05/01/2023

Lecture 4- The Information System: an Accountant’s Prospective

Part 3Habib Ullah Qamar

Govt. college of Commerce Gujranwala

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What is System Elements of system Characteristics of a System An Artificial System’s Example Information System Framework

Review of Last Lecture

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Accounting information System TRP GL/FRS MRS MIS AIS vs MIS

Today’s Topic

An accounting information system (AIS) is a system of collecting, storing and processing financial and accounting data that is used by [decision maker]]s. An accounting information system is generally a computer-based method for tracking accounting activity in conjunction with information technology resources.

It Processes Financial and non-Financial Transactions. (Customer Information)

Accounting Information System

Management often requires information that goes beyond the capability of AIS.

As organizations grow in size and complexity, specialized functional areas emerge, requiring additional

information for production planning and control, sales forecasting, inventory warehouse

Management Information System(MIS)

supports daily business operations with numerous reports, documents, and messages for users throughout the organization.

central to the overall function of the information system by converting economic events into financial transactions;

recording financial transactions in the accounting records (journals and ledgers);

And distributing essential financial information to operations personnel to support their daily operations.

AIS Subsystems :Transaction Processing System

with business events that occur frequently. a firm may process thousands of

transactions Transactions are grouped into Cycles TPS Consists of three Cycles the revenue cycle the expenditure cycle conversion cycle Each cycle captures and processes different

types of financial transactions.

AIS Subsystems :Transaction Processing System

The general ledger system (GLS) financial reporting system (FRS) are two

closely related subsystems. Due to their operational

interdependency, viewed as a single integrated system

Input comes from the transaction cycles. Summarize transaction cycle activity update the general ledger control

accounts.

AIS Subsystems: General Ledger/Financial Reporting Systems

less frequent events, such as stock transactions, mergers, and claim settlements,

The financial reporting system measures and reports the status of financial resources and the changes in those resources.

The FRS communicates this information primarily to external users. Much of this information consists of traditional financial statements, tax returns, and other legal documents.

AIS Subsystems: General Ledger/Financial Reporting Systems

Provides the internal financial information needed to manage a business.

Managers must deal immediately with many day-to-day business problems,

as well as plan and control their operations. Managers require different information for

the various kinds of decisions they must make

include budgets, variance reports, cost-volume-profit analyses, and reports using current (rather than historical) cost data

AIS Subsystems: Management Reporting System

The Sarbanes–Oxley Act of 2002 (Pub.L. 107–204, 116 Stat. 745, enacted July 30, 2002), also known as the "Public Company Accounting Reform and Investor Protection Act" (in the Senate) and "Corporate and Auditing Accountability and Responsibility Act" (in the House) and more commonly calledSarbanes–Oxley, Sarbox or SOX, is a United States federal law that set new or expanded requirements for all U.S. public company boards, management and public accounting firms. There are also a number of provisions of the Act that also apply to privately held companies, for example the willful destruction of evidence to impede a Federal investigation.

WHAT Is SOX-wikipedia.org

SOX legislation requires that management must design and implement internal controls over the entire financial reporting process.

This includes the financial reporting system, the general ledger system, and the transaction processing systems that supply the data for financial reporting. SOX further requires that management certify these controls and that the external auditors express an opinion on control effectiveness.

Without such a model, critical management and audit responsibilities under SOX may not be met.

Why Is it Important to Distinguish between AIS and MIS

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We start with literature definition of AIS We discussed types of AIS Subsystems Summarize discussion of AIS Subsystems AIS and MIS are compared and discussed

from accountant’s prospective.

What we learn today

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Thank you , take careSee you again in sha ALLAH