AIS Lecture 1.pptx dgdgrfrfefefefefefefgef

Accounting Information Systems
With highly customized products or services, sales are likely to be to a single customer with the pricing
decision being based on direct negotiations with the customer for a known quantity. In contrast, a market
leader must make a pricing decision, normally for large and unknown volumes of a single product, that is
sold to thousands of different customers. To apply cost-plus pricing in this situation an estimate is required
of sales volume to determine a unit cost, which will determine the cost-plus selling price. This circular pro�cess occurs because we are now faced with two unknowns that have a cause-and-effect relationship, namely
selling price and sales volume. In this situation, it is recommended that cost-plus selling prices are estimated
for a range of potential sales volumes. Consider the information presented in Example 10.1 (Case A).
You will see that the Auckland Company has produced estimates of total costs for a range of activity
levels. Instead of adding a percentage profit margin, the Auckland Company has added a fixed lump
sum target contribution of £2 million to cover fixed costs and provide a profit contribution.
The information presented indicates to management the sales volumes, and their accompanying
selling prices, that are required to generate the required profit contribution. The unit cost calcula�tion indicates the break-even selling price at each sales volume that is required to cover the cost of
the resources committed at that particular volume. Management must assess the likelihood of selling
the specified volumes at the designated prices and choose the price that they consider has the highest
probability of generating at least the specified sales volume. If none of the sales volumes is likely to be
achieved at the designated selling prices management must consider how demand can be stimulated
and/or costs reduced to make the product viable. If neither of these is successful the product should
not be launched; and the same goes if other strategies were to be used. The final decision must be based
on management judgement and knowledge of the market.
The situation presented in Example 10.1 represents the most extreme example of the lack of market
data for making a pricing decision. If we reconsider the pricing decision faced by the company, it is likely
that similar products are already marketed and information may be available relating to their market
shares and sales volumes. Assuming that Auckland’s product is differentiated from other similar prod�ucts, a relative comparison should be possible of its strengths and weaknesses and whether customers
would be prepared to pay a price in excess of the prices of similar products. It is therefore possible that
Auckland may be able to undertake market research to obtain rough approximations of demand levels
at a range of potential selling prices as illustrated in Example 10.1 (Case B). Let us assumThe Auckland Company terr

1. ACCT 406: Accounting Information Systems Lecture 1 Dr. E. Nartey 2019/2020 UNIVERSITY OF GHANA BUSINESS SCHOOL

2. Learning Objectives Introduction to AIS After engaging in this presentation, you should be able to: Critically evaluate accounting practices, reflecting how accounting information systems enrich and extend the role of the accountant Compare and contrast data and information Critique and synthesize system concepts Justify and communicate the role of accounting information in supporting decision makers

3. What is an accounting information system ? The definition of an accounting information system (AIS) has been an ongoing issue. Constant challenges are: the need for the field of accounting information systems to carve out its own area distinct from other disciplines. being a part of a constantly evolving and changing landscape. The search for the definition of accounting information systems goes back to first principles.

4. Accounting First Principles Accounting information systems can assist with the accounting cycle and related processes

5. Accounting First Principles The accounting cycle is routinely handled by accounting information systems (AISs). AISs allow journalising and posting transactions for financial reports to be performed more efficiently. AISs range in scope and complexity: Enterprise Resource Planning Solutions

6. Accounting First Principles AIS has changed the role of accountants to one of ensuring … Data quality Designing and validating usable financial reports Solving problems Advising senior corporate decision makers AISs still rely on a knowledge of accounting.

7. Learning Objective No. 2 Compare and contrast data and information

8. Data and Information Explained The traditional accounting process is focused on capturing financial data. Data are the raw facts relating to or describing an event. The ability to record appropriate data forms an important part of the quality of an AIS. Data is still captured in the journals and ledgers How it is done will vary from organisation to organisation

9. Data and Information Explained Data needs to become useful This happens when the application of rules or knowledge enable a conversion into information . Information is used in decision making. For example sales data can be made useful by summarising the details in weekly sales summaries. One key issue with information is the potential to provide too much - this is referred to as information overload . Organisations need to be sure that the information they produce is relevant and necessary . Needs to facilitate decision making.

10. Useful Information Characteristics Relevance ✔️ Reliability ✔️ Completeness Timeliness ✔️ Understandability ✔️ Verifiability ✔️ Accessibility ✔️ 10

11. Value of Information Benefits Reduce uncertainty Improve decisions Improve planning Improve scheduling Costs Time Resources Production Distribution 11

12. Users of Accounting Information Internal Users Managers at different levels in an organization Operations management Middle management Top/strategic management Employees External Users Stockholders Creditors Investors Government agencies Customers 12

13. Internal and External Flow of Information

14. Learning Objective No. 3 Critique and synthesize system concepts What is a system?

15. What is a system? A system is an organised set of principles or procedures created and used to carry out a specific activity Dependent on the input-processing-output (IPG) model used in accounting

16. What is a System? Data Input Inputting into an AIS Manual keying Scanning via bar coder readers or the like Image scanners Magnetic ink character recognition (MICR) Voice recognition Optical mark readers

17. What is a System? Processing. Processing refers to the activities that are performed on the data inputs Validity checking ✔️ Manipulation of inputs ✔️ Calculations

18. What is a System? Outputs Outputs refers to what is obtained from a system or the result of what a system does Focus on decision making Receipts Invoices Reports Financials

19. What is a System? Outputs Outputs are the starting point for systems design Focus is on capturing and processing data to obtained the desired outputs, information needs

20. What is a System? Summary

21. What is a System? Control Controls are an important part of an AIS Control system is the set of checks and balances to ensure: The system is running as expected There are no data errors or exceptional circumstances Control systems interact with inputs, process and outputs

22. What is a System? Scope Any system needs to have a defined task or domain to which it is applied . i.e. mandate of the system Concept of system scope : the domain that a system addresses Systems also operate within an external environment E.g., taxation system Australian Accounting Standards Company Law

23. What is an Accounting Information System? The application of technology to the capturing, verifying, storing, sorting and reporting of data relating to an organisation’s activities.

24. Learning Objective No. 4 Justify and communicate the role of accounting information in supporting decision makers

25. The role of accounting and accounting information Accounting information is central to many activities within and beyond an organisation.  Some of the purposes of accounting information, mentioned in Statement of Accounting Concepts 2 (SAC 2) are assessing: profitability and cash flows ✔️ the ability of a supplier to operating into the future and provide goods or services ✔️ whether the business is achieving its aims and objectives. ✔️perhaps in finance and credit risks

26. The role of accounting and accounting information But, traditional financial statements are not the only source of information available through the AIS. An AIS can generate diverse financial information. Uses of this information include: decision-making by external and internal stakeholders e.g. investment decisions evaluating company performance.

27. The role of accounting and accounting information Data management is the processing of attaining, storing and controlling of data (in an AIS). Organisations need to carefully decide what information is gathered – this can be done by data classification : ‘a fundamental process that drives…the alignment of information to best address business needs’. Data classification involves understanding the organisation, its processes and the data necessary to support those processes. i.e. which department or process needs what information