Page 34 - Encyclopedia of Business and Finance

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Accounting Information Systems

INFORMATION SYSTEMS IN organization. Such data are often compared to budgeted
CONTEXT data prepared for financial management and for external
AISs cover all business functions from backbone account- financial reporting.
ing transaction processing systems to sophisticated finan- Decision analysis is a through review of the decisions
cial management planning and processing systems. a manager is responsible for making. The primary deci-
sions that managers are responsible for are identified on
Financial Reporting. Financial reporting starts at the an individual basis. Then models are created to support
operational levels of the organization where the transac- the manager in gathering financial and related informa-
tion processing systems capture important business events tion, developing and designing alternatives, and making
such as normal production, purchasing, and selling activ- actionable choices. This method is used when decision
ities. These events (transactions) are classified and sum- support is the system’s primary objective.
marized for internal decision making and for external Process analysis is a thorough review of the organiza-
financial reporting. tion’s business processes. Organizational processes often
are identified and segmented into a series of events that
Cost Accounting Systems. Cost accounting systems such either add or change data. These processes can then be
as activity-based costing (ABC) systems are used primarily modified or reengineered to improve the organization’s
in manufacturing environments, but increasingly are operations in terms of lowering cost, improving service,
being applied to service companies, such as banks, real improving quality, and improving management informa-
estate firms, and insurance companies. These allow organ- tion.
izations to track the costs associated with production of
goods and performance of services. Design. The design phase takes the results of the analysis
phase and turns them into detailed specific designs that
Management Accounting Systems. Management account- can be implemented in a subsequent phase. It involves the
ing systems such as master budgets are used to facilitate detailed design of all inputs, processing, storage, and out-
organizational planning, monitoring, and control for a puts of the proposed accounting system. Inputs may be
defined using screen layout tools and application genera-
variety of activities. Such systems allow all managerial lev-
tors. Processing can be shown through the use of flow-
els to have access to prompt reporting and statistical
charts or business process maps that define the system
analysis. The systems are used to gather information to
logic, operations, and work flow. Logical data storage
consider alternative scenarios, and to identify an optimal
designs are shown by modeling the relationships between
answer among the hypothetical scenarios.
the organization’s resources, events, and agents in dia-
grams. Also, entity relationship diagram modeling is used
DEVELOPMENT OF AN AIS to document large-scale database relationships. Output
The development of all AISs includes the basic phrases of designs are documented through the use of a variety of
planning, analysis, design, reporting, implementation, reporting tools such as report writers, data extractions
and support. The time associated with each of these tools, query tools, and online analytical processing tools.
phrases can be as short as a few weeks or as long as several Data capture and storage. Screen designs and system
years. interfaces are the primary data capture devices of AISs and
are developed through a variety of tools. Storage is
Planning. The first phase of systems development is the achieved through the use of normalized databases that
planning of the project. This entails determination of the increase functionality and flexibility.
scope and objectives of the project, the definition of proj- Processing. Business process maps and flowcharts are
ect responsibilities, control requirements, project phases, used to document the operations of the systems. Modern
project budgets, and project deliverables. AISs use specialized databases and processing designed
specifically for accounting operations. This means that
Analysis. The analysis phase requires a thorough evalua- much of the base processing capabilities come delivered
tion and documentation of the accounting and business with the accounting or enterprise software.
processes in use by the organization. This phase may
include reengineering to take advantage of modern best Reporting. Reporting is the driving force behind AIS
practices and the operating characteristics of modern sys- development. If the system analysis and design are suc-
tem solutions. cessful, the reporting process provides the information
Data analysis involves a thorough review of the that helps drive management decision making and exter-
accounting information that is being collected by an nal financial reporting. Accounting systems make use of a

ENCYCLOPEDIA OF BUSINESS AND FINANCE, SECOND EDITION 11