BU486 Chapter Notes - Chapter 1: Information Overload, Internal Control, Business Process
Chapter 1 – Accounting Information Systems: An Overview
Data – Facts collected, recorded, and stored in the system
Information – data that has been organized and processed to provide meaning and improve decision
making
Information overload – occurs when those limits are passed resulting in a decline in decision making
quality and increase in the cost of providing that information
Information Technology (IT) – to help decision makers more effectively filter and condense information
Value of information – benefit from having information minus the cost of producing the information
What Makes Information Useful
1. Relevant – information needed to make a decision
2. Reliable – information free form bias
3. Complete – does not miss out important parts
4. Timely – information needs to be provided in time to make the decision
5. Understandable – must be presented in a meaningful manner
6. Verifiable – two independent people can produce the same conclusion
7. Accessible – available when needed
Business process – set of related, coordinated, and structured activities and tasks that are performed
Give-get exchange – such as giving up cash to get inventory from a supplier and giving employees a
paycheck in exchange for their labor
5 major business processes or transaction cycles
1. Revenue cycle – where goods and services are sold for cash or future promise to receive cash
(give good – get cash)
2. Expenditure cycle – where companies purchase inventory for resale or raw materials to use in
producing products (get goods – give cash)
3. Production or conversion cycle – where raw materials are transformed into finished goods (give
labor and give raw materials – get finished goods)
4. Human resource/payroll cycle – where employees are hired, trained, compensated, evaluated,
promoted, and terminated (give cash – get labor)
5. Financing cycle – where companies sell shares to investors and borrow money (give cash – get
cash)
Accounting Information System (AIS) – system that collects, records, stores, and processes data to
produce information for decision makers
1. The people who use the system
2. The procedures and instructions used to collect, process, and store data
3. The data about the organization and its business activities
4. The software used to process the data
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Document Summary
Chapter 1 accounting information systems: an overview. Data facts collected, recorded, and stored in the system. Information data that has been organized and processed to provide meaning and improve decision making. Information overload occurs when those limits are passed resulting in a decline in decision making quality and increase in the cost of providing that information. Information technology (it) to help decision makers more effectively filter and condense information. Value of information benefit from having information minus the cost of producing the information. Business process set of related, coordinated, and structured activities and tasks that are performed. Give-get exchange such as giving up cash to get inventory from a supplier and giving employees a paycheck in exchange for their labor. Improving the quality and reducing the costs of products or services. Improving efficiency and effectiveness of its supply chain. Supply chain extended system that includes the organization value chain as well as its suppliers, distributors, and customers.
