AIS 424A- Winter 2013
List of Most Important Topics to Review for Exam I
The three basic objectives of AIS
To effectively collect and store data about a company’s activities, transactions, and resources -
Capture transaction data on source documents.
Record transaction data in journals, which present a chronological record of what occurred. -
Post data from journals to ledgers, which sort data by account type. 2.
To transform data into information useful to management in internal decision making:
In classic (manual) systems, this information is provided in the form of reports that fall into two main categories: –
To provide adequate internal controls:
Safeguard organizational assets
Ensure that the information produced by the system is reliable. c)
Ensure that business activities are performed efficiently and in accordance with management’s objectives.
Major steps of the accounting cycle
Source documents by cycle
General Ledger & Reporting System
Designing a Chart of accounts
First digit: represents the major types of accounts
Second digit: represent the subaccounts within major types of account. Third digit: represents the specific or unique names of the accounts
Types of journals
cash receipts journal
cash payments journal
The concept of audit trail including the distinction between backward and forward audit trails An audit trail is a traceable path of a transaction through a data processing system from point of origin to final output, or backwards from from final output to point of origin. It is used to check the accuracy and validity of ledger postings.
Backward: 3->2->1 existence assertion
Forward: 1->2->3 competence assertion
Internal control considerations
The third function of an AIS is to provide adequate internal controls to accomplish three basic objectives: 1.
Ensure that the information is reliable.
Ensure that business activities are performed efficiently. 3.
Safeguard organizational assets.
What are two important methods for accomplishing these objectives? 1
Provide for adequate documentation of all business activities. 2
Design the AIS for effective segregation of duties, including:
C-custody of assets
The difference(s) between financial and managerial reports Managerial:
1. Internally focus
2. No mandatory rules
3. Financial and nonfinancial information; subjective information possible 4. Emphasis on the future
5. Internal evaluation and
decisions based on very detailed information Financial:
1. Externally focus
2. Must follow externally imposed rules
3. Objective financial information
4. Historical orientation
5. Information about the firm as a whole
Difference between a spreadsheet and a database
A database is a means of storing a lot of information.
A spreadsheet is a way of describing a table of numeric data, and having some of that data interacts.
Disadvantages of flat file environments
Data Redundancy – Data entered multiple times; which increases the chance of recording errors and mistakes
Data Storage - creates excessive storage costs of paper documents and/or magnetic form
Data Updating - any changes or additions must be performed multiple times
Currency of Information - potential problem of failing to update all affected files; Data inconsistency
Data Sharing/Task-Data Dependency - user’s inability to obtain additional information as his or her needs change; Restricted ability to share data
Advantages of relational databases
Removes all three anomalies
Various items of interest (customers, inventory, sales) are stored in separate tables. ...
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