Accounting Information systems

1
Accounting Information systems

• Chapter 1
• Introduction and overview

2
Introduction

• Revolution in information technological and AIS
• Accounting provides information for decision
  making
• Evolution of accounting from data gathering to
  decision making information systems

3
Introduction- continued

• Uniform definition of AIS is lacking
• AIS in measurement, manipulation and
  communication systems
• Operational accounting
• Equity accounting
• Significant transformations in AIS

4
Objectives of Financial Accounting

• Provide information useful for decision makers
• External users
• Internal users
• General purpose annual reports include
• Balance sheets
• Income statement
• Statement of cash flows
• Management report
• Auditors report

5
Objectives of Financial Accounting

• General purpose reports
• Support investment and credit decisions
• Provide cash flow information
• information on the resources and obligations

6
Investors and creditors focus on

• Profitability
• Liquidity
• Solvency
• Stability
• Growth
• Global
• Quality of information to safeguard against
• possible corporate fraud.

7
Examples of recent accounting frauds

• Enron boosted profit by over 1 billion
• Worldcom overstated cash flow by 3.8 billion
• Xerox boosted income by 1.5 billion over five
  years
• Bristol Myers boosted revenue by 1.5 billion

8
Objectives of Managerial Accounting

• Managerial accounting helps managerial decisions
• Assits planning and control
• Measure results
• Provide feedback

9
National Association of Accountants (NAA)
definition of Managerial Accounting

• As the process of
• Identifying
• Measuring
• Accumulating
• Analyze

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Two essential Qualities of Accounting information

• Relevance
• Accounting information must be relevant to the
  needs of the decision makers
• All decision makers do not need same information
• Reliability
• Refers to faithfulness, constancy, and
  trustworthiness
• Includes facts and not opinion

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Hierarchy of Accounting Attributes

• FASB concepts-2
• Relevant information must have
• Predictive value
• Feedback value
• Timeliness value
• Reliable information must be
• Verifiable
• Faithfully represented
• Neutral - unbiased

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Levels of details and the nature of accounting
information

• How much information do we need
• Decide on cost and benefit of information
• Accounting reports only the material facts
• What is a material fact?
• Remain cautiously conservative and avoid being
  overtly optimistic in assessing value of the
  assets and income of the firm

13
Levels of details and the nature of accounting
information

• Accounting data are surrogates
• Accounting is not the true measure of things
• Accounting measures are based on assumtions,
  approximation, principles, and objectives needs
  to be achieved
• Detail and aggregate data are needed at
  different levels of the organization
• Accounting data cover past, present, and future
  time periods

14
Value of Accounting information

• Value of information depends on two factors
• Accuracy
• True and unbiased representation of facts
• Reduction of uncertainty
• Improves decision makers level of confidence and
  ability to predict the outcome

15
Users of Accounting Information

• Most people use accounting information in one
  form or other
• Accounting information influences the life of
  people in many ways
• Users are classified as
• Internal users
• External users
• Depending on the types of users- the nature of
  information and the level of details will vary

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Roles of Accountants in AIS

• Controllership responsibilities
• Fiduciary responsibilities
• Manage the accounting systems
• Interpret results
• Safeguard assets
• Planning and control

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Systems concepts and AIS

• An array of things to achieve defined goals
• Process input and produce output
• Systems consists of hierarchy of systems and
  subsystems
• Functional departments and limitations
• Departmental information systems
• Compartmentalization of data

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Managerial Levels and Systems View

• Anthonys systems framework and AIS
• Strategic planning process and AIS
• Management control and AIS
• Operational control and AIS

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AIS in Historical Perspectives

• Original AIS concepts and purpose
• AIS in 70s
• AIS in 90s
• Recent AIS
• The future of AIS