Lecture Accounting information systems: Chapter 1 - Richardson, Chang, Smith

Chapter 1 - Accounting information systems and firm value. After reading this chapter, you should be able to: Define an accounting information system and explain characteristics of useful information, distinguish among data, information and an information system, Distinguish the roles of accountants in providing information and explain certifications related to accounting information systems,...

Accounting Information Systems and Firm Value

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• LO#1 Define an accounting information system and explain

characteristics of useful information.

• LO#2 Distinguish among data, information and an information

system.

• LO#3 Distinguish the roles of accountants in providing

information and explain certifications related to accounting

information systems.

• LO#4 Describe how business processes affect the firm’s

value chain.

• LO#5 Explain how AIS affects firm value.

• LO#6 Describe how AIS assists the firm’s internal business

Accountants as Business

Analysts

• Increasingly, the role of an accountant is

to help address business opportunities

the accountants need to decide what

information is needed, then build an

information system to gather the

necessary information and finally analyze that information to offer helpful advice to

management

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Accounting Information Systems

(AIS) is defined as a system that records,

processes and reports on transactions to provide financial and non-financial

information to make decisions and have

appropriate levels of internal controls

(security measures to protect sensitive

data) for those transactions

information that companies are required to have and also information that can be

used to make important decisions

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Why Study AIS?

• It’s fundamental to accounting.

– Accounting is an information providing activity, so

accountants need to understand:

implemented, and used

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What Can an AIS Do?

track a variety of things

over the world.

store.

system

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A Simple Information System

Possible Input: Sales at Starbucks

Possible Storage: Database of all Sales at Starbucks

Possible Processing: Queries of What Sells Best at Night

Possible Output: Reports of What Sells Best at Night

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Attributes of Useful Information

attributes:

making a difference in a decision

Data vs Information

event and have little meaning on their

own

• Information is defined as being data

organized in a meaningful way to be

useful to the user Data serves as an

input

particularly toy might be considered data However, after subtracting the cost of

goods sold from the sales price to

compute the net profit would be

considered information if it helps a retailer decide whether to carry that particular toy

in its inventory

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Information Overload

large amount of data

overload

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Information Value Chain

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Discretionary versus Mandatory

Information

• Discretionary information is information

that is not required by law

overheads costs associated with each pound

of chicken at Tyson Foods.

discretionary information outweigh the costs

of obtaining it.

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Discretionary versus Mandatory

Information

is required by law

Reports that include Financial Statements)

and Tax Returns

reports for public companies.

minimize the costs of producing this

information.

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Role of Accountants in AISs

information while ensuring the data’s

reliability, security, accessibility and relevance.

• Certified Internal Auditor

auditors

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Value Chain

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Where do AIS add value to a

Business? In the Primary

Activities?

• Inbound logistics are the activities

associated with receiving and storing raw materials and other partially completed

materials, and distributing those materials

to manufacturing when and where they

are needed

• Operations are the activities that

transform inputs into finished goods and

services (e.g turning wood into furniture

for a furniture manufacturer; building a

house for a home builder)

• Outbound logistics are the activities that

warehouse and distribute the finished

goods to the customers

• Marketing and sales activities identify

the needs and wants of their customers to help attract them to the firm’s products

and buy them

• Service activities provide the support of

customers after the products and services are sold to them (e.g warranty repairs,

parts, instruction manuals, etc.)

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Where do AIS add value to a

Business? In the Support

Activities?

• Firm infrastructure activities are all of the

activities needed to support the firm,

including the CEO, finance, accounting,

and legal

• Human resource management activities

include recruiting, hiring, training and

compensating employees

• Technology activities include all of the

technologies to support value-creating

activities These technologies also include research and development to develop new products or research and development to determine ways to produce products at a cheaper price

• Procurement activities involve purchasing

inputs such as raw materials, supplies,

and equipment

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AIS and Internal Business

Processes

for the enterprise (or ERP) system

database that collects data from

throughout the company including orders, customers, sales, inventory, and

employees

within the company in a useful and timely way

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Use of ERP System

from a customer, fill the order, ship it, and then create an invoice to bill the customer

can view and update the information

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Figure 1.6 AIS and External

Business Processes

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The Supply Chain

• The supply chain refers to the flow of

materials, information, payments, and

services from suppliers all the way through the customer

can be made more efficient using the AIS

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Supply Chain Management

be used to optimize processes within the supply chain

be ordered.

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Customer Relationship

Management

interactions with customers

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Customer Relationship

Management

record of their past purchases and product searches and then uses that information to recommend other similar products for the customer to consider

the financial products currently being used

by its bank’s customers through its AIS,

they will be able to help identify additional bank products (upselling items such as

insurance products, CD’s, mutual funds,

etc.) to sell to their clients

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The Effect of AIS on the Income

Statement

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AIS, Firm Profitability, and Stock

Prices

used to improve company profits

in IT can positively affect a company’s

stock price

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(AIS) is defined as being an information

system that records, processes and

reports on transactions to provide financial information for decision making and

control

systems to create value The value chain illustrates how during each primary

activity, the product should gain some

value An AIS serves an important role in enabling value in each primary and

supporting activity

and external business processes such as enterprise systems, supply chain

management and customer relationship

management software

business processes more efficient and

effective A designed and

well-functioning AIS can be expected to create value by increasing revenues and

reducing expenses

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