Module 1

Class IT Applications Tools in Business

Created Aug 19, 2020 453 AM

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Last Edit Aug 30, 2020 936 AM

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Information Environment
Video M1.1

What is Information (in business)?

Information is a business resource that:

needs to be appropriately managed

is vital to the survival of contemporary business

Fundamental Objectives of Information common to all organizations

Support the firm's day-to-day operations

Support management decision making

Accounting Information is important for the management or the decision

making body of an organization

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 The management cannot decide without reasonable for backing it up

To make a decision it has to be based on genuine facts and figures

For making the right decision, they rely on statistical data and information
that accounting provides

Support the stewardship function of management

role of management is important for the the overall development of a

business organization.

Successful completion of these function depends on management's

efficient accounting system

Functions of Management

 Planning

 Organizing

 Collecting business elements

 Motivating

 Coordinating

 Controlling

 Budgeting

Internal & External Information Flows

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 Horizontal flows of information

to capture transactions and operations data

Vertical flows of information

Downward flows - contains instructions, quotas, and budgets

Upward flows - contains aggregated transactions and operations data

Each user groups has unique information requirements. The higher the level of
managements the greater the need for aggregated information and less need in
detail

What is Information System?

a system is a group of interrelated multiple components of subsystems that

serve a common purpose

is a set of formal procedures by which data is collected, processed into

information, and distributed to users

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 2 Information Subsytems

Management Information System MIS

a system that processes non financial transactions not normally

processed by traditional accounting information systems

This support the 4 functional area of business, accounting, and finance:

1 Sales, 2 Marketing , 3 Manufacturing and Distribution, and 4
Human Resources

Accounting Information System

Accounting

is an information system. It identifies, collects, processes, and

communicates economic information about a firm using a wide variety
of technologies

It captures and records the financial effects of the firm's transaction.

It distributes transaction information to operations personnel to
coordinate many key tasks.

Subsystems of Accounting Information System

 General Ledger/Financial Reporting System GL/FRS

non discretionary reporting - is a type of reporting in which

the organization has few or no choices in the information in
provides

Examples: Traditional Financial Statements, Tax Returns, and

other legal documents

 Management Reporting System MRS

Discretionary Reporting - is a type of reporting in which the

organization can choose what information to report and how
to present it.

 Transaction Processing System TPS

which is composed of:

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 a. Expenditure Cycle

a.1 Purchase System

a.2 Cash Disbursement System

a.3 Payroll Processing System

a.4 Fixed Asset System

b. Conversion Cycle

b.1 Costing Accounting System

b.2 Production & Planning Control System

c. Revenue Cycle

c.1 Sales Processing System

c.2 Cash Receipts System

Accounting Information System are specialized subset of information systems

that processes:

financial transactions; e.g. sale of goods

non financial transactions that directly affects the processing of financial

transactions, e.g. addition of newly approves vendors

Information System processes transactions that could assist in decision making

Transactions

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 event that affects the interest of the organization and its processed by its
information system as a unit of work

2 types of transactions:

a. Financial Transactions - economic events that affect the assets and equity
of the organization. It is measured in financial terms and it is reflected in the
accounts of the firm

b. Non Financial Transactions - events that do not meet the narrow definition
of Financial Transaction

Video M1.2

General Model for Accounting Information Systems

Data Sources

"transactions"

are financial transactions that enter the information system from internal and
external sources

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 'transform data to needed information'

External Sources of Data

a. External Financial Transactions

the most common source of data for most organizations

example: Sale of Goods and Services, Purchase of Inventory, Receipt

of Cash or Disbursement of cash Payroll)

b. Internal Financial Transactions

involve the exchange or movement of resources within the

organization.

example: movement of raw materials into work-in-process →

application of overhead → finished goods inventory OR depreciation of
equipment

DATA → INFORMATION
Components of a General Model for Accounting Informa

 Data Collection

first operational stage in the information system

involves: capturing transaction data, recording them on to forms, editing

and validating data

 Data Processing

is a group that manages the computer resources used to perform the

day-to-day processing of transactions

it involves classifying, transcribing, sorting, batching, merging, calculating,

summarizing, and comparing collected data.

 Database Management

Once processed, data is stored in a repository or database

The organization's database is its physical repository for financial and

non financial data

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 The term could apply to a filing cabinet or computer disk

includes storing, retrieving, or deleting processed data

It can also refer to a special software system that is programmed to

which data elements each user is authorized to access

 Information Management

the process of compiling, arranging, and preparing data for presentation

to the end-user

After information generation, information is presented to end users

Characteristics of a 'useful information'

 Completeness - all essential information to complete a decision or task is

present

 Accuracy - information is free from material errors

 Relevance - information must serve the purpose of its generation

 Timeliness - the timeline of the information is aligned with the objectives

 Summarization - information is aggregated in accordance to the end users'

need

End Users

are users for whom the system is built

2 types of users in the AIS model:

 External Users - include creditors, stockholders, potential investors,

regulatory agencies, tax authorities, suppliers, and customers.

 Internal Users - management at all levels of the organization as well as

operations personnel

Feedback

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 is a form of output that is sent back to the system as a source of data

usually used as a basis for improvement of the AIS

Data Hierarchy

refers to the systematic organization of data.

It is a basic concept in data and database theory that helps to show the
relationships between smaller and larger components in a database or data
file.

it is used to give a better sense of understanding about the components of

data and how they are related

Data Attribute

the most elemental piece of potentially useful data in the database. It holds a
single fact or attribute of an entity.

In a form, you may refer them as data field

example: Customer Account Number, Customer name, customer address,

current balance of account, and customer credit limit

Record

collection of data attribute

This is a complete set of attributes for a s single occurrence within an entity

class or a collection of related fields

example: Account Receivable Records

File

a complete set of records of an identical class

example: Account Receivable File

M1.2 Organizational Structure

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 What is an Organization Structure?

is a system that outlines how certain activities are directed in order to

achieve the goals of an organization

These activities can include rules, roles, and responsibilities

The structure of an organization helps to allocate:

responsibility

authority

accountability

Physical AIS is composed of technologies of various types and configurations, as

well as people and tasks from across the organization, thus there is as need for
segmentation
Segmentation

means to divide the organization into parts, or segments, which are definable
accessible actionable, and profitable

segmenting by business function is a very common method of organizing

example: a sales processing system - which is a subsystem of the revenue

cycle - includes the following organization functions: sales, credit, inventory
control, warehousing, shipping, billing, A/R, General Ledger, and Data
Processing

Functional Segmentation

Business organization takes into consideration the resources they need to

manage in the business

from these resources the firm assigns a department or a group of people

who's functions are focused on each aspect of the mentioned resources

4 resources that a business must manage:

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  Materials

Materials management

Production
1 production planning,
2 scheduling the flow of materials, labor, and machinery to
efficiently meet production needs,
3 Quality control which monitors the manufacturing process at
various points to ensure that the various finish products meets the
firm's quality standards,
4 Maintenance which keeps the machineries and other
manufacturing facilities in running order

Marketing -
1 generates revenue

2 the main task is to thoroughly understand their potential

customers and determine how they will reach them

3 Major function: Sales

Distribution

1 Main function: Warehousing and shipping

2 they make sure that the product or service is available for the
consumer or business user who needs it

 Labor

Personnel
1 they supply the organization with personnel and takes care of their
well being
2 they also ensure that they are fit for the role they are chosen for

 Financial capital

Finance
1 forecasting and budgeting business revenues

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 2 focuses on these area for financing reasons: loans and investment

3 Notable function: credit - which ensures the credit worthiness of

the client

 Information Resource)

Accounting

1 control of inventory to safeguard asset

2 recording of the accounts receivable and preparation of billing
which will be recorded in the general ledger

3 manages the accounting resource of the management by:

〰 capturing and recording transactions
〰 distribute transaction information to operations personnel
〰 the value of information is determined by its reliability
〰 characteristic of a useful information: Complete, Accurate,
Relevant, Timely, and Summarized to the needs of the user
〰 unreliable information has no value
4 information reliability requires accounting independence

5 Accounting activities must be separate and independent of the

functional areas maintaining resources.
6 Accounting supports these functions with information but does
not actively participate
7 Decision makers in these function require that such vital
information be supplied by an independent source to ensure its
integrity

Technology
1 Technology Advancements have enhanced the accountant's ability
to interpret data efficiently and effectively because of the readily
ability of data and information needed
2 Accountants - company's most trusted advisor
3 main role: drive growth and improve operations

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 4 vital task: data processing for internal and external users

3 methods in processing data that companies employ Data Processing)

 Distributed Data Processing

Reorganizing the computer services function into small information

processing units that are distributed to end users and placed under
control

users process transactions locally with each user segment and IT needs to
support their operations

the users function independently and tend not to share information

distributed data processing or DDP model of data processing - in this

model users process transactions locally with each user segment and it
needs to support their operations also the users function independently
and tend not to share data and information

some of the possible disadvantages of this model are:

loss of control

mismanagement of company resources

hardware and software incompatibility

redundant tasks

data storage - excessive storage costs of paper documents or

magnetic forms

data updating - changes or additions must be performed multiple

times

currency information - potential problem of failing to update

affected files

task-data dependency - user's inability to obtain additional

information as needs change

data integration - separate files are difficult to integrate across

multiple users

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 consolidating tasks are usually segregated

2. Centralized Data Processing

All data processing is performed by one or more large computers housed

at a central site that serves users throughout the organization

inter organization communication and data sharing

Organization employ a combination of both types

By applying both methods, the organization could address the disadvantage

while enjoying its advantages

3. System Development and Maintenance

System Development - is the process organizations use to acquire

information systems

Systems Maintenance - may be trivial or significant. Bet ween 8090% of

system's total cost may be incurred because of maintenance activities

2 kinds of software that may be used by an organization

 Custom Software

is software built to individual specificatioons

System development life cycle is the software development process.

Requires an in-house team of qualified individuals

Custom systems are more expensive than commercial packages

example: Enterprise Resource Planning ERP is a system assembled of

prefabricated software components

 Commercial software

is a pre-coded software that a user purchases from a software vendor.

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 It is available for general accounting and industry specific applications.
Sometimes called turnkey systems because they often can be
implemented by the user with little or no modification

Database and Network Administration

Centrally organized companies with shared data use database administration

to ensure security and integrity

Network Administration - responsible for effective functioning of hardware

and software

Network - is a collection of computer and communication devices that

allow users to communicate, access data and applications, and share
information and resources.

Due to the highly technical and dynamically changing expense of IT, many
executives look towards IT outsourcing, where the organization sells IT
resources and leases back IT services

Cloud computing data centers deliver hosted IT services over the internet:

Software as a service SaaS

Infrastructure as a service IaaS

Platform as a service PaaS

M1.3 Role of Accountant in AIS

What is the role of an accountant in an Accounting Information System?

guides developer to better provide information that will be beneficial for the
company

3 Roles of an Accountant

 Information System User

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 Accountants usually access the data in the company's AIS in order to
perform their job functions

This includes preparing, analyzing budgets, and financial statement,

preparing tax returns and examining record for accuracy

Supreme Users

 Information System Designer

plays an important role in system development as domain experts

accounting function - responsible for the conceptual system

conceptual system determines the nature of the information required,

its sources, its destination, and the accounting rules that must be
applied

computer function - responsible for the physical system

physical system - is the medium and method for capturing and

presenting the information.

 System's Auditor

auditor - an expert who expresses an opinion about the fairness of a

company's financial statement

accountant perform audits which typically involve the AIS

includes:

Internal audit - is an independent, objective assurance and consulting

activity designed to add value and improve an organization's
operations. Helps accomplish objectives by bringing a systematic
disciplined approach to evaluate and improve the effectiveness or risk
management, control, and governance processes

IT audit - is the review of the computer-based components of an

organization. The audit is often performed as part of a broader
financial unit

Fraud audit - is a detailed examination of the financial records of a

business, with the intent of finding instances of fraud. It had increased
in popularity as a corporate governance tool. It may be initiated by

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 managers to investigate employees or the board to investigate
management

External audit

is an independent attestation and opinion (audot report) regarding

financial statement presentation

attest function - is an independent auditor's responsibility to

opine as to the fair presentation of a client firm's financial
statement.

requires auditors (independent CPAs) to test internal controls and

perform substantive tests of data

test of controls - are tests that estabish whether internal

controls are functioning properly

substantive tests - are tests that determine whether database

contents fairly reflect the organization's transactions.

critical element is auditor independence, which means the auditor

is free from factors that might influence the audit report

SOX legislation restricts non-audit services that auditors may

provide and prohibits them from providing:

other accounting services including bookkeeping, financial

information systems design and implementation, appraisal or
valuation, actuarial, and internal audit outsourcing

management or human resources, broker or dealer, investment

adviser, or investment banking services

legal and expert services unrelated to the audit

any other service that the board determines, by regulation, is

impermissible

M1.4.1 Intro to Technology

Technology

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 Came from the Greek word techne which means art and craft.

it was first used to describe applied arts but now it is used to describe the
advancement in changes around us

it starts with the beginning of life on earth and goes until the founding of
early modern technologies such as computer

Computers

Such as computer generally speaking computers can be classified into 3

generations

Each generation lasted for a certain period of time and each gave us either a
new and improved computer or an improvement to the existing computer

3 Generations of computer
First Generation

could only perform single task had no operating system and mainly used
vacuum tube

includes the following events:

1937 the first electronic digital computer was built by doctor John V.
Atanasoff and Clifford Berry. It was called the Atanasoff-Berry Computer
ABC

1943 an electronic computer named the Colossus was built for the
military

1946 the first general-purpose digital computer the electronic numerical

integrator and computer ENIAC was built. it is said that this computer
weighed 30 tons and had 18,000 vacuum tubes which was used for
processing.

Second Generation

used transistors instead of vacuum tubes which were more reliable computers
built had memory in operating systems.

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 it was also during this generation that over 100 computer programming
languages were developed

includes the following events:

1951 the first computer for commercial use was introduced to the public;
the universal automatic computer or univac 1

1953 the international business machine or IBM 650 and 700 series
computers made their mark in the computer world

Third Generation

integrated circuits were invented, thus computers became smaller, more

reliable and they are able to run many different programs at the same time.

includes the following events:

1980 Microsoft disk operating system Ms-dos) was born

1981 IBM introduced the personal computer or PC for home in office

1984 Apple gave us the Macintosh computer with its icon driven interface

90s gave us the windows operating system

As a result of the various improvements to the development of the computer we

have seen the computer being used in all areas of life
It is a very useful tool that will continue to experience new development as time
passes
In the 21st century nothing has made more of an impact on our daily lives than
technology

New technologies have spurred what now is called the:

4th industrial revolution

Internet of Things

it is the ability of devices to communicate with each other without human

interference

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 such functionality makes it possible to continuously monitor and measure
various elements through a data network connected to the Internet

How does the Internet of things work?

sensors and microchips (embedded computers) are installed in specific

devices and from there the collected data are transmitted to an application
usually via the internet that will store, process, analyze, and share this data in
a cloud.

Embedded computers

compact, have limited hardware and usually has a single purpose of

enhancing the capabilities of everyday devices

Artificial Intelligence

it is the technological use of logic and prior experience to simulate human

intelligence

it has the following capabilities:

 speech recognition

 local reasoning

 creative responses (for 13 | best example: siri, google assistant, alexa,
and bixby)

 immersive technologies - these are technologies that attempts to emulate

a physical world through the means of a digital or simulated world by
creating a surrounding sensory feeling thereby creating a sense of
immersion

virtual reality or VR - it is the use of computers to simulate a real or

imagined environment that appears as a 3 dimensional or 3D space

examples: flight simulators and other learning related simulators

augmented reality or AR - it is a type of virtual reality that uses an

image of an actual place or thing then adds digital information to it

M1.4.2 Impact of Technology

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 how technology affects aspects in our everyday life:

 personal use

today most people simply can't imagine life without smartphones they
have evolved to such an extent that they've moved way beyond mere
communication to being a constant companion that's geared to learn your
unique needs and make your life easier to navigate

the technology behind are:

artificial intelligence

games and apps

all apps uses artificial intelligence to process specific data on

behalf of the user games incorporate virtual reality to simulate a
different environment for the user to enjoy.

Digital assistance

which uses natural language processing that interpret and digitize

spoken words in commands

accessibility options

this is particularly useful for persons with sensory disabilities.

it uses AI such as screen readers captioning, and speech recognition

to assist the user despite their disability.

smartphones even allow special input devices to be connected for

such users

 Workspace

Intelligent workspace - offers integrated cognitive solutions that help

companies collaborate across borders

online collaborative productivity software - that allows employees to

easily share information with stakeholders without consuming much of the
company's resources such as paper

working remotely or telecommuting - which allows employees to carry

out their task even if they are away from the workplace. this benefits the

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 company specially in situations like the one we are experiencing right now
with the COVID19 pandemic technology also affects the education

 Education

intelligent classroom

inevitable outcome of the available advanced computing, network,

and data communication technology

E books - allows students to read an access content such as videos from

devices

learning management system or LMS - is a web based training that

allows students to:

check progress on a course

take practice tests

exchange messages with involved parties

take classes and earn degrees on line

social networking - allows exchange of information and stories between

individuals

 Transportation

GPS or Global Positioning System - is a radio navigation system that

allows land, sea, and airborne users to determine their exact location,
velocity, and time 24 hours a day in all weather conditions anywhere in
the world. this is primarily being used to navigate routes, estimating ETAs,
avoid unfavorable traffic conditions, and tracking parcels for delivery

It also affects the manner we travel with the automations that technology
brings to our modes of transportation

 Healthcare

our healthcare system nowadays are using state of the art medical
equipment to treat or diagnose patients

examples:

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 3D printers - which are used to replicate body parts used for medical
studies or as a substitute for the real stuff

medical monitoring devices- that provides accurate and timely results

to monitor patients vital signs and research symptoms and diagnosis

(new) M health - or the use of mobile and wireless technologies to

support the achievement of health objectives

 Manufacturing

robotics - is the main influencer for this it is useful in situations where it is

impractical dangerous or inconvenient to use a human

computer aided manufacturing or CAM - which streamlines production and

allows for shipping products more quickly; introduced by machine to machine
communication

7. Commerce

is the buying and selling of goods and services or the transmitting of funds or
data over an electronic network primarily the Internet

these business transactions occur either as:

business to business B2B

this consists of business providing goods and services to other

businesses like the ones offered by the business process outsourcing
or BPO industry

business to consumer B2C

it involves the sale of goods and services to the general public or

consumers such as what is happening with online shops

consumer to consumer C2C

occurs when one consumer sells directly to another like what occurs
in a Facebook marketplace

8. Technology

green computing - this is the environmentally responsible and eco friendly use
of computers

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 in broader terms, it is also defined as the study of designing,
manufacturing/engineering, using, and disposing of computing devices in a
way that reduces their environmental impact such as the reduction of the use
of papers in a paperless environment

Energy Star program - reduces electricity consumption and environmental

waste generated by modern appliances and machine

M1.4 Computer Hardware

Computer Hardware

refers to the physical tangible computer equipment and devices which

provides support for major functions such as input, processing and
communication

It can be classified into four distinct categories (hardware components):

 processing device

process raw data instructions into information

central processing unit or CPU -a complex integrated circuit

consisting of millions of electronic parts in is primarily responsible for
converting input or data into meaningful output or information data
travels in and out of the CPU through a bus

computer bus - is a communication system that transfers data

between components inside a computer or between computers; this
expression covers all related hardware components such as a wire or
optical fiber

 storage device

it is used for data and information retention

computer memory - a storage device that is responsible for holding

data and programs as they are being processed by the CPU

two basic types of memory:

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  the random access memory or ram - the main memory of a
computing device it stores data for a short period of time or until
the computing device is kept on

 read only memory or ROM - permanently stores data on the

computing device

Other Storage Solutions:

internal drives - hard disk drive or HDD and solid-state drive or

SD

external drives - external HDD flash drives and optical drives

cloud storage - it can store electronic files on the Internet instead

of a local computer; e.g. Google Drive, Microsoft OneDrive, and
Dropbox

 input device

they input or send instructions or commands to a computer

examples: joysticks, mouse, keyboard, microphone, scanner, and

digital cameras

 output device

they disseminate data and information to the user sample

examples: printers, copiers, monitors, headphones, speakers, and

projectors

Micro computers

a small relatively inexpensive computer with a microprocessor as its central

processing unit or CPU

largely supplanted by the term personal computer or PC which specifies a

computer that has been designed to be used by one individual at a time

three general types of personal computers:

 desktop

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 it consists of a system unit monitor keyboard and mouse it is more
powerful and has more storage capability and its hardware
components can be easily upgraded

 all in one computer

it's monitored and system unit our house together thus take up less
space but it is difficult to service or upgrade because its parts are
customized to its build and more expensive than desktops

 mobile device

highly portable but usually less powerful and specifications and is

sometimes a bit difficult to service or upgrade

M.1.4 Computer Software

Computer software

we have learned about computer hardware and their wonders on the previous
module but hardware cannot work by themselves it needs instructions like an
army who needs a commanding officer to conduct operations and that
commanding officer is what we call as a software

Software

a program that enables a computer to perform a specific task as opposed to

the physical components of the system or hardware. it has to be loaded into
the computer storage before it can be executed

2 types of software:

 system software

a type of computer program that is designed to run a computer's

hardware and application programs or provide a platform for other
software

this can be classified into three types:

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 operating system - a software that communicates with the
hardware and allows other programs to run

examples: windows OS series, The Mac OS X series, and for

mobile the Android and iOS series

language processor - it is a computer program that is designed or

used to perform tasks such as processing program code to machine
code it access the interpreter of your computing device that
interprets all the computer language and relays them to your
machine

utility software - it is a software that is designed to help analyze

configure optimize or maintain a computer or support its
infrastructure

examples: disk defragment, system profilers network

managers, application launchers, antivirus software, backup
software, disk repair, disk cleaners, registry cleaners, disk
space analyzer, File Manager, file compression, and hardware
drivers

 application software (app application)

is a computer program designed to help people perform an activity

depending on the activity for which it was designed

an application can manipulate text, numbers, audio, graphics and a

combination of these elements

four key types:

device management apps- which provide tools for maintaining a

computer or device

productivity apps - allows creation of documents graphics and to

interact with digital media

communication apps - allows user to share or receive

communications or information

personal interest apps - provides users with tools to pursue their

personal interests

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 Software types can also be classified by their tasks

 spreadsheet software

let you interact with numbers, charts, graphics, text, and data. it should
perform calculations on data stored in a grid of cells and recalculate
values automatically when the data changes in this software

worksheets - are laid out in a grid of rows and columns they use
letters to identify each column in consecutive numbers to identify each
row

cell - is the location formed by the intersection of a column in a row

key features:

formatting tools to change a worksheet's appearance

ability to create a printed output of the created spreadsheet

web capabilities to share workbooks online, add hyperlinks, and save

worksheets as web pages

developer tools to add customized functions

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 tools to analyze data

 database software

it is the phrase used to describe any software that is designed for

creating databases and managing the information stored in them

sometimes referred to as database management systems or DBMS

database software tools are primarily used for storing, modifying,

extracting, and searching for information within a database

microsoft access???

each piece of data is entered and stored in a field

tables are a collection of records for a single subject

query extracts data based on specified criteria, or conditions, for one

or more fields

a report is a user designed layout of database content

a form is a screen used to enter data into a database

key features:

ability to collect data in a manner that allows access retrieval and

reporting of that data

represent a query in structured query language SQL

execute database applications such as track inventory, maintain

customer lists, or manage employee records.

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