Summary AIS

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Summary - AIS

  • 1.1 The information Environment

  • In what kind of levels of activity is the business organization divided?
    Business operations, operations management, middle management and top management
  • What are the business operations?
    The activities consist of the product oriented work of the organization, such as manufacturing, sales and distribution.
  • What is the operations management?
    Operations management is directly responsible for controlling day-to-day operations.
  • What is the middle management?
    Middle management is accountable for the short-term planning and coordination of activities necessary to accomplish organizational objectives.
  • What is the top management?
    The top management is responsible for longer-term planing and setting organizational objectives.
  • How does information flow within the organization?
    Horizontally, vertically and exchanges between the organization and users in the external environment.
  • What is the horizontal information flow?
    Horizontal flows support operations=level tasks with highly detailed information about the many business transactions affecting the firm. 
  • What is the vertical information flow?
    The vertical flow distributes information downward from senior managers to junior managers and operations personnel in the form of instructions, quotas, and budgets. In addition, summarized information pertaining to operations and other activities flows upward to managers at all levels. 
  • What is the external environment information flow?
    This represents exchanges between the organization and external users, i.e. trading partners and stakeholders.
    Exchanges with trading partners include customer sales and billing information, purchase information for suppliers and inventory receipts information. Stakeholders are entities outside (or inside) the organization with a direct of indirect interest in the firm.
  • What is a system?
    A system is a group of two or more interrelated components or subsystems that serve a common purpose.
  • What are the criteria of a system?
    It has to have multiple components, relatedness and purpose.
  • What is a subsystem?
    A subsystem is viewed in relation to the larger system of which it is a part. Likewise, a subsystem is called a system when it is the focus of attention. 
  • What is of particular importance to the study of information systems?
    System decomposition and subsystem interdependency
  • What is system decomposition?
    Decomposition is the process of dividing the system into smaller subsystem parts. By composing a system, we can present the overall system as a hierarchy and view the relationships between subordinate and higher-level subsystems.
  • What is subsystem interdependency?
    A system's ability to achieve its goal depends on the effective functioning and harmonious interaction of its subsystems. If a vital subsystem fails or becomes defective and can no longer meet its specific objective, the overall system will fail to meet its objective.
  • What is an information system?
    It is the set of formal procedures by which data are collected, processed into information, and distributed to users.
  • In which two broad classes of systems are informations systems decomposed?
    Accounting information systems and management information systems
  • What is a transaction?
    A transaction is an event that affects or is of interest to the organization and is processed by its information system as a unit of work.
  • In which two classes do transactions fall?
    Financial transactions and non-financial transactions.
  • What is a financial transaction?
    A financial transaction is an economic event that affects the assets and equities of the organization, is reflected in its accounts, and is measured in monetary terms.
  • What is a non-financial transaction?
    Events that do not meet the narrow definition of a financial transaction.
  • What is the accounting information system?
    AIS subsystems process financial transactions and non financial transactions that directly affect the processing of financial transactions.
  • Out of which subsystems is the AIS composed?
    1. The transaction processing system (TPS)
    2. The general ledger/financial reporting system (GL/FRS)
    3. The management reporting system (MRS)
  • What is the TPS?
    It supports daily business operations with numerous reports, documents, and messages for users throughout the organization.
  • What is the GL/FRS?
    It produces the traditional financial statements, such as the income statement, balance sheet, statement of cash flows, tax returns, and other reports required by law.
  • What is the MRS?
    It provides internal management with special-purpose financial reports and information needed for decision making such  as budgets, variance reports, and responsibility reports.
  • What is the management information system (MIS)?
    It processes non financial transactions that are not normally processed by traditional AIS.
  • Why is it important to distinguish between AIS and MIS?
    SOX legislation requires that management design and implement internal controls over the entire financial reporting process. SOX further requires that management certify these controls and that the external auditors express an opinion on control effectiveness. Because of the highly integrative nature of modern information systems, management and auditors need a conceptual view of the information system that distinguishes key processes and ares of risk and legal responsibility from the other (non-legally binding) aspects of the system. Without such a model, critical management and audit responsibilities under SOX may not be met. 
  • What is the transaction processing system?
    The TPS converts economic events into financial transactions, recording financial transactions in the accounting record and distributing essential financial information to operations personnel to support their daily operations. It deals with business events that occur frequently. The TPS consists of three transaction cycles. the revenue cycle, the expenditure cycle and the conversion cycle. 
  • What is the general ledger/financial reporting systems?
    The GLS processes summaries of transaction cycle activity to update the general ledger control accounts. The bulk of the input to the GL portion comes from the transaction cycles. Other less frequent events also enter the GLS trough alternate sources.
    The FRS measures and reports the status of financial resources and the changes in those resources. The FRS communicates this information primarily to external users, which is called non-discretionary. 
  • What is the management reporting system?
    The MRS provides the internal financial information needed to manage a business, which are discretionary reports because the organization can choose what information to report and how to present it. 
  • What kind of end users are there?
    External and internal end users. Internal users include management at every level of the organization, as well as operations personnel. Internal reporting is governed by what gets the job done. It is a less structured and generally more difficult challenge than external reporting. 
  • What is the difference between data and information?
    Data are facts, which may or may not be processed and have no direct effect on the user. Information causes the user to take an action that he or she otherwise could not, or would not, have taken. Information is determined by the effect it has on the user, not by its physical form. If output form the information system fails to cause users to act, the system serves no purpose and has failed in its primary objective.
  • What are data sources?
    Data sources are financial transactions that enter the information system from both internal and external sources. External financial transactions are economic exchanges with other business entities and individuals outside the firm. Internal financial transactions involve the exchange or movement of resources within the organization.
  • What is data collection?
    The objective with data collection is to ensure that event data entering the system are valid, complete and free from material errors. 
  • Which two rules govern the design of data collection procedures?
    Relevance and efficiency. The information system should only capture relevant data. Efficient data collection procedures are designed to collect data only once. 
  • What is a database?
    The organizations database is its physical repository for financial and non-financial data.
  • What is a data attribute?
    The data attribute is a logical and relevant characteristic of an entity about which the firm captures data. 
  • What is a record?
    A record is a complete set of attributes for a single occurrence within an entity class. Every record in the database must be unique in at least one attribute, this attribute is the primary key.
  • What is a file?
    A file is a complete set of records of an identical class.
  • What is database management?
    It involves three fundamental tasks; storage, retrieval and deletion. The storage task assigns keys to new records and stores them in their proper location in the database. Retrieval is the task of locating and extracting an existing record from the database for processing. After processing is complete, the storage task restores the updated record to its place in the database. Deletion is the task of permanently removing obsolete or redundant records from the database. 
  • What is information generation?
    Information generation is the process of compiling, arranging, formatting, and presenting information to users. Regardless of physical form, useful information has the following characteristics: relevance, timeliness, accuracy, completeness, and summarization.
  • What is relevance?

    Relevance means that the content of a report must serve a purpose.

  • What is timeliness?
    Timeliness means that the information must be no older than the time of the action it supports.
  • What is accuracy?
    Accuracy means that the information must be free from material errors. Material errors exist when the amount of inaccuracy in information causes the user to make poor decisions or to fail to make necessary decisions. 
  • What is completeness?
    Completeness means that no piece of information essential to a decision or task should be missing. 
  • What is summarization?
    Summarization means that information should be aggregated in accordance with the user's needs.
  • What is feedback?
    Feedback is a form of output that is sent back to the system as a source of data. Feedback may be intenral or external and is used to initiate or alter a process.
  • What are the three fundamental information system objectives?
    1. To support the stewardship function of management.
    2. To support management decision making.
    3. To support the firm's day-to-day operations.
  • What is the system development cycle?
    The process in which larger organizations with unique and frequently changing needs engage in in-house development. 
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