MANAGEMENT INFORMATION SYSTEMS 8/E

Unit 6
The Accounting Information System & The Management Information System
1-1

MANAGEMENT INFORMATION SYSTEMS 8/E

Chapter 11
The Accounting Information System

11-2

What is Data Processing?

Manipulation or transformation of symbols for the purpose of increasing their usefulness. s Data processing (DP) and transaction processing (TP) are often used interchangeably. s Applied to business data
s
11-3

Accounting Information Systems (AIS)

Gathers data describing a firms activity s Transforms data into information s Makes information available to users inside and outside the firm
s

11-4

A Model of an Accounting Information System

Environment
Information
Management

Data

Data processing software

Database
Accounting Information System

Input physical resources

Transform

Output physical resources

Environment

11-5

Data Processing Tasks

1. Gather data
Each transaction is documented What happened? When did it happen? How much (volume, value)? Transactions describe

11-6

Data Processing Tasks [cont.]

2. Manipulate data
Classify (use codes) Sort Calculate Summarize

11-7

Data Processing Tasks [cont.]

3. Store data
Describes each transaction Represents most of the database

11-8

Data Processing Tasks [cont.]

4. Document preparation
Triggers
By an action By a time schedule

Hardcopy or on-screen

11-9

Characteristics of the AIS

Performs necessary tasks s Standard procedures s Detailed data s Historical focus s Provides minimal problem-solving information
s

11-10

The Distribution System

s

Sample AIS

Users
Manufacturers Wholesalers Retailers

General in nature s Used in many different types of firms

s

Retailers Manufacturing Service

11-11

DFDs
s

Data flow diagram

Document a system in a hierarchical manner Data flows, processes, environmental elements

Context level is overall system within environment s Leveled and Balanced DFDs
s

11-12

Customers

Sales orders

A Context Diagram of the Distribution System

Commitments Purchases orders

Rejected sales order notices Invoices Statements Payments by customers

Shipments Supplier invoices

Distribution system

Suppliers

Supplier statements

Payments to suppliers Income statement Balance sheet Budget reports

Stock

Materials stockroom

Management
Other reports 11-13

Customers

Sales Orders Rejected sales order notices Invoices

A Figure 0 Diagram of the Distribution System

Statements Payments by customers Receivables ledger data Inventory ledger data

1. Fill Orders
Purchasing data Received items Commitments

3. Maintain general ledger

Income statement

Payables ledger data Other reports Budget reports

2. Order replenishment stock

Purchase Orders Shipments Supplier invoices

Suppliers

Balance sheet

Supplier statements Payments to suppliers

Management
Stock

Materials stockroom

11-14

Sales orders

Customers

Rejected sales order notices

A Figure 1 Diagram of the Systems that Fill Customer Orders

Accepted orders

Payments by customers

1.1 Order Entry

Statements

Completed orders Invoices

Filled items

1.2 Inventory

Billed orders

1.3 Billing
Purchasing data Inventory ledger data
3 3 2 2

1.4 Accounts receivable

Receivables ledger data

Received items

11-15

A Figure 2 Diagram of the Systems that Order Replenishment Stock

1 Purchasing data 2.1 Purchasing Commitments Purchase orders

Filled purchase orders

Issued purchase order data

Shipments

Suppliers

Received items 2.2 Receiving Received purchases Incurred obligations Payable ledger data

1 Materials stockroom
Supplier invoices

Stock

2.3 Accounts payable

Supplier statements Payments to suppliers

11-16

A Figure 3 Diagram of the Systems That Perform General Ledger Processes

1 1 2
Receivables ledger data Inventory ledger data Payables ledger data

3.1 Update general ledger

General ledger records Updated general ledger records

Management report data

General ledger

3.2 Prepare management reports

Other reports Budget reports

Balance sheet Income statement

Management
11-17

Fill Customer Orders

s

Order entry
Sales order form

Inventory
Process sales Process receipts Feed general ledger

11-18

A Figure 1.1 Diagram of the Order Entry System

Customers
Sales orders Edit rejects

Rejected sales order notices

1.1.1 Edit order data

Edited orders

Sales Sales order order edit edit ejects ejects

Customer Customer credit file credit file 1.1.2 1.1.2 Computer Computer credit credit check check
Credit data

Edited and checked orders

Accepted orders 1.2

1.1.3 Log in orders

Order data

Credit Rejects

Sales order credit rejects

1.3

Completed orders

1.1.4 Mark filled orders

Date filed

Order log
11-19

1.1

A Figure 1.2 Diagram of the Inventory System

Accepted orders

1.2.1 1.2.1 Check Check the the balance balance on hand on hand

Item records

Inventory file additions

1.2.3 1.2.3 Add Add received received items items

Received items

Backorder records

Backorder Backorder file file

Items available

Inventory Inventory file file

Filled items

1.2.2 1.2.2 Check Check the Purchasing data the reorder reorder point point 2

Updated item records

Inventory records

1.2.4 1.2.4 Provide Provide general general ledger ledger data data

Inventory ledger data

1.3

11-20

Billing
s

Invoice
Note:
1. Customer data 2. Item data

11-21

1.2

Filled items

A Figure 1.3 Diagram of the Billing System

1.3.1 Obtain customer data Invoice data

Customer data

Customer file

Invoices Customers Customers

1.3.2 Prepare invoices

Billed orders
1.4

Completed orders
1.1

11-22

Accounts Receivable
s

Four separate triggers

Today's sales Today's payments Time to send statements Need to provide general ledger data

11-23

1.3

Billed orders

A Figure 1.4 Diagram of the Accounts Receivable System

New receivables Receivables records

1.4.1 Add new receivables

Accounts Accounts Statement records receivable receivable file file

Receivables records to delete 1.4.2 Delete paid receivables

1.4.4 Provide general ledger data Receivables ledger data

1.4.3 Prepare statements

Statements

Payments by Customers customers

Paid receivables records

Paid receivables file

11-24

Order Replenishment Stock

s

Purchasing
Emerging technologies
EDI ISDN

Purchase order

11-25

A Figure 2.1 Diagram of the Purchasing System

Purchasing data 2.1.1
1

Past performance data

Select suppliers

Inventory and supplier data 2.1.2 Obtain verbal commitments

Supplier Supplier file file

Purchase order data Issued purchase order data 2.1.3 Prepare purchase orders

Commitments

2.2 2.3

Purchase Orders

Suppliers

Incurred Obligations

Purchase order records Outstanding Outstanding purchase purchase order files order files 2.1.4 Close out purchase orders

Purchase Purchase Order Order history file history file

Purchase records to close out Filled purchase Orders 2.2

11-26

Removed purchase order records

A Figure 2.2 Diagram of the Receiving System

2.1
Issued purchase order data

Suppliers

Purchased item data

Purchased Purchased items file items file

Shipments Stocks

2.2.1 process receipts

Receipt information

Received items Materials stockroom 1 2.2.1 Notify Filled purchase orders other 2.1 systems Received purchases
11-27

2.3

Accounts Payable
s

The firm pays suppliers when: 1. Stock was ordered (P.O. file copy) 2. Stock was received (Received purchases file) 3. Invoice

11-28

A Figure 2.3 Diagram of the Accounts Payable System

2.1 Incurred Obligations 2.3.1 Set up supplier payables records 2.2 Received Purchases New Payables data Payables Records

Payables Ledger Data 2.3.4 Provide general ledger data 3

Accounts Accounts payable payable file file

Payables Records to delete Paid Payables Records

Received Received purchases purchases file file

Receipt Data
Payment data

2.3.3 Delete paid payables

Paid Paid payables payables file file Supplier Invoices

2.3.2 Make supplier payments

Invoice and Invoice and Supplier statement statements statement file Paid Supplier file Data Invoice Data Suppliers Suppliers
Payments to Suppliers
11-29

AIS is the Foundation System

The AIS must be implemented first MIS Depends on a well DSS designed AIS ES

11-30

Summary
AIS maintains financial records of the firm s Data processing components
s

Data gathering Data manipulation Data storage Document preparation

AIS Subsystems s AIS contributes to problem solving

11-31

MANAGEMENT INFORMATION SYSTEMS 8/E

Chapter 12
The Management Information System

12-32

MIS Definition
s

A computer-based system that makes information available to users with similar needs.
Users are typically comprise a formal organizational entity Describes what has happened in the past

12-33

Early MIS Efforts

s s

s s s

Popular in business by the mid 1960s Punched card and keydriven machines were used only for data processing The first computers were applied the same way Only a few computer literate people in the firms Managers became aware of computers processes and power

12-34

MIS is an Organizational Resource

s

Information
Past, present, future Periodic reports, special reports, simulations

Similar needs
Functional area Management level Managers and nonmanagers
12-35

An MIS Model
s

Database
AIS data and information Environmental data and information

Interorganizational information systems (IOS)

Firms band together with other organizations such as suppliers
12-36

An MIS Model
Environment
Organizational problem solvers

Data

Information

Report writing software

Mathematical models

Database

Management Information System

Environment

12-37

Organizational Information Systems

Executive Information System (EIS)

Marketing Manufacturing Financial Human resource information information information information system system system system

12-38

Functional Information Systems

s

MIS tailored to meet users needs for information concerning functional areas
Manufacturing HRIS Others

s s

Executive information systems (EIS) Enterprise information system

Pulls functional ISs together Enterprise resource planning (ERP)

Report Writing Software

Periodic and special reports may look the same s Difference is in what triggers the report
s

Periodic report
Produced on a schedule

Special report
Produced when something out of the ordinary occurs
12-40

Incorporating Management by Exception

Prepare the report only when exceptions occur s Use the report sequence to highlight exceptions s Group exceptions together s Show the variance from the norm
s

12-41

An Overtime Earnings Report

OVERTIME EARNINGS REPORT FOR WEEK ENDING AUGUST 19
Department Name Receiving Inspection Materials Handling Tooling Assembly Plating Shipping TOTALS OVERTIME EARNINGS Current Month Year-to-Date $ 2,305.00 $ 1,025.60 $ 3,392.50 $ 78.00 $ 0.00 $ 3,504.90 $ 5,219.16 $15,525.16

Department No.

16-10 16-11 16-12 16-13 16-14 16-15 16-16

$ 5,319.20 $ 4,386.12 $12,629.00 $ 1,049.00 $ 792.80 $12,635.20 $18,294.16

$55,105.48
12-42

SALES BY PRODUCT FOR THE MONTH OF JUNE

PRODUCT NUMBER 129875 087235 118320 250067 228203 576000 516012 090407 PRODUCT NAME GASKET CENTER CASE MAINSHAFT 1ST MOTION SHAFT OIL SEAL REAR LAYGEAR HUB 5TH SHIFT FORK 1-2 SYNCHRO RING 2ND CURRENT MONTH SALES $ 5,090.23 4,760.01 1,789.45 11,560.24 8,369.34 .00 450.95 2,243.27 YEAR-TO-DATE SALES $ 31,764.00 29,329.45 28,243.59 23,450.07 14,709.03 13,623.68 12,634.44 9,963.58

282130 576301

BUSH SHIFT LEVER OIL SLINGER

.00 .00

490.00 11.50
12-43

AGED ACCOUNTS RECEIVABLE REPORT AS OF MAY 31

--------------------------------------------------------------------CUSTOMER-------CURRENT 30-60 60-90 OVER 90 TOTAL NUMBER NAME AMOUNT DAYS DAYS DAYS AMOUNT ----------------------------------------------------------------51212 KELLY & MARLEY INC 1,003.10 20.26 1023.26 51221 KENNEDY ELECTRIC 181.34 181.34 52472 KENYON MACHINERY 443.10 443.10 53204 KEPNER DANA CO 153.26 114.14 11.12 278.52 54233 KERITE CO 367.94 101.74 469.68 54574 KEYMAN ASSOCIATES 432.71 431.71 55081 KIMBULIANS 24.12 122.81 146.93 55430 KIRSCH CO 26.30 26.30

60245 60772

LEBEN DRILLING LEEMONT INC

1.10 476.93 174.96 35.87 35.95

652.39 71.82
12-44

SALES BY SALESPERSON REPORT FOR THE MONTH ENDING MARCH 31

SALESPERSON ----------NO. NAME 0120 10469 19261 20234 61604 62083 63049 64040 CURRENT-MONTH YEAR-TO-DATE ------------------------------------------QUOTA ACTUAL VARIANCE QUOTA ACTUAL VARIANCE 1200 1000 800 1500 2000 1000 1100 1050 9650 1083 1162 1090 1305 2333 990 1250 985 10198 -117 +162 +290 -195 +333 -10 +150 -65 548 3600 3000 2400 4500 6000 3000 3300 3150 28950 3505 3320 2510 4110 6712 2319 2416 3020 27912 -95 +320 +110 -390 +712 -681 -884 -130 -1028

JOHN NELSON LYNN SHERRY DARVIN UPSHAW JANIE EVANS TRAVIS BURKE CATHY HAGER STEVE JENNER SAM MOSELY TOTALS

12-45

Modeling
Models are abstractions s Models may be:
s

Physical Narrative Graphic Mathematical

12-46

Mathematical Modeling
Most important to MIS users s Three dimensions
s

Influence of time Degree of uncertainty Ability to optimize

12-47

Mathematical Model Types

s

Static
Does not include time Like a snapshot

Dynamic
Includes time Like a motion picture

12-48

Mathematical Model Types (cont.)

s

Probabilistic
Includes probabilities of events occuring 0.00 to 1.00

Deterministic
Events are certain Not random

12-49

Mathematical Model Types (cont.)

s

Optimizing
Selects best solution Requires structured problems

Suboptimizing
Also called satisficing Model identifies outcomes for manager to select among
12-50

Simulation
Use of a model is called simulation s Scenario
s

Conditions that influence the simulation Scenario data elements

Decision variables
Input values

Output format varies

12-51

Simulation (cont.)
s

Simulation Technique
Single scenario for optimizing model What-if game for suboptimizing models Change only single decision variable per run Systematically discover answers to problems

Output format
Include both decision variables and outcomes on same report
12-52

Modeling Example
s

Use model to simulate the effect of:

Price of product Amount of plant investment necessary to provide sufficient capacity Amount to invest in marketing activity Amount to invest in R & D

Enter model input s Review model outputs

s
12-53

More on Modeling
s

Advantages
Can be a learning experience Speed allows consideration of more options Provides predictive power Less expensive than trial-and-error method

Disadvantages
Difficult to model a business system High degree of mathematical skills required
12-54

INVENTORY PLANNING MODEL OCTOBER 11

SCENARIO: BEGINNING BALANCE: DAILY SALES UNITS: DECISIONS: 0RDER QUANTITY: REORDER POINT: LEAD TIME: RESULTS: BEGINNING DAY BALANCE RECEIPTS 1 200 2 180 50 3 160 100 175 3 200 20

SALES 20 20 20

ENDING BALANCE 180 160 140

ORDER QUANTITY 25

RECEIPT DUE DATE 5

12-55

Graphic Output
s

Use graphics to
present a quick summary detect trends over time forecast activities seek relatively simple impressions from a large volume of data

12-56

Graphical Output
Reports and model outputs can be produced in tabular or graphical form s Spreadsheets have encouraged the use of graphics s Can improve decision making capability
s

12-57

Which Graphs to Use

s s s

Line or bar charts are best to summarize data Grouped line or bar charts show trends over time Grouped bar charts are better for representing parts of a whole Compare variables using horizontal, not vertical, bars Use single line or bar charts to compare data points

12-58

GROUPED/MULTIPLE LINE CHART

100 90 80 70 60 50 40 30 20 10 0 1980 1981 1982 1983 1984 1980 Apples Oranges Peanuts

GROUPED BAR CHART

Sales Revenue Oranges Peanuts
90 80 70 60 50 40 30 20 10 1981 1982 1983 1984 0

Sales Revenue
Apples

Years (c)
12-59

Years
(a)

Segmented Line Chart

Dollars in Millions
200 150 100 50 0

1980

1981

1982

1983

1984

Years (b)

Legend:
Apples Oranges Peanuts

12-60

Segmented/Divided Bar Chart

Sales Revenue Dollars in Millions
200 150 100 50 0 1980 1981 1982 1983 1984 Legend:
Apples Oranges Peanuts
12-61

Years (d)

Human Factors Consideration

Behavioral influences can affect employees in their computer-related tasks s Fear
s

Replacement of people by computers Computer systems tailored to organizations, not individuals Managers and line workers are affected
12-62

Minimizing Fear
Use computer as a means of achieving job enhancement s Use formal communications to keep employees aware of firms intentions s Build a relationship of trust with employees s Align employees needs with firms objectives
s
12-63

Putting the MIS in Perspective

The first attempt to make information available to management s Enjoyed its greatest prominence in the 1960s when it first originated s Now integrated throughout the firm
s

12-64

MIS and Problem Solving

s

Organizationwide information resources

Provides problems solving information Sets stage for accomplishment in other areas such as DSS, the virtual office, and knowledge-based

Problem identification and understanding

Main idea is to keep information flowing to the manager Manager uses MIS to signal impending problems

Main weakness is that it is not aimed at individual problem solvers

12-65

Summary
MIS is an organizational reason providing information to managers with similar needs s Functional MISs began to emerge s MIS subsystems
s

Report-writing software Mathematical models

s

Management by exception can be incorporated

12-66

Summary [cont.]
s

Mathematical modeling
Only an approximation

Computer graphics s Behavioral influences s Quality of IS

s

12-67