's performance.

Why do government agencies use accounting information?

For purposes such as evaluating compliance with laws and regulations.

What reports are most commonly provided to external users?

The four basic financial statements.

How does internal access to accounting information compare with external access?

Internal users generally have access to more detailed information; external users receive more restricted information.

Can management share additional accounting information with external users?

Yes. Management can approve additional sharing when it supports the relationship or is otherwise warranted.

What is an accounting information system, or AIS?

A system that delivers accounting information using people, equipment, and processes.

What is a system?

A collection of resources working together toward common goals or objectives.

What are the three types of resources identified in the slides' definition of a system?

People, equipment, and processes.

What does IPO stand for?

Input, Process, Output.

What is an example of input, process, and output in an AIS?

Input: enter sale details; process: calculate and record the sale; output: produce a receipt or sales report.

What forms can an AIS take?

Manual or paper-based, computerized or technology-based, or a combination of both.

What are the four main purposes of an AIS?

Meet statutory reporting requirements; provide timely, relevant, accurate information; support business processes; protect against abuse of accounting data or the system.

What does an AIS do with accounting data and information?

It captures, stores, processes, and communicates them.

What requirements must an AIS follow?

Professional, industry, and government standards, along with the organization's own requirements.

How does an accounting transaction differ from an accounting event?

A transaction results in a journal entry; an event captures data that may later become an accounting transaction.

How can effective use of accounting information benefit a company?

It can improve decisions and efficiency and provide an advantage over competitors.

What are the main characteristics and drawbacks of a manual AIS?

It uses pen, paper, and human processing; continuing employee wages can make it expensive, human processing can cause errors, and data collection may be limited.

What are the main characteristics and dependencies of a computerized AIS?

It uses computer processing with some human involvement and depends on hardware, software, electricity, and IT personnel; it can collect and analyze more data.

What are automation, organization, and communication as computerized AIS benefits?

Automation records and posts transactions with little human interaction; organization structures stored data; communication lets systems share data with little human interaction.

What does garbage in, garbage out mean, and what causes inaccurate information?

Bad input produces unreliable output. Causes include human mistakes, incorrect programming, and inconsistent data duplicated across applications; users may then make incorrect decisions.

What are the three accountant roles in an AIS, and what does each do?

User: enters complete and accurate data and retrieves information. Auditor: understands transactions and evaluates controls against manipulation. Consultant: recommends lower-cost, more efficient data collection and summarization. All three must understand the system.