Accounting Information Systems:

Essential Concepts and Applications

Fourth Edition by Wilkinson, Cerullo,

Raval, and Wong-On-Wing

Chapter 2: The Business

Environment and the AIS

Slides Authored by Somnath Bhattacharya, Ph.D. Florida Atlantic University

The Business Firm as a System

Business

Firm

Environment

of the Firm

Organization’s

functions

AIS Transaction

Cycles

Business Events

from Operations

Organization

Information

System

Operational

System

Figure 2-1

System Characteristics of

Business Firms

Objectives

Environment

Constraints

Input-Process-Output

Feedback

Controls

Subsystems

Examples of AIS Subsystems

(Merchandising)

No Planning/Control, Investment, or Production Cycles reflected here

Inventory

System

General

Ledger

System

Order entry

Sales

System

Billing/ A. Receivable Cash Receipts

System

Purchasing/ A. Payable/ Cash Disb.

System

Human Resource

Management (Payroll) System

Revenue

Cycle

Expenditure

Cycle

Shipping Receiving

Ext/Fin. reporting

Tax & req. reporting

Internal reporting

Examples of AIS

Subsystems: Service Firm Revenue

General

Ledger

System

Human resource Management

System (payroll)

Service firm Revenue Cycle

Billing/

A.Receivables

Cash Receipts

System

No Purchasing, Production, Planning/Control, Investment Cycles

reflected here

Examples of AIS

Subsystems: Production Cycle

Inventory

System

Human Resource

Management (Payroll System

General

Ledger

System

Purchasing/ A. Payable/ Cash Disb.

System

Production

System

Production Cycle

No Revenue, and Investment Cycles reflected here

Organizational Structure in

Business Firms

Hierarchical

Matrix: Blend functional and project-

oriented structures

Decentralized

Network

A Networked

Organizational Structure

Consultant Training

Marketing Consulting

Services

Consultant Recruitment

Operation Management

Customer Project Team

Customer Services

Management

Figure 2-5

The Operational System of

a Manufacturing Firm

Facilities

Labor (human services)

Data

Funds

Acquiring

Materials

Producing

Finished

Goods

Storing

Finished

Goods

Shipping

Finished

Goods

Goods

to

Customer

Supporting

Operations

AIS

Information

Funds

Material

from

Supplier

Manufacturing Firm

Data and information flow

Physical flows Figure 2-7

Useful Data Elements

Concerning a Business Event

The nature of the element and when it occurred

Which “agents” were involved

What kinds of resources were involved and in what quantities

Where the event took place

Data Management:

Some Specifics

Field 1 Field 2 Field 3

Field 1 Field 2 Field 3

Field 1 Field 2 Field 3

Records { File

Some More Specifics

The manual activity of journalizing transactions is equivalent to the computerized recording of transactions in a transaction file

In general, manual accounting journals are equivalent to computerized transaction files

Similarly, manual general ledger and subsidiary ledgers are equivalent to computerized Master files. e.g., There is typically 1 record in the general ledger for each account in an entity’s chart of accounts

Examples of Master files include: Accounts Receivable Master File

Accounts Payable Master File

Inventory Master File

1) The flow begins at the upper left-hand corner of the sheet and generally moves from left to right and from top to bottom

2) All steps are clearly presented in a sequence, or a series of sequences. No obvious gaps in the procedure should be present

3) Symbols are used consistently throughout. Thus the symbol for manual processing (an inverted trapezoid) should appear each time a clerk performs a step in the procedure

Examples: What is what?

Figure 2-9

Basic Rules of Flowcharting - I

Source Document Destroy From prior

processing

Basic Rules of Flowcharting - II

4) The dispositions of all documents and reports are shown. In fact, the final “resting place” of every copy of every of every prepared document should be specified. Typical dispositions include placing documents in files, sending documents to outside parties such as customers, forwarding documents to connecting procedures (such as a general ledger procedure), and distributing reports to managers. If the disposition consists of destroying a document, this action may be represented in the manner shown below:

Figure 2-9 - continued

5) The “sandwich” rule is consistently applied. This rule states that a processing symbol should be sandwiched between an input symbol and an output symbol, in the manner shown below:

Input

document

Output

document Manual

Process

Figure 2-9 - continued

Basic Rules of Flowcharting - III

6) When a document crosses an organizational

line within the flowchart, the document is pictured again in the new organizational unit. However, the repetition is not usually necessary in some instances if the organizational units are adjacent

7) All symbols contain a brief but specific label written inside the symbols

8) Multiple copies of documents are drawn as an overlapping group and are numbered in the upper right-hand corners; these numbers remain the copies during their flows through the procedure

Figure 2-9 - continued

Basic Rules of Flowcharting - IV

9) Added comments are included within annotation symbols and are attached to appropriate symbols, such as the processing symbols to which the comments are related

10) Ample connections (cross-references) are provided. The symbols used in forming the connections depend on the situation. Thus, if two sheets are needed to to contain the flowchart, the flows between pages are formed by off-page connector symbols. In those cases where the procedure being flowcharted links to an adjoining procedure, the connection can be formed by a terminal symbol

Figure 2-9 - continued

Basic Rules of Flowcharting - V

11) Exceptional Occurrences, such as back orders, are clearly noted. They may appear as (i) comments within annotation symbols, (ii) separate flowcharts, with references to the main flowchart, or (iii) decision branches, as shown below:

Customer Credit

Satisfactory?

Reject

Order

Accept

Order

Rejection

Letter

Acknowledgement

Sales Order

To Customer

To Customer

To sales Order Processing

From prior

processing

Figure 2-9 - continued

Basic Rules of Flowcharting - VI

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Accounting Information Systems:

Essential Concepts and Applications

Fourth Edition by Wilkinson, Cerullo,

Raval, and Wong-On-Wing