Summary AIS [ABN]

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Summary - AIS [ABN]

  • 1.1 1. Recognize the information flows within a company

  • What is operations management, middle management and top management?

    Operations management

    - Controlling day to day operations, required information is highly detailed: sales, shipping, usage of labor and materials and internal transfers of resources.

    Middle Management

    - Short term planning and coordination of activities necessary to accomplish organizational objectives, required information is more aggregate.

    Top Management
    - Long term planning and setting of organizational objectives, required information is summarizing overall firm performance. 

  • What kind of information do trade partners and stakeholders need?    


    The form of information trade partners need restricts itself to customer sales and billing information, purchase and inventory (receipts) information. Stakeholders demand another type of information which mainly has a financial nature (financial statements, tax returns, stock transaction information). 


  • What are the internal, external, horizontal and vertical information flows?    

    Horizontal; for the specific management function or operational personnel
    Vertical flows; Budget information and instructions from top to bottom & performance information from bottom to top.
    Internal; horizontal and vertical flows
    External; information between the company and stakeholders, suppliers and customers. 

  • 1.2 2. Understand the difference between AIS and MIS

  • What is a system?

    A system is a group of two or more interrelated components or subsystems that serve a common purpose. Remember a system as follows: multiple components, which are related and serve a common purpose. 

  • What is a subsystem?


    A system is called a subsystem when it is viewed in relation to the larger system of which it is a part.    

  • What is an information system and its main objectives?

    An information system is the set of formal procedures by which data are collected, processed into information and distributed to its users.

    Overall there are three main objectives to be identified for information systems:

    - Support the stewardship function of management
    - Support management decision making
    - Support firms’ day to day operations 

  • What are the two main components of an information system?    

    The AIS and MIS

  • What is an AIS responsible for?


    - It identifies, collects, processes, and communicates economic information about a firm using a wide variety of technologies.
    - It captures, processes and records financial transactions and nonfinancial transactions that affect the processing of financial transactions.
    - It distributes transaction information to internal and external users. 

  • What is an AIS and MIS?

    Accounting Information Systems (AIS) process
    - financial transactions; e.g., sale of goods
    - nonfinancial transactions that directly affect the processing of financial transactions; e.g.,addition of newly approved vendors

    Management Information Systems (MIS) process
    - nonfinancial transactions that are not normally processed by traditional AIS; e.g., tracking customer complaints 

  • What are the three subsystems of the AIS?

     The AIS consists out of three essential sub-systems: 

    - Transaction Processing System 

    records financial transactions in accounting records

    distributes essential information to operations personnel for daily activities 

    - General Ledger / Financial Reporting Systems 

    processes summarized transactions from TPS and updates GL control accounts 

    produces financial statements and reports 
     Typically non-discretionary

    - Management Reporting System (MRS)
    produces special-purpose reports for internal use

     Typically discretionary

  • See picture on p. 6

  • 1.3 3. Remember the basic accounting records used in transaction processing systems

  • What is the transaction processing system and what does it consist of?

    The transaction processing system is central to the overall function of the information system by converting economic events in to 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. The TPS consists out of three transaction cycles: Revenue cycle, expenditure cycle and conversion cycle. 

  • What is a transaction?


    A transaction is an economic event that affects the assets and equities of the firm, is reflected in its accounts and is measured in monetary terms. 

  • What are the accounting records used in the manual system of the TPS?

    A manual system contains the following accounting records:

    - Source documents
    o Documents that are used to capture and formalize transaction data that the transaction cycle needs for processing. 

    - Product Documents

    o Are the documents created as a result of the transaction process.
    - Turnaround Documents

    o Are product documents of one system that turn in to source documents for another system

    - Journals
    o Is a record of chronological entry

    - Special Journals
    o Are used to record specific classes of transactions that occur in high volume 

    - General Journal
    o Used to record nonrecurring, infrequent and dissimilar transactions

    - Ledger
    o A ledger is a book of accounts that reflects the financial effects of the firms transactions after they are posted from the various journals. Ledgers show activity per account type. 

    - General Ledger

    o Contains the firm’s account information in the form of highly summarized control accounts.

    - Subsidiary Ledger
    o Contain the details of the individual accounts that constitute a particular control account. 

  • What are the files used in a digital system in the TPS?

    - Master file
    o A master file contains account data, the GL and SL are examples of master files.

    - Transaction file
    o Is a temporary file of transaction records used to change or update data in a master file, sales orders, inventory receipts etc are examples of transaction records. 

    - Reference file

    o Stores data which is used as standards for processing transactions, e.g. tax table used by payroll program.

    - Archive file
    o Contains records of past transactions that are retained for future reference. 

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