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CHAPTR (1)

A system is:
A set of interrelated components that interact to achieve a goal
Most systems are composed of smaller subsystems that support the larger system
Every organization has goals. The subsystems should be designed to maximize achievement of the
organization’s goals, even to the detriment of the subsystem itself

Goal conflict Goal congruence

occurs when a subsystem’s goals are occurs when the subsystem’s goals are in
inconsistent with the goals of another line with the organization’s goals
subsystem or with the system as a whole
a subsystem achieves its goals while. contributing to the
organization’s overall goal

Data
are facts that are collected, recorded, stored, and processed by an information system.
Organizations
collect data
about:

Events that occur Resources that are affected by Agents who participate in the
those events event
For example,
the business needs to collect data about a sale (date, total amount), the resource sold (good or
service, quantity sold, unit price), and the people who participated (customer, salesperson).
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Information
is data that have been organized and processed to provide meaning to a user and
improve the decision-making process.

data Information DISION

AIS USER

Usually, more information and better information translates into better decisions. However, there are limits to the
amount of information the human mind can absorb and process. .

information overload

Exceeding the amount of information a human mind can absorb and process,
resulting in a decline in decision-making quality and an increase in the cost of
providing information

Value of information

= Benefits of information - Cost of producing information

Costs ..
Reduction of uncertainty
Improved decisions time and resources to ( Collect , Process data)
Improved ability to plan and schedule activities Distributing information to users

So we provide information, that has positive value ( the benefits are more than costs)

It reduces It’s It doesn’t leave Provided in It’s presented in a Two Available to

uncertainty dependable, out anything time for manner you can independent, users when
by helping ( free from that’s decision comprehend and knowledgeable they need it
you predict error or bias important. makers to use. people produce and in a
what will and make the same format they
happen or faithfully decisions. information can use
confirm portrays
what events and
already has activities.
happened.
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WHAT IS AN AIS

An AIS is a system that collects, records, stores, and processes data to produce
information for decision makers.

The components The functions

There are six components of an AIS: The functions of an AIS are to:
1. The people who use the system ▪ Collect and store data about
events, resources, and agents.
2. The procedures and instructions used to
collect, process, and store data ▪ Transform that data into
3. The data about the organization and its business information that management can use
activities to make decisions about events,
resources, and agents.
4. The software used to process the data
▪ Provide adequate controls to
5. The information technology infrastructure, ensure that the entity’s resources
including the computers, peripheral devices, and (including data)
network communications devices used in the AIS

6. The internal controls and security measures

that safeguard AIS data

AIS is divided into

Financial Accounting Managerial Accounting

Information System (FAIS) Information System
(MAIS)
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A) Financial Accounting Information System (FAIS)
Definition Objective
an accounting system that records, processes and it provides information to external users such
reports past transactions in accordance with as shareholders, creditors and government
generally accepted accounting principles (GAAP).

External users primarily use information that is either:

MANDATORY INFORMATION ESSENTIAL INFORMATION

required by a governmental entity, such required to conduct business with

as Form 10-K required by the SEC. external parties, such as purchase
orders
• In providing mandatory or essential information, the focus should be on:
– Minimizing costs.
– Meeting regulatory requirements.
– Meeting minimum standards of reliability and usefulness
FAIS provides information to external users with a certain limit (general information) using
financial statements

- Characteristics of Financial Statements:

1- Financial statements are prepared in accordance with GAAP
2- Financial statements are prepared annually
3- Financial statements reflect past events
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B) Managerial Accounting Information System (MAIS)
Definition Objective
an accounting system that records, processes and it provides information to internal users
reports information for internal use in accordance with (managers)
management preferences

Internal users primarily use discretionary information.

The primary focus in producing this information is ensuring that benefits exceed costs, i.e., the
information has positive value.
MAIS provides information to internal users with no limit using management reports
Characteristics of Management Reports:
1- Management reports are prepared in accordance with management preferences
2- Management reports are prepared annually, monthly or weekly
3- Management reports reflect past and future events

WHY STUDY ACCOUNTING INFORMATION SYSTEMS?

• Accounting is an information-providing activity, so accountants need to understand:

How the system that provides that information is designed, implemented, and used.
How financial information is reported, and How information is used to make decisions.
• Other accounting courses focus on how the information is provided and used.
An AIS course places greater emphasis on: How the data is collected and transformed, and
How the availability, reliability, and accuracy of the data is ensured.

Other systems courses focus on design and implementation of information systems,

databases, expert systems, and telecommunications, however AIS courses focus on
accountability and control.
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1- A set of two or more interrelated components that interact to achieve a goal is:
A) A system B) An accounting information system
C) Data D) Mandatory information
2-This results when a subsystem achieves its goals while contributing to the
organization's overall goal.
A) Goal conflict B) Goal congruence
C) Value of information D) Systems congruence
3-Goal conflict may result when
a) A decision or action of a subsystem is inconsistent with the system as a whole.
b) A subsystem achieves its goals while contributing to the organization's overall goal.
c) Duplicate recording, storage and processes are eliminated.
d) The data exceeds the amount the human mind can absorb and process.
4-Facts that are collected, recorded, stored and processed by an information system
A) Information B) Data
C) Systems D) Mandatory information
5-Information is
a) What happens when the data exceeds the amount the human mind can absorb.
b) The benefit produced by the information minus the cost of producing it.
c) Facts that are collected, recorded, stored, and processed by an information system.
d) Data that have been organized and processed to provide meaning to a user.
6-Data are
a) facts entered, stored, and processed by an information system.
b) processed output that is useful to decision makers.
c) another word for information.
d) quantitative facts that are not qualitative by nature.
7-Which of the following statements below shows the contrast between data and
information?
A) Data is the output of an AIS. B) Information is the primary output of an AIS.
C) Data is more useful in decision-making than information. D) Data and information are the same.
8-Information is
a) basically the same as data.
b) raw facts about transactions.
c) potentially useful facts when processed in a timely manner.
d) data that have been organized and processed so that it's meaningful.
9-Humans can absorb and process only so much information. Information __________
occurs when those limits are passed.
A) overload B) excess
c) anxiety d) discretion
11-The benefit produced by the information minus the cost of producing it.
A) Goal congruence B) Information
C) Information overload D) Value of information
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10-The value of information can best be defined as
a) how useful it is to decision makers.
b) the benefits produced by possessing and using the information minus the cost of producing it.
c) how relevant it is.
d) the extent to which it maximizes the value chain.
12-The primary objective of accounting is to
A) implement strong internal controls.
B) provide useful information to decision makers.
C) prepare financial statements.
D) all of the above.
13-An accounting information system (AIS) processes ____ to provide users with ____.
A) data; information B) data; transactions
C) information; data D) data; benefits
Question One: True or False Statements
1. Information system is set of two or more interrelated components that interact to achieve a goal
2. Accounting information system is set of two or more interrelated components that interact to
achieve a goal

Data differ from information in the way that data are meaningful bits of information. False

Question three: SHORT ANSWER

1. Define the concept of a system.
2. Define an accounting information system.
3. Identify the components of an accounting information system.
4. WHY STUDY ACCOUNTING INFORMATION SYSTEMS?

Question four: Match the description listed in the right column with the information
characteristic listed in the left column.