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CHAPTER 1
Introduction to Accounting Information
Systems
John Timmy Merjudio, CPA, MBA, CLSSBB
Marinduque State University
CHAPTER OUTLINE
• Overview of Accounting Information System (AIS)
• Role and importance of AIS in Business
• Components and functions of AIS
• Types of information system
• Fundamentals of Computerized Information System
• Role of Accountant in AIS
• Types of Audit in AIS
ASSESSMENT
• Quiz
• Reflection Paper (Accounting Information System in Modern World)
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OVERVIEW OF ACCOUNTING INFORMATION SYSTEM
What is accounting?
• Accounting is a vital process that involves the systematic recording, summarizing, analyzing, and reporting of financial
transactions to provide insights into a business's financial health and performance. It encompasses activities such as
bookkeeping, financial statement preparation, and overall financial management.
• It has been called as the language of business
What is information?
• Information is a business resource and vital to the survival of the business organization. Its flow could be external or
internal
Introduction to Accounting Information Systems
OVERVIEW OF ACCOUNTING INFORMATION SYSTEM
What is system?
• A system is a group of two or more interrelated components or subsystems that serve a common purpose
• Elements of systems are multiple components, relatedness, system vs subsystem and purpose
What is information system?
• set of formal procedures by which data are collected, processed into information, and distributed to the users
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OVERVIEW OF ACCOUNTING INFORMATION SYSTEM
What is accounting information system (AIS)?
• subsystem that process financial and nonfinancial transactions that directly affect the processing of financial transactions
• system of collecting and processing transaction data and communicating financial information to decision-makers
FRAMEWORK FOR INFORMATION SYSTEM
Introduction to Accounting Information Systems
OVERVIEW OF ACCOUNTING INFORMATION SYSTEM
• AIS subsystem are composed of transaction processing system, general ledger/financial reporting system and management
reporting system
• Transaction Processing System
• Support daily business operations with numerous reports,
TPS documents, and messages for users throughout the organization
• General Ledger/Financial Reporting System
AIS Subsystem • Produce traditional financial statements, such as the income
statement, balance sheet, statement of cash flows, tax returns
GL/FRS and others required by law
• Management Reporting System
• Provides internal management with special-purpose financial
reports and information needed for decision making such as
MRS budget, variance reports and subsystem
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ROLE & IMPORTANCE OF AIS IN BUSINESS
Importance of Accounting Information System in Business
• Improving the quality and reducing the costs of products and services
• Improving efficiency
• Sharing knowledge
• Improving the efficiency and effectiveness of its supply chain
• Improving the internal control structure
• Improving decision making
Introduction to Accounting Information Systems
KEY COMPONENTS AND FUNCTION OF AIS
General Model of AIS
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COMPONENTS AND FUNCTION OF AIS
Six components of AIS Functions
People
Collect and store data
Procedures and Instructions
Data
Transform data into
Software Used
information
IT infrastructure
Provide adequate
control
Internal controls and security measures
Introduction to Accounting Information Systems
TYPES OF INFORMATION SYSTEM
Accounting Information • Composed of transaction processing systems, GL/ Financial reporting system and management reporting
systems. Computerized system that processes, records, and provide reports of consolidated transaction in
System (AIS) real time
• Comprehensive framework that leverages technology to gather, process, store, and disseminate information to
Management Information support managerial functions within an organization. It serves as the backbone of modern management,
System (MIS) ensuring that decision-makers are equipped with accurate, timely, and relevant data to steer their
organizations toward success.
• Sophisticated computer-based applications designed to assist decision-makers in solving complex problems
Decision Support System and making strategic choices. By harnessing advanced analytics, data modelling, and artificial intelligence,
(DSS) DSS provide invaluable insights, enabling managers to navigate uncertainties, explore alternatives, and make
well-informed decisions.
Executive Support System • Designed to assist senior management in strategic decision-making processes. Tailored to the needs of high-
level executives, it provides comprehensive information from internal and external sources, enabling leaders
(ESS) to analyze trends, assess organizational performance, and formulate long-term strategies.
Office Automation • Essential tools for businesses aiming to enhance productivity, streamline workflows, and foster collaborative
work environments. It refers to the integration of computer hardware, software, and network connections to
System (OAS) optimize routine office tasks and facilitate efficient information management.
• Encompasses a set of technologies, applications, and processes that analyze and transform raw data into
Business Intelligence insights which are meaningful. This helps businesses to gain a comprehensive understanding of their
operations, customers, and market dynamics. By employing advanced analytics and data visualization
System (BIS) techniques, BIS empowers organizations to make informed decisions, identify patterns, and forecast trends,
thereby gaining a competitive edge in the fast-paced business landscape.
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FUNDAMENTALS OF COMPUTERIZED INFORMATION SYSTEM
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ROLE OF ACCOUNTANT IN AIS
Three ways involvement of accountant
USERS SYSTEM DESIGNERS SYSTEM
AUDITORS
Accounting function is the single Accountants are responsible for key Reliability of internally produced
largest user of IT and all system that aspects of information system, financial statement must be proved
process financial transaction including assessment of by auditing the company’s system
impact accounting functions. As information needs, defining the as form part of substantive testing
end users accountant needs to content and format of output and test of control. Reports are to
provide clear picture of their needs reports, specifying sources of data, be validated by independent expert
to system designer. what are the accounting rules and auditor.
controls needed for better system
integrity and efficiency
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TYPES OF AUDIT IN AIS
External Auditing IT Auditing Internal Auditing
• System auditors responsibility • Usually performed as a • Conducting FS audits,
was limited to attestation broader part of financial audit examining operational
function and expand its scope and attest the effectiveness of compliance with orgt’l
and role into a broader client’s IT controls to establish policies, reviewing the
concern of assurance the degree of compliance with organization’s compliance
prescribed standards. with legal obligations,
evaluating operational
efficiency, detecting and
pursuing fraud within the firm,
and conducting IT audits
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