Page 48 - Accounting Information Systems

C H A P TER 1 The Information System: An Accountant’s Perspective 19

Distribution
Distribution is the activity of getting the product to the customer after the sale. This is a critical step.
Much can go wrong before the customer takes possession of the product. Excessive lags between the tak-
ing and filling of orders, incorrect shipments, or damaged merchandise can result in customer dissatisfac-
tion and lost sales. Ultimately, success depends on filling orders accurately in the warehouse, packaging
goods correctly, and shipping them quickly to the customer.

Personnel
Competent and reliable employees are a valuable resource to a business. The objective of the personnel
function is to effectively manage this resource. A well-developed personnel function includes recruiting,
training, continuing education, counseling, evaluating, labor relations, and compensation administration.

Finance
The finance function manages the financial resources of the firm through banking and treasury activities,
portfolio management, credit evaluation, cash disbursements, and cash receipts. Because of the cyclical na-
ture of business, many firms swing between positions of excess funds and cash deficits. In response to these
cash flow patterns, financial planners seek lucrative investments in stocks and other assets and low-cost lines
of credit from banks. The finance function also administers the daily flow of cash in and out of the firm.

THE ACCOUNTING FUNCTION
The accounting function manages the financial information resource of the firm. In this regard, it plays
two important roles in transaction processing. First, accounting captures and records the financial effects
of the firm’s transactions. These include events such as the movement of raw materials from the ware-
house into production, shipments of the finished products to customers, cash flows into the firm and
deposits in the bank, the acquisition of inventory, and the discharge of financial obligations.
Second, the accounting function distributes transaction information to operations personnel to coordinate
many of their key tasks. Accounting activities that contribute directly to business operations include inven-
tory control, cost accounting, payroll, accounts payable, accounts receivable, billing, fixed asset accounting,
and the general ledger. We deal with each of these specifically in later chapters. For the moment, however,
we need to maintain a broad view of accounting to understand its functional role in the organization.

The Value of Information
The value of information to a user is determined by its reliability. We saw earlier that the purpose of in-
formation is to lead the user to a desired action. For this to happen, information must possess certain
attributes—relevance, accuracy, completeness, summarization, and timeliness. When these attributes are
consistently present, information has reliability and provides value to the user. Unreliable information has
no value. At best, it is a waste of resources; at worst, it can lead to dysfunctional decisions. Consider the
following example:
A marketing manager signed a contract with a customer to supply a large quantity of product by a
certain deadline. He made this decision based on information about finished goods inventory levels.
However, because of faulty record keeping, the information was incorrect. The actual inventory levels
of the product were insufficient to meet the order, and the necessary quantities could not be manufac-
tured by the deadline. Failure to comply with the terms of the contract may result in litigation.
This poor sales decision was a result of flawed information. Effective decisions require information
that has a high degree of reliability.

Accounting Independence
Information reliability rests heavily on the concept of accounting independence. Simply stated, account-
ing activities must be separate and independent of the functional areas that maintain custody of physical