AE 20 Lection 1

Accounting Inform
ation
System
AIS
01 Introduction to AIS
02 Information Systems within a firm
03 The business environment and the AIS

What is AIS?
AIS
An accounting information system (AIS) is a structure that a

business uses to collect, store, manage, process, retrieve,
and report its
financial data so it can be used by accountants, consultants,
business analysts, managers, chief financial officers (CFOs),
auditors, regulators, and tax agencies.
Components of an AIS
Components of an AIS
#6. Internal Controls
 The internal controls of an AIS are the security measures it

contains to protect sensitive data. These can be as simple as
passwords or as complex as biometric identification
How AIS is used?
 An AIS contains various elements important in the

accounting cycle. Although the information contained in a
system
varies among industries and business sizes, a typical AIS
includes data relating to revenue, expenses, customer
information, employee information, and tax information.
 Specific data includes sales orders and analysis reports,
purchase requisitions, invoices, check registers, inventory,
payroll, ledger, trial balance, and financial statement
information.
Manual Accounting System
A manual system is a bookkeeping system where records

are maintained by hand, without using a computer system.
Instead, transactions are written in journals, from which the
information is manually rolled up into a set of financial
statements.
Traditional AIS
Like a manual AIS but with use of simple file

(e.g. Excel Spreadsheet Recording)
The Role of AIS in the Value Chain
Value Chain
 Value is provided by performing a series of activities referred to as the

value chain. These include primary and support activities (sometimes referred
to as “line” and “staff” activities respectively).
Primary activities include:
Inbound logistics—receiving, storing, and distributing inputs.
Operations—transforming inputs into outputs.
Outbound logistics—distributing goods or services to customers.
Marketing and sales—helping customers buy the product.
Service—post-sale support, such as repair and maintenance.
The Role of AIS in the Value Chain
Value Chain
Support activities include:

Firm infrastructure—accountants, lawyers, administration, AIS.
Human resources—recruiting, hiring, training, and compensating.
Technology—R&D, website development, and other activities to improve
products or services.
Purchasing—buying inputs and other resources.
The Role of AIS in the value chain
The AIS and Corporate Strategy
 Corporations have unlimited opportunities to invest in
technology but limited resources with which to do so.
Consequently, they must identify the improvements likely to
yield the highest return. This decision requires an
understanding of the entity’s overall business strategy.
 Michael Porter suggests that there are two basic business

strategies companies can follow—either a product-
differentiation strategy or a low-cost strategy.
 A product differentiation strategy involves setting your
product apart from those of your competitors, i.e., building a
“better” mousetrap by offering one that’s faster, has enhanced
features, etc.
 A low-cost strategy involves offering a cheaper

mousetrap than your competitors. The low cost is made
possible by operating more efficiently.
Porter also argues that companies must choose a strategic
position among three choices:
 Variety-based strategic position—offers a subset of the industry’s products or

services. Example: An insurance company that only offers life
insurance.
 Needs-based strategic position—serves most or all of the needs of a
particular group of customers in a target market. Example: Farm
Bureau insurance companies that tailored products to the needs to
farmers.
 Access-based strategic position—serves a subset of customers who

differ from others in terms of factors such as geographic location or
size. Example: Providing satellite internet to rural users who do not
have access to cable or DSL.
Note: These strategic positions are not mutually exclusive and can overlap.
 Choosing a strategic position is important because it helps a

company focus its efforts as opposed to trying to be everything to
everybody.
 The AIS should help a company adopt and maintain its strategic position; Requires
that data be collected about each activity and requires the collection and integration
of both financial and non-financial data.
 Accounting and information systems should be closely integrated and that the AIS
should be the primary information system to provide users with information they need
to perform their jobs.
IT and Business Strategy
 IT strategy (information technology strategy) is a comprehensive plan that outlines

how technology should be used to meet IT and business goals. An IT strategy, also
called a technology strategy or IT/technology strategic plan, is a written document that
details the multiple factors that affect the organization's investment in and use of
technology.
 Business Strategy
 A business strategy refers to the actions and decisions that a company takes to
reach its business goals and be competitive in its industry. It defines what the
business needs to do to reach its goals, which can help guide the decision-making
process for hiring and resource allocation. A business strategy helps different
departments work together, ensuring departmental decisions support the overall
direction of the company.
 Business Strategy Components
There are six key components of a business strategy. They include:

1. Vision and business objectives
2. Core values
3. SWOT analysis
4. Tactics
5. Resource allocation plan
6. Measurement
 Business Strategy Examples
1. Cross-sell more products

2. Most innovative product or service
3. Grow sales from new products
4. Improve customer service
5. Cornering a young market
6. Product differentiation
7. Pricing strategies
8. Technological advantage
9. Improve customer retention
10. Sustainability
The Role of Accountants in AIS
 Accountants are primarily involved in three ways: as system
users, designers, and auditors.
1. Accountants as users
In reality, Junior accounting staff members are not privileged to
be at the helms of affairs to participate in the designing stage of
accounting information system. Generally, they only play the role of
users of accounting information system. In most organizations, the
accounting function is the single largest user of IT.
 2. Accountants as System Designers
Accountants are major catalysts in the design of
accounting information system. They are the most suitable and
most equipped information measurement professionals to design
the information system. It is generally believed that insiders in
every area of life make better developmental instrument. This
function of designing AIS includes the design of managerial
accounting information system to aid management in decision
making processes.
 3. Accountants as System Auditors
Accountants audit the already ‘acclaimed’ AIS to ensure

that what is claimed to have been implemented is actually
followed. Note that the role of auditors is not to fetch thieves in
a system, but to ensure that rules claimed to be followed are
backed up by documentation and where it is not possible for it
to be documented, the auditors should observe the process take
place.
The Business
Environment
And The AIS
The Business Environment and AI
S
S
S
Organizational Structure
Hierarchical
Matrix
Thank you

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Accounting Inform

02 Information Systems within a firm

03 The business environment and the AIS

An accounting information system (AIS) is a structure that a

#6. Internal Controls

 The internal controls of an AIS are the security measures it

 An AIS contains various elements important in the

A manual system is a bookkeeping system where records

Like a manual AIS but with use of simple file

 Value is provided by performing a series of activities referred to as the

Support activities include:

 Michael Porter suggests that there are two basic business

 A low-cost strategy involves offering a cheaper

 Variety-based strategic position—offers a subset of the industry’s products or

 Access-based strategic position—serves a subset of customers who

 Choosing a strategic position is important because it helps a

of both financial and non-financial data.

 IT strategy (information technology strategy) is a comprehensive plan that outlines

 Business Strategy Components

There are six key components of a business strategy. They include:

1. Cross-sell more products

Accountants audit the already ‘acclaimed’ AIS to ensure

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