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Interrelationship Of Business Processes And The AIS. Business processes
occur so that organizations may serve their customers. As the many business
processes occur, all of the data generated must be collected and processed by the
accounting information system. The accounting information system collects detailed
information from these business processes. In manual systems, this collection is
through the use of source documents, special journals, and subsidiary ledgers. As
this detailed information is processed, it is summarized in the general ledger
accounts. Whether the system is manual or computerized, it must collect the data
from business processes, summarize and process this data, and provide outputs.
Types Of Accounting Information Systems.
o Manual Systems. Manual systems use manual record keeping processes
and paper-based records such as source documents, turnaround documents,
general ledger, general journal, special journals, subsidiary ledgers, and
employees follow certain processes to record transactions in the documents.
Usually, only very small organizations use manual systems. However, even in
a large, computerized system, some manual steps may still occur. For
example, a human may write information on a source document before it is
entered into an IT system.
o Legacy Systems. Legacy systems are older IT systems that may have been
in place within the organization for many years. These are usually systems
based on mainframe host computers and older technology. They were written
in computer languages such as COBOL or Basic. There are both advantages
and disadvantages to legacy systems. When the benefits of newer systems
outweigh the advantages of the legacy systems, many companies replace the
legacy systems with newer technology. As an alternative to replacing legacy
systems, some organizations may continue to commit resources to maintain
and/or enhance them. Two methods of enhancing legacy systems are screen
scrapers and enterprise application integration.
o Modern, Integrated IT Systems. These systems are based on current
technology. They are purchased software, rather than software developed
internally, but may be modified to meet the organizations needs. Purchased
software has the advantages of lower costs, fewer bugs, and a shorter
implementation time. These modern, integrated systems usually run in one of
two types of computer models: client-server or cloud computing.
o Client-server Computing. In a client-server system, two types of computers
are networked together to accomplish processing. Client computers are
smart terminals that can share some of the processing tasks such as
manipulation and presentation of data. The server manages and stores the
large database and runs complex application programs. Tasks are assigned
to either the client or server on the basis of which can handle the task most
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efficiently. Many ERP systems use a web browser and individual PCs as the
client computers.
o Cloud Computing. Cloud computing is a centralized approach to IT whereby
servers are purchased from a third party provider; thus, the organizations
data and software reside with a third party. Cloud computing services include
Software as a Service (SaaS), Database as a Service (DaaS), Platform as a
Service (PaaS), and Infrastructure as a Service (IaaS). The cloud computing
approach is growing in popularity due to its advantages of scalability,
expanded access, reduced infrastructure, and cost savings.
Accounting Software Market Segments. Accounting software can be categorized
according to the type of enterprise is its intended market. The four categories of
accounting software types are small companies, midmarket companies, beginning
ERP, and high end or tier 1 ERP. Small company accounting software is intended
for companies with revenue of approximately $250,000 or less. Midmarket
accounting software is targeted to companies with revenue between $250,000 and
$10 million. Beginning ERP is intended for companies with revenue between $10
and $100 million. Tier 1 ERP systems are targeted to companies with revenue in
excess of $100 million. Software companies are consistently trying to expand the
market they serve and this leads to software vendors trying to serve the category
above or below them. Thus, a single software system might be targeted to
companies slightly larger or smaller than the original, intended market.
Input Methods Used in Business Processes. Almost all business processes
generate some type of accounting data. There are many different types of
processes, and many different ways to capture the data from these processes.
o Source Documents And Keying. Transaction data is often captured on
pre-printed, sequentially numbered source documents. From this source
document, employees enter the data into the IT system using a keyboard.
This process is time consuming and error prone. Many companies have
replaced this source document and keying approach with newer technology.
o Bar Codes. Bar codes are machine-readable symbols consisting of a series
of bars and spaces. You see these bar codes on products you buy at grocery
stores and all types of retail stores. Bar codes can be used with a bar code
reader to track inventory movement and monitor employee time worked.
o Point Of Sale Systems. The most well-known use of bar codes is in Point of
Sale Systems. The Universal Product Code on product labels is read by a
bar code scanner at the cash register. Many retail establishments use point
of sale systems, using either bar code readers or touch screens.
o Electronic Data Interchange. EDI is the intercompany, computer-tocomputer transfer of business documents in a standard format. EDI permits
the electronic transmission of purchase orders, invoices, and payments
between trading partners.
o E-Business And E-Commerce. E-business includes all forms of online
electronic business transactions and processing, whereas, e-commerce is
online buying and selling by consumers. When data are exchanged
electronically, much of the manual processing is eliminated, thereby reducing
time, cost, and errors.
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implement IT systems, they must consider the ability to monitor these systems for
fraud or unethical behavior.
Appendix A: Resources, Events, Agents In AIS. The REA model views
accounting systems as data about resources, events, and agents. Resources are
assets such as cash or inventory. Events are the business processes, and agents
are parties such as customers or vendors. REA is used as a model to understand
accounting systems, but as of yet is limited in practical application.