THE ROLE OF AIS IN THE VALUE CHAIN

WHAT IS THE ACCOUNTING INFORMATION SYSTEM?

Accounting Information System (AIS) is a system that collects, processes, and

stores financial and non-financial data to help businesses track their money and make
better decisions.

It includes people, computers, and software that work together to record

transactions, generate financial reports, and ensure accuracy.

BENEFITS OF AIS

 Improves Efficiency
 Enhances Decision-Making
 Reduce Cost
 Strengthens Security
 Ensures Compliance

THE VALUE CHAIN

The value chain is a business model that describes the full range of activities a
company performs to create a product or service and deliver it to costumers.
Value chain is an interconnected links, each link represents a different stage in the
process, and value is added at each stage.

ROLE OF AIS TO THE VALUE CHAIN

Example of a value chain for a company that sells shoes:

Inbound Operatio Outbound Marketing

Logistic Logistic & Sales Service
s
ns
 Firm Infrastructure
 Human Resource Management
 Technology Development
 Procurement
OVERALL IMPACT OF AIS ON THE VALUE CHAIN

 Reduce costs by improving financial efficiency.

 Enhances decision-making with real-time data.
 Improves financial accuracy and compliance.
 Supports business growth by optimizing processes.
DATA CONCEPTS
WHAT IS DATA?
In general, data is information such as facts and numbers used to analyze
something or make decisions. Data refers to all the facts that are collected, stored, and
processed by an information system.
DATA VS. INFORMATION
Data are facts, which may or may not be processed (edited, summarized, or
refined) and have no direct effect on the user.

Information causes the user to take action that he or she otherwise could not, or
would not, have taken. This is often defined simply as processed data. Information is
determined by the effect it has on the user, not by its physical form. Thus, information is
not just a set of processed facts arranged in a formal report, this also allows users to take
action to resolve conflicts, reduce uncertainty, and make decisions.
 Data Sources

Data sources are financial transactions that enter the information system from
both internal and external sources. External financial transactions are the most
common source of data for most organizations. Internal financial transactions involve
the exchange or movement of resources within the organization

 Data Collection

Data collection is the first operational stage in the information system. The
objective is to ensure the event of data entering the system is valid, complete, and
free from material errors. In many respects, this is the most important stage in the
system. Two rules govern the design of data collection procedures—relevance and
efficiency.

 Data Processing

Once collected, data usually require processing to produce information. Tasks in

the data processing stage range from simple to complex.

 Database Management

The organization’s database is its physical repository for financial and non-
financial data. Database can be a filing cabinet or a computer disk. Regardless of the
database’s physical form, we can represent its contents in a logical hierarchy. The
levels in the data hierarchy are attribute,
record, and file.

1. Data Attribute - the data attribute is the most elemental piece of potentially
useful data in the database. An attribute is a logical and relevant characteristic of
an entity about which the firm captures data. The attributes shown in Figure 5 are
logical because they all relate sensibly to a common entity—accounts receivable
(AR). Each attribute is also relevant because it contributes to the information
content of the entire set.
2. Record - record is a complete set of attributes for a single occurrence within an
entity class. For example, a particular customer’s name, address, and account
balance is one occurrence (or record) within the AR class. To find a particular
record within the database, we must be able to identify it uniquely.
3. Files - a file is a complete set of records of an identical class. For example, all the
AR records of the organization constitute the AR file. Similarly, files are constructed
for other classes of records such as inventory, accounts payable, and payroll. The
organization’s database is the entire collection of such files.
INFORMATION GENERATION
Information generation is the process of compiling, arranging, formatting, and
presenting information to users. Information can be an operational document such as a
sales order, a structured report, or a message on a computer screen. Regardless of
physical form, useful information has the following characteristics: relevance, timeliness,
accuracy, completeness, and summarization.
Relevance - the contents of a report or document must serve a purpose. This
could be to support a manager’s decision or a clerk’s task. We have established
that only data relevant to a user’s action have information content. Therefore, the
information system should present only relevant data in its reports.
Timeliness - the age of information is a critical factor in determining its
usefulness. Information must be no older than the time period of the action it
supports. For example, if a manager makes decisions daily to purchase inventory
from a supplier based on an inventory status report, then the information in the
report should be no more than a day old.
Accuracy - information must be free from material errors. However, materiality is
a difficult concept to quantify. It has no absolute value; it is a problem-specific
concept. This means that, in some cases, information must be perfectly accurate.
Often, perfect information is not available within the user’s decision time frame.
Therefore, in providing information, system designers seek a balance between
information that is as accurate as possible, yet timely enough to be useful.
Completeness - no piece of information essential to a decision or task should be
missing. For example, a report should provide all necessary calculations and
present its message clearly and unambiguously.
Summarization - information should be aggregated in accordance with the user’s
needs. Lower level managers tend to need information that is highly detailed. As
information flows upward through the organization to top management, it becomes
more summarized.
Generally, the value of information to a user is determined by its reliability. Because,
the purpose of information is to lead the user to a desired action. For this to happen,
information must possess the above mentioned five characteristics.
 Feedback
Feedback is a form of output that is sent back to the system as a source of data.
Feedback may be internal or external and is used to initiate or alter a process. For
example, an inventory status report signals the inventory control clerk that items of
inventory have fallen to, or below, minimum allowable levels. Internal feedback from
this information will initiate the inventory ordering process to replenish the
inventories.
INFORMATION SYSTEM OBJECTIVES
Each organization must tailor its information system to the needs of its users. Therefore,
specific information system objectives may differ from firm to firm. Three fundamental
objectives are, however, common to all systems;
1. To support the stewardship function of management.
2. To support management decision making.
3. To support the firm’s day-to-day operations
 BUSINESS SYSTEM DESIGN
Business System Design refers to the process of developing structured methods for
organizing, managing, and optimizing business processes through technology and
information systems. It involves defining the components, workflows, and data structures
that support business operations efficiently.
ROLE OF ACCOUNTANTS IN BUSINESS SYSTEM DESIGN
 Traditionally, accountants designed manual accounting systems.
 With computerization, they shifted to defining financial data structures and control
mechanisms.
 Accountants ensure financial integrity, reporting accuracy, and compliance.

CONCEPTUAL SYSTEM PHYSICAL SYSTEM

(ACCOUNTANTS ' ROLE) (IT PROFESSIONALS ' ROLE)

Defines financial reporting rules Develops technical infrastructure

Determines data collection needs Implements software and databases

Ensures regulatory compliance Optimizes system performance

Designs financial controls Secures data and prevent breaches

KEY COMPONENTS
1. SYSTEM ARCHITECTURE
- Defines the structure of the business system, including databases, applications,
and network infrastructure.
- Ensures integration between different system components
2. DATA MANAGEMENT
- Establishes how data is collected, stored, processed, and secured.
- Ensures compliance with data governance and regulatory requirements.
3. BUSINESS PROCESSES & WORKFLOW AUTOMATION
- Defines the structure of the business system, including databases, applications,
and network infrastructure.
- Ensures integration between different system components.
4. COMPLIANCE AND REGULATORY REQUIREMENTS
- Aligns system functions with GAAP, IFRS, and tax regulations.
- Supports audit and compliance reporting.
- Ensures financial records meet legal retention and privacy laws (e.g., SOX,
GDPR).
TYPES OF BSD
 Transaction Processing Systems (TPS) - Focuses on recording and processing
daily business transactions (e.g., sales, purchases, payroll)
 Management Information Systems (MIS) - Converts transaction data into
meaningful reports for decision-making. Provides financial summaries, budgeting
reports, and performance analysis.
 Decision Support Systems (DSS) - Helps managers make data-driven financial
decisions. Uses predictive analytics, risk assessment, and financial modeling.
 Enterprise Resource Planning (ERP) Systems - Integrates finance, HR, supply
chain, and operations into a single system. Ensures real-time data sharing across
departments for efficiency.
 Customer Relationship Management (CRM) Systems - Tracks customer
transactions, invoicing, and payment history. Helps in credit management and
customer financial interactions.
IMPLEMENTATION METHODS

REQUIREMENTS

1. Functional Requirements – The specific tasks the system must perform.

2. Non-Functional Requirements – Performance, security, and usability standards.
3. Stakeholder Requirements – Needs of users, management, and IT teams.

TOOLS

1. Flowcharts & Data Flow Diagrams (DFDs) – Visual representations of system

processes.
2. Unified Modeling Language (UML) – Diagrams to design object-oriented
systems.
3. Entity-Relationship Diagrams (ERDs) – Illustrates data relationships in
databases.
4. Business Process Modeling Notation (BPMN) – Standardized process
mapping.

TRENDS

1. Artificial Intelligence (AI) Integration – Automating decision-making processes.

2. Cloud Computing – Enhancing accessibility and cost-effectiveness.
3. Big Data & Analytics – Improving insights and data-driven decisions.
4. Blockchain Technology – Enhancing security and transparency.

INFORMATION SYSTEM IN A FIRM

The purpose of an information system (IS) is to facilitate decision-making,

coordination, control, analysis, and visualization inside an organization by gathering,
processing, storing, and distributing information.

COMPONENTS

 DATA COLLECTION - Transaction, invoices

 DATA PROCESSING - Calculation, reconciliations
 INFORMATION OUTPUT - Financial reports, compliance documents
EXAMPLE :
• HARDWARE
• SOFTWARE
• DATA
• PEOPLE
• PROCESSES
TYPES OF INFORMATION SYSTEM

 TRANSACTION PROCESSING SYSTEMS - Handle routine day-to-day business

transactions.
 MANAGEMENT INFORMATION SYSTEMS - Provide managers with reports to
assist in decision making.
 DECISION SUPPORT SYSTEMS - Aids in complex decision-making through
analysis tools
 CUSTOMER RELATIONSHIP MANAGEMENT SYSTEMS - Manage interactions
with customers to improve service and satisfaction.

BENEFITS OF INFORMATION SYSTEM

Information systems offer numerous key benefits that can greatly enhance the efficiency
and effectiveness of an organization. Some of the primary benefits include:

 Improved Decision Making: Information systems provide timely and accurate

data, enabling managers to make informed and better decisions.
 Increased Efficiency: Automation of tasks streamlined processes, and faster
access to information reduce manual work and increase operational efficiency.
 Cost Reduction: By improving workflows, reducing redundancies, and optimizing
resources, information systems help reduce operational costs.
 Enhanced Communication: They facilitate better communication within an
organization and with external stakeholders, leading to faster response times and
improved collaboration.
 Competitive Advantage: By using real-time data and analytics, organizations
can identify trends, anticipate customer needs, and stay ahead of competitors.
 Better Customer Service: Information systems enable better tracking of
customer preferences and histories, which can lead to personalized services and
improved customer satisfaction.

AIS AD CORPORATE STRATEGY

 Support for Corporate Strategy: AIS helps businesses to match their financial
data to their overarching objectives.
 Decision-Making: Aids in the formulation of data-driven strategic choices on
investments, budgeting, mergers, and acquisitions.
 Resource Allocation: Enables management to efficiently monitor and distribute
resources for strategic projects.

INFORMATION TECHNOLOGY AND BUSINESS STRATEGY

Information technology, or IT, is the storage, management, and processing of

information via the use of computers, software, networks, and other technologies. It
facilitates communication, problem-solving, and effective data management for both
individuals and enterprises. IT, to put it simply, is the use of technology to simplify and
improve tasks.

Components:
⚬ Hardware: Physical devices like servers and computers.
⚬ Software: Applications and programs used by businesses.
⚬ Networks: Communication systems like the internet and internal systems.
⚬ Data: Information that businesses analyze and process.
 Business strategy is a plan that a company creates to achieve its goals, grow,
and succeed in its market. It outlines how the business will compete, what it aims to
achieve, and the actions it will take to get there. This could involve things like offering
unique products, targeting specific customers, or improving efficiency. Essentially, it's
the roadmap for a business to reach its long-term objectives.

Key Elements of Business Strategy:

• Vision and Mission

• Goals and Objectives
• Market Positioning
• Competitive Advantage

By fostering innovation, cutting expenses, and increasing efficiency, information

technology (IT) supports company strategy. IT helps firms run more efficiently by
automating jobs and streamlining procedures. Growth-promoting services and new
business models like streaming platforms and e-commerce are also supported. IT assists
companies in making better decisions and reacting to changes more rapidly by analyzing
data. Additionally, IT helps organizations develop and scale by offering flexible solutions
like cloud computing and improves customer experience through personalized services.
All things considered, IT helps companies stay ahead of the competition by facilitating
innovation, enhancing operations, and facilitating more informed decision-making.

ACCOUNTANTS AS SYSTEM-ORIENTED PROFESSIONALS

IMPORTANCE OF ACCOUNTANTS IN AIS

Accountants play a crucial role in Accounting Information Systems (AIS) because

they bridge the gap between financial expertise and technological systems. As
businesses increasingly rely on digital tools to manage financial data, accountants must
understand and oversee these systems to ensure accuracy, security, and compliance.

KEY ROLES OF ACCOUNTANTS IN AIS

Accountants are no longer just record keepers—they are system-oriented

professionals who oversee, manage, and optimize Accounting Information Systems (AIS).
Their role in AIS involves ensuring the accuracy, security, and efficiency of financial
processes, integrating technology with accounting principles, and supporting data-driven
decision-making.

THE SYSTEM-ORIENTED MINDSET OF ACCOUNTANTS

Modern accountants must think beyond numbers, they need a system-oriented

mindset to effectively manage Accounting Information Systems (AIS). This means
understanding how financial data flows within a system, ensuring its accuracy, and using
technology to enhance decision-making.
 A system-oriented mindset allows accountants to leverage technology for financial
management, improve data-driven decision-making, and ensure financial security.
Today’s accountants are not just bookkeepers—they are financial strategists who
understand, analyze, and protect digital financial systems.

FUTURE OF ACCOUNTANTS IN AIS

The accounting profession is rapidly evolving due to technological advancements

in AIS. Accountants are no longer just number crunchers; they are system analysts, data-
driven decision-makers, and financial strategists. The future of accountants in AIS will be
shaped by automation, artificial intelligence (AI), blockchain, cloud computing, and data
analytics.