graphically describes the flow of data w/in an org.

4 symbols

Useful for high-level system descriptions

DFD

Data Flow

represents the flow of data between processes, data stores, & data sources/destinations

- Symbol -

[image]

DFD

Processes

transformation of data

- Symbol-

[image]

DFD

Data Store

temporary or permanent data repository

- Symbol -

_______

_______

DFD

Context Diagram

highest-level DFD

summarly-level system view

- ex. -

depicts the system & its external players

analytical technique to pictorally describe a system

standard symbols

more detailed than a DFD

illustrates flow of doc.s & info

useful in analyzing internal controls

relationships among the...

input → processing → output of an AIS

Sales & Cash Receipts Cycle

Beginning, End, Major Account

Begin - receipt of an order

End - cash collection

Account - Accounts Receivable

Sales & Cash Receipts Cycle

Subcycles (x5)

Sales

Cash Receipts

Sales Returns & Allowances

Estimate of BD Exp.

Write-off of Uncollectibles

set of 2 or more interrelated components

↓

achieve goal

Info

benefit produced - cost of producing it

internal info

who should get it, how much, etc.

system that...

collects, records, stores, & processes...

data to produce info for decsion makers

Characteristics of Useful Info

Relevant

↓ uncertainty

↑ predictions

confirms/corrects predictions

Characteristics of Useful Info

Reliable

error-free

accurate

Characteristics of Useful Info

Complete

Characteristics of Useful Info

Timely

Characteristics of Useful Info

Understandable

Characteristics of Useful Info

Verifiable

Characteristics of Useful Info

Accessible

available as needed

useable format

activities that go into providing value to customers

Activities

1. Inbound Logistics - handling materials
2. Operations - inputs --> FGs
3. Outbound Logistics - distribution to customers
4. Marketing & Sales - help customers buy g/s
5. Service - post-sale support

allow the 5 primary value chain activities to be performed

• Infrastructure
• HR
• Technology
• Purchasing

links suppliers to customers

-ex.-

RM Suppliers

↓

Manufacturer

↓

Distributor

↓

Retailer

↓

Customer

repetitive, routine, & understood

can be delegated to low-level employees

incomplete decision making rules

subjective assessments

supplement formal data analysis

nonrecurring & nonroutine

No framework or model for decision-making

Decision Scope

Operational Control

efficient performance of specific tasks

- ex. -

inventory management

extending credit

Decision Scope

Management Control

efficient use of resources to accomplish org. objectives

- ex. -

budgeting

product improvements

HR policies

Decision Scope

Strategic Planning

establishing org. objectives & policies to accomplish them

- ex. -

financing policies

acctg. practices

developing new product lines

acquiring other businesses

system's total activities > sum of each part

mutually reinforcing activities

uses data warehouses, etc....

complex algorithms...

forecast future events

agreement to exchange g/s...

or any other event w/ measureable economic effects

Give-Get Transaction Cycles

Revenue Cycle

Give-Get Transaction Cycles

Expenditure Cycle

Give-Get Transaction Cycles

Production Cycle

Give-Get Transaction Cycles

HR/Payroll Cycle

• hire
• train
• compensate
• evaluate
• promote
• terminate...employees

Give-Get Transaction Cycles

Financing Cycle

sell stock to investors

borrow $$$ & pay interest

pay dividends

operations that turn data → meaningful info

[image]

***don't forget about data storage

data on business activities

can be used to verify account totals, etc.

data records sent to external users

↓

returned to the system as an input

capture transactions at time of origin

↑ accuracy & efficiency of data input

summary-level data for every...

asset, liability, equity, revenue, & expense account

detailed data for...

any general ledger account...

w/ many individual subaccounts

- ex. -

A/R subsidiary - customer info, amounts, etc.

systematic assignment of numbers or letters...

to items...

to classify & organize them

Coding

Sequence

consecutive #

ensures no gaps w/in the sequence...ensures all items are accounted for

- ex. -

pre-numbered checks

Coding

Block

Reserved blocks of ## w/in a sequence

- ex. -

auto parts = 10,000-19,999

oils = 20,000-29,999

Coding

Group

often used w/ block coding

2+ digit subgroups used to code an item

sort, summarize, & retrieve info by subcode

- ex. -

Digit Position

1-2 = product line & size

3 = color

4-5 = Year of Manufacture

6-7 = optional features

list of all general ledger accounts an org. uses

includes codes for account ##

records infrequent / non-routine transactions

- ex. -

end-of-period adjustments & closing entries

simplifies recording many repetitive transactions

eventually transferred to appropriate ledger

- ex. -

Sales Journal

provides references for where postings came from

checks accuracy & validity of ledger postings

something about which info is stored

- ex. -

employees

inventory

customers

Important characteristics that need to be stored

necessary info about an entity

- ex. -

employee pay rate

customer billing address

physical space...

w/ stored data values

Set of fields...

w/ various attributes...

of the same entity

intersecting row & column...

an individual field w/in a record

- ex. -

Address

P.O. Box 123

related records...

grouped together

Store cumulative info...

about an org.'s resources & users

(similar to a ledger in a manual AIS)

records for individual transactions...

during a specific fiscal period...

→ used to update the appropriate master file

(like a journal in a manual AIS)

interrelated, centrally coordinated files

- ex. -

A/R file

customer & sales analysis tools

↓

customer database

Creating - adding new data records

Reading - retrieving existing data

Updating - brings data current

Deleting - purging useless records

Information Outputs

Documents (def + 2)

records of transactions or other data

Source - Used at the beginning of transaction processing activities

Operational - generated at the end of the process

Information Outputs

Reports

integrate all org. operations w/ traditional AIS

attempts to solve issues w/ incompatible systems, etc.

Documentation

Narrative Description

written, step-by-step explanation of a system & its components

supplements flowcharts, DFDs, etc.

DFD

Data Source / Destination

depict entities w/in a process

user of the info

- Symbol -

[image]

AIS

Components (x6: PPDSII)

1. People - operate system & perform functions
2. Procedures/Instructions - manual & automated
3. Data
4. Software - process data
5. IT Infrastructure - hardware, etc.
6. Internal Controls & Security

AIS

Value Addition

↑ efficiency

↑ decision making

↑ knowledge sharing

↑ internal controls

↓ cost

General Ledger

Diagram of Role w/in AIS

[image]

↓

Interal & External users

Information Outputs

Query

Documentation

Why should we document processes?

Essential to running an acctg. department

Knowledge in "someone's head" is risky - what if they leave

Shows strengths & weaknesses of internal controls

Sarbanes Oxley requirements

DFDs & Flowcharts

Guidelines for Creation (x15 total, x14 listed)

1 - Understand the system

2 - Ignore control processes & actions

3 - Determine system boundaries (start & stop)

4 - Draw context diagram 1st...then other details

5 - Identify & label all data flows

6 - Group data flows that always flow together

7 - Show a process whenever data is converted into a new form

8 - Group related, simultaneous processes

9 - Number/Show order of processes

10 - Include action verbs in Process names (i.e. update, prepare, etc.)

11 - Identify & label data stores

12 - Identify & label data sources & destinations

13 - Move from top → bottom, left → right

14 - Don't cross lines

DFDs & Flowcharts

Flowchart specific guidelines

Identify entities to be included

Seperate column for each entity

Identify exceptions/extra info w/ annotation bracket

Use standard flowchart symbols

Use on/off-page connectors as appropriate

***Accountant's Objectives (x7)

...Sales/Cash Reciepts Cycle

(similar to other cycles)

1 - Record all existing transactions for each subcycle

2- All transactions recorded at correct amount

3 - All transactions classified by chart of accounts

4 - All transactions included in the proper period

5 - Write-off uncollectible receivables

6 - Valuations/assumptions are reasonable

7 - All material disclosures included in F/S & notes

***Accountant's Objectives

in General Terms

1. completeness
2. accuracy
3. correct GL & account
4. cut-off period
5. full disclosure
6. valuation
7. transparency / full disclosure

Internal Controls

...how to get them

Maintain adequate documents & records

Transaction Authorization

- approve credit before shipment

- approval for returns, etc.

Seperate acctg roles from asset custody

Independent checks on performance

- account for all sequence coded documents

- check journal footings & post. ref columns

- reconcile GL = subsidiary ledgers

Monthly statements to customers

Cash account used soley for payroll

Makes reconciliation easier

1 cash receipt = company deposits

1 cash disbursement = employee paychecks