information systems course

Summary This chapter examined conceptually the revenue cycle of a typical merchandising firm and focused on the following areas: (1) the functional areas and the flow of transaction information that triggers key tasks; (2) the documents, journals, and accounts that support audit trails, decision making, and financial reporting; and (3) the exposure to risks in the revenue cycle and the control techniques that reduce them. The chapter examined the operational and control implications of different degrees of technology. First, we examined the manual system depicting people, organizational units, and physical documents and files. The purpose of this was to help the reader envision the segregation of duties and independent verifications, which are essential to effective internal control regardless of the technology in place. In the process, we high- lighted inefficiencies intrinsic to manual systems, which gave rise to modern systems using improved technologies and techniques. Next

PC-Based Accounting Systems The software market offers hundreds of PC-based accounting systems. In contrast to mainframe and client-server systems that are frequently custom-designed to meet the specific user requirements, PC applications tend to be general-purpose systems that serve a wide range of needs. This strategy allows software vendors to mass-produce low-cost and error-free standard products. Not surprisingly, PC accounting systems are popular with smaller firms, which use them to automate and replace manual sys- tems and thus become more efficient and competitive. PC systems have also made inroads with larger companies that have decentralized operations. Most PC systems are modular in design. Typical business modules include sales order processing and accounts receivable, purchases and accounts payable, cash receipts, cash disbursements, general ledger and financial reporting, inventory control, and payroll. Their modular design provides users with some degree of flexibil

Computer-Based Accounting Systems We can view technological innovation in AIS as a continuum with automation at one end and reengineering at the other. Automation involves using technology to improve the efficiency and effectiveness of a task. Too often, however, the automated system simply replicates the traditional (manual) process that it replaces. Reengineering, on the other hand, involves radically rethinking the business process and the work flow. The objective of reengineering is to improve operational performance and reduce costs by identifying and eliminating non–value-added tasks. This involves replacing traditional procedures with procedures that are innovative and often very different from those that previously existed. In this section we review automation and reengineering techniques applied to both sales order process- ing and cash receipts systems. We also review the key features of point-of-sale (POS) systems. Next, we examine electronic data interchange (EDI) and t

Manual Systems The purpose of this section is to support the system concepts presented in the previous section with models depicting people, organizational units, and physical documents and files. This section should help you envision the segregation of duties and independent verifications, which are essential to effective internal control regardless of the technology in place. In addition, we highlight inefficiencies intrinsic to manual systems, which gave rise to modern systems using improved technologies. SALES ORDER PROCESSING The system flowchart in Figure 4-12 shows the procedures and the documents typical to a manual sales order system. In manual systems, maintaining physical files of source documents is critical to the audit trail. As we walk through the flowchart, notice that in each department, after completion of the assigned task, one or more documents are filed as evidence that the task was completed. Sales Department The sales process begins with a customer cont

Physical Systems In this section we examine the physical system. This begins with a review of manual procedures and then moves on to deal with several forms of computer-based systems. The inclusion of manual systems in this age of computer technology is controversial. We do so for three reasons. First, manual systems serve as a visual training aid to promote a better understanding of key concepts. Manual (document) flowcharts depict information as the flow of physical documents. Their source, routing, destination, and sequence of events are visually discernable from the flowchart. In computer-based systems, flows of digital documents are not easily represented on flowcharts and may be difficult for novice accounting information systems students to follow. Second, manual system flowcharts reinforce the importance of segregation of duties through clearly defined departmental boundaries. In computer-based systems, these segregations are often accomplished through computer programming

The Revenue Cycle Economic enterprises, both for-profit and not-for- profit, generate revenues through business processes that constitute their revenue cycle. In its simplest form, the revenue cycle is the direct exchange of finished goods or services for cash in a single transaction between a seller and a buyer. More complex revenue cycles process sales on credit. Many days or weeks may pass between the point of sale and the subsequent receipt of cash. This time lag splits the revenue transaction into two phases: (1) the physical phase, involving the transfer of assets or services from the seller to the buyer; and (2) the financial phase, involving the receipt of cash by the seller in payment of the account receivable. As a matter of processing convenience, most firms treat each phase as a separate transaction. Hence, the revenue cycle actually consists of two major subsystems: (1) the sales order processing subsystem and (2) the cash receipts subsystem. This chapter is organized