Core Concepts of
ACCOUNTING INFORMATION SYSTEMS
Moscove, Simkin & Bagranoff
Developed by:
S. Bhattacharya, Ph.D.
Florida Atlantic University
Chapter 7
Accounting Information Systems and Business
Processes: Part II
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Introduction
Additional Business Processes
Business Processes in Special Industries
Business Process Reengineering
John Wiley & Sons, Inc.
Introduction
The Resource
Management Process
• Many organizations have specialized information
needs, apart from the typical AIS requirements.
• The focus of AISs:
– Moving from transaction processing
– to capturing data around business processes.
Use Resources to produce
goods or services
• Two important transaction processing cycles
common to many organizational entities
– production cycle
– financing cycle
Human Resource Management
• Human resource management activity includes
– the personnel function
– the payroll function.
• The personnel function is responsible for
– hiring employees
– maintaining personnel records.
• The payroll function is responsible for
– maintaining the accounting records
related to employee remuneration.
To Generate
Revenues
• Resources include
Inventory
• But also
– Human resources
– Fixed assets
To acquire
Resources
Objectives of Human Resource
Management
• Hiring, training, and employing workers
• Maintaining employee earnings records
• Complying with regulatory reporting
requirements
• Reporting on payroll deductions
• Making timely and accurate payments to
employees
• Providing an interface for
personnel and payroll activities
Inputs to Human
Resource Management
• FORMS! FORMS! And more FORMS!
• Personnel Action Forms - document the hiring of
new employees or changes in employee status
• Time Sheets - used to track hours worked
• Payroll Deduction Forms - authorize the payroll
system to deduct amounts from gross pay for items
such as retirement, insurance, or union dues
• Tax Withholding Forms - authorize payroll to reduce
gross pay by the appropriate withholding tax.
• Don’t forget that some of these can also be
electronic!
Outputs of Human
Resource Management
• Financial Statement Information
• Employee Listings - shows current employees and may
contain address and other demographic information
• Paychecks - the final documents in the process; subject
to strict internal controls
• Check Registers - used to make journal entries for
salary and payroll tax expenses
Outputs of Human
Resource Management
• Deduction Reports - contain summaries of
deductions for employees as a group
• Tax (Regulatory) Reports - reports the government
requires for income tax, social security tax, and
unemployment tax information
• Payroll Summaries - used by
management in analyzing
expenses
Fixed Asset Management
• Fixed assets are assets with usable lives of
more than one year.
• The objective of a fixed-asset management
system is to manage the purchase,
maintenance, valuation and
disposal of an organization’s
fixed assets.
Objectives of Fixed Asset
Management
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Tracking purchases of fixed assets
Recording fixed asset maintenance
Valuing fixed assets
Allocating fixed asset costs
(recording depreciation)
• Tracking fixed asset disposals
Inputs to Fixed Asset
Management
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Purchase Requisition
Receiving Reports
Supplier Invoices
Construction Work Orders - if the company builds
the asset
• Repairs and Maintenance Reports - notifies a
company’s AIS to update expense or asset
accounts for repairs and maintenance
• Fixed Asset Change Forms - used as the basis for
transferring fixed assets from one location to
another, retiring, selling or trading-in fixed assets
Outputs of Fixed Asset
Management
• Financial Statement Information
• Fixed Asset Register - lists identification numbers for
each fixed asset and each assets location
• Depreciation Register - shows depreciation expense
and accumulated depreciation for each fixed asset
• Repair and Maintenance Reports - show the current
period’s repair and maintenance expenses as well as
each fixed asset’s repair and maintenance history
• Retired Assets Report - shows all assets
disposed of during the accounting period
Considerations for Fixed Asset
Management
• Value of fixed assets
– What is appropriate security?
• Time/cost to track
– Software
– Tagging
– People cost (assigning tags, entering
information)
Objectives of the
Production Process
The Production Process
• The production process
– begins with a request for raw material
– ends with the transfer of finished goods
• to warehouses or customer
• Concerns the capture of data and the
reporting of information associated with
producing goods in manufacturing
organizations.
Cost Accounting Subsystem
• Provides important control information for the
budget process.
• Can be characterized as job costing or process
costing systems.
• A job costing information system keeps
track of costs for each product or group of
products, called a job.
• Process costing systems make use of averages to
calculate the costs associated with goods in
process and finished goods produced.
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Track purchases and sales of inventories
Monitor and control manufacturing costs
Control inventory
Control and coordinate the production
process
• Provide input for
budgets
Just-in-Time (JIT)
Inventory Systems
• Inventory control ensures that the production cycle
processes inventory transactions appropriately so that
the financial statements correctly state the value of the
inventory and cost of goods sold accounts.
• The objective of JIT is to minimize inventories
at all levels.
• The production AIS may be integrated
with a computer integrated
manufacturing (CIM) system.
Inputs to the
Production Process
• Material Requisition Form - directs stores to issue
materials or parts to designated work centers or
authorized persons
• Bill of Materials - shows the types and quantities
of parts needed to make a single unit of product
• Master Production Schedule - shows the quantities
of goods needed to meet sales demands
MRP
• Material requirements planning (MRP I) system
monitors the acquisition and use of parts and
subassemblies.
• Manufacturing resource planning (MRP II) is a
more complex version of MRP II which uses the
information from the bill of materials and
production schedule to coordinate the purchase
and use of raw material inventories.
Outputs of the Product
Conversion Process
• Inventory Status Reports - allows purchasing and
production managers to monitor inventory levels
• Production Cost Reports - details the actual costs
for each production operation, each cost element,
and/or each separate job
• Manufacturing Status Reports - provide managers
with information about the status of various jobs
Inputs to the Product
Conversion Process
• Production order - incorporates data from sales
orders or forecasts, operations lists and bills of
materials in order to authorize the production of an
order or batch
• Job Time Card - shows the
distribution of labor costs to
specific jobs or production orders
Outputs of the Product
Conversion Process
• Financial Statement Information
• Materials Price Lists - shows prices charged for
raw materials
• Periodic Usage Reports - provides managerial
information about how various production
departments are using raw materials
• Inventory Reconciliation Reports - reconciles
physical inventory with perpetual records
The Financing Process
• The financing process is where a company
gets and uses financial resources, such as
cash, other liquid assets and investments.
• The financing process includes
the activities of borrowing
cash or selling ownership
shares.
Objectives of the
Financing Process
• Effective cash management – organizations can
make use of lockbox systems and electronic funds
transfer (EFT).
• Minimizing cost of capital, or the cost of obtaining
financial resources.
• Earn maximum return on investments by using
financial planning models.
• Project cash flows
Outputs of the
Financing Process
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Financial Statement Information
Cash Budget
Investment Reports
Debt and Interest Reports
Financial Ratios
Financial Planning Model Reports
Industries with
Specialized
AISs
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Professional service
Not-for-profit
Health care
Retail
Construction
Government
Banking and Financial services
Hospitality
Inputs to the
Financing Process
• Remittance Advices - accompanies a customer’s
payment
• Deposit Slips - banks provide to document
account deposits
• Checks - companies receive and issue checks
• Bank Statements - used to reconcile the cash
balance in the company’s ledger against the cash
balance in the bank account
• Stock Market Data
• Interest Data
• Financial Institution Profiles
Business Processes in Special
Industries
• Vertical market refers to markets or industries that
are distinct in terms of the services they provide or
the goods they produce.
• These organizations may require more information
than is typically output from a traditional AIS.
• Examples of specialized information needs include
time and billing systems, activity based costing
systems, and point-of-sale systems.
Business Process Reengineering
• Today, AISs are less concerned with accounting
transactions and more concerned with business events.
• Business events include important activities that affect
the business but are not captured by the financial
accounting system.
• Business process reengineering (BPR) concerns
redesigning business processes
from scratch.
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Chapter 7