Accounting information system summary

1. ACCOUNTING INFORMATION SYSTEMS (2020)
10/26/2020 PREPARED BY MR WILLIAM MUSHONGA(2020) 1
Session 3

2. E-Commerce and categories of e-commerce
e-commerce
Is defined as technology mediated
exchange, including the business process
of selling, buying, delivering, servicing
and paying for products and services
over computer networks.
Categories of e-commerce
➢ Business to Business (B2B) both participants in
the electronic transaction are organisations e.g.
wholesaler and retailer
➢ Business to consumer (B2C) this is where the
business sells its products or services to the
public
➢ Consumer to business (C2B) this is where the
customer provides the details about the product
their looking for, delivery dates, address and in
turn business view and bid online for the
provision of service or products
➢ Consumer to consumer (C2C) this is where the
consumers sell products/ services to each other
* Brain teaser

3. At the end of this session, learners should be
able to:
Explain the fundamental characteristics of information
Explain How management make use of an AIS
Analyse management functions and their information needs
Analyse decisions using the concept of Problem Structure
Analyse dysfunctional behaviour in managerial reports

4.  Accurate- information should be without errors, this means that the information must be
checked to ensure correctness
 Accessible- information should be easily available to users in order to meet their needs
 Up to date information- information received must not be updated
 Detail of information- some users prefer detailed information while others prefer a
summary.The information must provide all the important facts and not more than
necessary.
 Flexibility- the information must be able to be used for more than one purpose
 Relevance- information should be relevant to needs of the users
 Cost effectiveness- the value of the information should be balanced against the cost
 Reliability- information is reliable if we can depend on it. Reliability of information
depends on the source of the information
 Timely- information should be delivered when needed
 Format of information- information should not be overly complex and must be presented
in the required format
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Fundamental characteristics of information

5.  Monitoring the return on investments of an IS
 Developing an IS strategy that aligns IS goals
with the organisation’s goals
 Setting standards for the purchase and use of
hardware and software
 Constantly seeking new ways to meet the needs
of the internal users
 Implementing the measures to ensure that the
planned benefits from system solutions are
actually realised
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General objectives of an information system
department

6.  The second function of the AIS is toprovide
management with information useful for
decision making.
 The information an AIS provides fallsinto two
main categories:
▪ FinancialStatements
▪ Managerial Reports
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How management make use of an AIS

7.  identify and define the problem
 generate and evaluate the alternatives
 select the preferred solution
 Implement the selected solution
 Evaluate the results
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Steps that are involved in decision making process

8. ▪ Financial statements can be provided to both
external and internal parties.
▪ Some outputs are specifically for internal use:
▪ For planning purposes
▪ For management of day-to-day operations
▪ For control purposes
▪ For evaluation purposes
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Purposes of AIS output:

9. MANAGEMENT FUNCTIONS AND INFORMATION NEEDS
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10. MANAGEMENT FUNCTIONS
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11. •The problem structure reflects how well the decision
maker understands the problem.
•Elements of problem structure:
•data
•procedures
•objectives
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Problem Structure

12. PROBLEM STRUCTURE
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13. MANAGERIAL REPORTS
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
 Report objectives - reports must have value or
information content
They should:
▪ reduce the level of uncertainty associated with a
problem facing the decision maker
▪ influence the behavior of the decision maker in a
positive way

14. MANAGERIAL REPORTS
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 Goal congruence:
▪ A carefully structured management reporting system and
compensation schemes help to appropriately assign
authority and responsibility.
▪ If compensation measures are not carefully designed,
managers may be tempted to engage in actions not
optimal for the organization in the long-run.

15. Managerial reports
 Important to choose what to measure for
your problem.
 Youget what you measure
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16. Example:
 An instructor wants to improve student
performance
 He decides to encourage better attendance by
grading students on attendance (i.e.,
measuring it).
 What is the result?
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17. Possible result:
 Better student attendance
Conclusion
 The improved attendance may or may not
improve learning outcomes.
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18. OR ANOTHER RESULT COULD BE:
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 Students may be getting better grades when
attendance is measured, but not learning more.
 Some students may in fact reduce their studying
because they believe they can use the attendance
score to boost their grade.
 This behavior would be a dysfunctional result of
the measurement.
What would be a better method?

19. OTHER INAPPROPRIATE PERFORMANCE MEASURE EXAMPLES:
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▪ The use of price variance to evaluate a purchasing
agent can affect the quality of the items
purchased.
▪ The use of quotas (such as units produced) to
evaluate a supervisor can affect quality control,
material usage efficiency, labor relations, and
plant maintenance.

20.  The AIS must also be able to provide
managers with detailed operational
information about the organization’s
performance.
 Two important types of managerial reports
are
– budget
– performance reports
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21. WHAT IS A BUDGET?
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 A budget is the formal expression of goals in
financial terms.
 One of the most common types of budget is
a cash budget.

22. WHAT IS A PERFORMANCEREPORT?
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 A performance report lists the budgeted and
actual amounts of revenues and expenses
and also shows the variances, or differences,
between these two amounts.

23. MAGIC CO. MONTHLY PERFORMANCEREPORT
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Budget Actual Variance
Sales $32,400 $31,500 ($900)
Cost ofGoods 12,000 14,000 (2,000)
Gross Margin $20,400 $17,500 ($2,900)
Other Expenses 9,000 7,000 2,000
Operating Income $11,400 $10,500 ($900)

24. BE CAREFUL USING BUDGET REPORTS
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 Budgets can cause dysfunctional behavior.
 Example:
▪ In order to stay within budget, the IT Department
did not buy a security package for its system.
▪ A hacker broke in and devastated some of their
data files.
▪ Critical security measures were foregone in order
to meet budgetary goals.
▪ The resulting costs far outweighed the savings.

25. OTHER PROBLEMS WITH BUDGET:
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 Budgeting can also be dysfunctional in that
the focus can be redirected to creating
acceptable numbers instead of achieving
organizational objectives.
 Does this mean organizations shouldn’t
budget?

26. 1) Some people say that accountants should
focus on producing financial statements
(e.g. balance sheet) and leave the design
and production of managerial reports (e.g.
performance reports) to information
systems specialists.
What are the advantages and disadvantages
of following this advice?
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27.  WHAT ARE SOME OF THE PROBLEMS THAT MIGHT OCCUR WHEN
MANAGEMENT FOCUSES ONLY ON PROFIT MEASURE BASED
REPORTS? (WHAT AREAS OFTHE BUSINESS
MIGHT SUFFER AS A RESULT?)
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28. THE END