BU486 Accounting Information Systems 2026 final exam
prep Wilfrid Laurier University
Chapter 1: Conceptual Foundations of Accounting Information Systems
System: Set of 2+ interrelated components that interact to achieve a goal
• Often have subsystems that support larger system
Goal Conflict: When a subsystem’s goals are inconsistent with goals of another subsystem or whole system
• Changes in subsystems must first consider effect on other subs and whole system
Goal Congruence: when a subsystem achieves its goals while contributing to overall organization’s goal
• Larger organizations with more complicated system = difficult to achieve goal congruence
Data: Facts collected, recorded, stored & processed by an information system
• Businesses always need to collect several kinds of data (i.e. unit price, quantity sold)
Information: Data that has been organized & processed to provide meaning and improve decision making
• Usually make better decisions as quantity & quality of information increase
7 Characteristics that make information useful & meaningful:
1) Relevant - Reduces uncertainty, improves decision making, or confirms/corrects prior expectations
2) Reliable - free from error/bias, accurately represents organization events/activities
3) Complete - Does not omit important aspects of the events/activities being measured
4) Timely - Provided in time for decision makers to make decisions
5) Understandable - presented in a useful & intelligible format
6) Verifiable - 2 independent, knowledgeable people produce the same information
7) Accessible - available to users when they need it and in format they can use
Information overload: exceeding amount of information a human mind can absorb & process, resulting in
decline in decision-making quality & increase in cost of providing information
Information technology (IT): computers & other electronic devices used to store, retrieve, transmit &
manipulate data
Value of information: benefit produced by information minus cost of producing it
• Benefits of information include: Reduced uncertainty, improved decisions, & improved ability to
plan/schedule activities
• Cost of information include: time & resources spent to produce & distribute information
o Hard to quantify costs & benefits but should be done as accurately as possible
Business process: set of related, coordinated, & structured activities & tasks, performed by
person/computer/machine that help accomplish a specific organizational goal
• To be effective, must decide what decisions need to be made, the information needed, and how to
gather/process the data
• 5 major business processes or transaction cycles: revenue, expenditure, production, payroll, and
financing cycles
Transaction: agreement between 2 entities to exchange goods/services or an event that can be measured in
economic terms
Transaction processing: process of capturing transaction data, processing it, storing it for later use, and
producing information output
Give-Get Exchange: transactions that happen a great many times (i.e. giving cash to get inventory)
Revenue cycle: goods/services sold for cash
Expenditure cycle: purchasing inventory or raw materials in exchange for cash
Production/Conversion cycle: give labour and raw materials in exchange for finished goods
Payroll Cycle: Give cash in exchange for labour
Financing cycle: companies sell shares for money, or pay dividends and interest on loans
General ledger & reporting system: Information-processing operations involved in updating general ledger &
preparing reports for management and third parties
,Accounting Information Systems (AIS): system that collects, records, stores and processes data to produce
information for decision makers
, • This includes people, procedures, data, software, IT infrastructure, internal controls and security
measures
6 Components of an AIS:
1) People that use the system
2) Procedures and instructions used to collect, process and store data
3) Data about the organization and its business activities
4) Software used to process the data
5) Information Technology Infrastructure including computers, networking devices
6) Internal controls & security measures that safeguard AIS data
• The 6 components enable AIS to fulfill the 3 important business functions:
1) Collect and store data about activities, resources and personnel
2) Transform data into information so management can plan, execute, control & evaluate
activities (decision-making)
3) Provide adequate controls to safeguard assets/data
Value added by:
1) Improve quality & reduce costs of products/services
2) Improve efficiency
3) Share knowledge
4) Improve efficiency & effectiveness of supply chain
5) Improve internal control structure
6) Improve decision making
3 factors that influence AIS design:
1) Developments in IT
2) Business Strategy
3) Organizational culture
Predictive analysis: use of data warehouses & complex algorithms to forecast future events, based on
historical trends & calculated probabilities
Value chain: Linking together all primary & support activities in a business, value added as product passes
through chain
Primary activities: value chain activities that produce, market & deliver products and services to customers
and provide post-delivery service & support
• 5 primary activities: Inbound logistics, operations, outbound logistics, marketing & sales, service
Inbound logistics: consists of receiving, storing & distributing materials an organization uses to create services
& products it sells
• Ex: automobile manufacturer receives & handles steel, glass & rubber
Operation activities: transform inputs into final products or services
• Ex: assembly line activities convert raw materials into finished car
Outbound logistics: activities distribute finished products/services to customers
• Ex: shipping automobiles to car dealers
Marketing & Sales Activities: help customers buy organization’s products/services
• Ex: Advertising
Service activities: provide post-sale support to customers
Support activities: value chain activities that enable primary activities to be performed efficiently and
effectively
• 4 support activities: firm infrastructure, technology, purchasing, and human resources
Firm infrastructure: accounting, finance, legal & admin activities that allow organization to function
• AIS is part of firm infrastructure
Human resources activities: recruiting, hiring, training and compensating employees
Technology activities: improve a product or service
, • Ex: R&D, product design, investments in IT
Purchasing activities: procure raw materials, supplies, machinery & buildings used to carry out primary
activities
Supply chain: an extended system that includes an organization’s value chain and suppliers, distributors and
customers
• Value chain is part of supply chain
Chapter 2: Overview of Transaction Processing & Enterprise Resource Planning Systems
Data processing cycle: four operations performed on data to generate meaningful & relevant information
1) Data Input
2) Data Storage
3) Data Processing
4) Information Output
Data input
• 3 facets of each business activity:
1) Each activity of interest
2) Resource affected by each activity
3) People who participate in each activity
• Most business use paper source documents to collect data about business activities
• Source documents: documents used to capture transaction data at its source, when transaction
occurring
o Ex: Sales orders, purchase orders, employee time cards
• Turnaround documents: records of company data in machine-readable form sent to external party and
then returned to system as input
o Ex: utility bill sent to customer and then returned with payment
• Source data automation: collection of transaction data in machine-readable form at time and place of
origin
o Ex: point-of-sale terminals & ATMs
• Steps in processing input:
1) Capture transaction data and enter them into system (3 facets)
2) Ensure captured data are accurate and complete (automation, well-designed turnaround
documents, and data entry screens)
3) Ensure company policies followed
Data Storage
• General ledger: contains summary-level data for every asset, liability, and other accounts of
organization
• Subsidiary ledger: contains detailed data for any G/L with many individual subaccounts
• Control account: title given to a G/L account that summarizes the total amounts recorded in a
subsidiary ledger
o Ex: A/R control account in the G/L represents the total amount owed by all customers, whereas
balances in A/R subsidiary ledger have amounts owed by each specific customer
• Coding: systematic assignment of numbers/letters to items to classify and organize them
o Sequence codes: Items numbered consecutively so that gaps in sequence code indicate missing
items that should be investigated
▪ Ex: prenumbered checks invoices, and POs
o Block code: blocks of numbers that are reserved for specific categories of data (to help organize
data)
prep Wilfrid Laurier University
Chapter 1: Conceptual Foundations of Accounting Information Systems
System: Set of 2+ interrelated components that interact to achieve a goal
• Often have subsystems that support larger system
Goal Conflict: When a subsystem’s goals are inconsistent with goals of another subsystem or whole system
• Changes in subsystems must first consider effect on other subs and whole system
Goal Congruence: when a subsystem achieves its goals while contributing to overall organization’s goal
• Larger organizations with more complicated system = difficult to achieve goal congruence
Data: Facts collected, recorded, stored & processed by an information system
• Businesses always need to collect several kinds of data (i.e. unit price, quantity sold)
Information: Data that has been organized & processed to provide meaning and improve decision making
• Usually make better decisions as quantity & quality of information increase
7 Characteristics that make information useful & meaningful:
1) Relevant - Reduces uncertainty, improves decision making, or confirms/corrects prior expectations
2) Reliable - free from error/bias, accurately represents organization events/activities
3) Complete - Does not omit important aspects of the events/activities being measured
4) Timely - Provided in time for decision makers to make decisions
5) Understandable - presented in a useful & intelligible format
6) Verifiable - 2 independent, knowledgeable people produce the same information
7) Accessible - available to users when they need it and in format they can use
Information overload: exceeding amount of information a human mind can absorb & process, resulting in
decline in decision-making quality & increase in cost of providing information
Information technology (IT): computers & other electronic devices used to store, retrieve, transmit &
manipulate data
Value of information: benefit produced by information minus cost of producing it
• Benefits of information include: Reduced uncertainty, improved decisions, & improved ability to
plan/schedule activities
• Cost of information include: time & resources spent to produce & distribute information
o Hard to quantify costs & benefits but should be done as accurately as possible
Business process: set of related, coordinated, & structured activities & tasks, performed by
person/computer/machine that help accomplish a specific organizational goal
• To be effective, must decide what decisions need to be made, the information needed, and how to
gather/process the data
• 5 major business processes or transaction cycles: revenue, expenditure, production, payroll, and
financing cycles
Transaction: agreement between 2 entities to exchange goods/services or an event that can be measured in
economic terms
Transaction processing: process of capturing transaction data, processing it, storing it for later use, and
producing information output
Give-Get Exchange: transactions that happen a great many times (i.e. giving cash to get inventory)
Revenue cycle: goods/services sold for cash
Expenditure cycle: purchasing inventory or raw materials in exchange for cash
Production/Conversion cycle: give labour and raw materials in exchange for finished goods
Payroll Cycle: Give cash in exchange for labour
Financing cycle: companies sell shares for money, or pay dividends and interest on loans
General ledger & reporting system: Information-processing operations involved in updating general ledger &
preparing reports for management and third parties
,Accounting Information Systems (AIS): system that collects, records, stores and processes data to produce
information for decision makers
, • This includes people, procedures, data, software, IT infrastructure, internal controls and security
measures
6 Components of an AIS:
1) People that use the system
2) Procedures and instructions used to collect, process and store data
3) Data about the organization and its business activities
4) Software used to process the data
5) Information Technology Infrastructure including computers, networking devices
6) Internal controls & security measures that safeguard AIS data
• The 6 components enable AIS to fulfill the 3 important business functions:
1) Collect and store data about activities, resources and personnel
2) Transform data into information so management can plan, execute, control & evaluate
activities (decision-making)
3) Provide adequate controls to safeguard assets/data
Value added by:
1) Improve quality & reduce costs of products/services
2) Improve efficiency
3) Share knowledge
4) Improve efficiency & effectiveness of supply chain
5) Improve internal control structure
6) Improve decision making
3 factors that influence AIS design:
1) Developments in IT
2) Business Strategy
3) Organizational culture
Predictive analysis: use of data warehouses & complex algorithms to forecast future events, based on
historical trends & calculated probabilities
Value chain: Linking together all primary & support activities in a business, value added as product passes
through chain
Primary activities: value chain activities that produce, market & deliver products and services to customers
and provide post-delivery service & support
• 5 primary activities: Inbound logistics, operations, outbound logistics, marketing & sales, service
Inbound logistics: consists of receiving, storing & distributing materials an organization uses to create services
& products it sells
• Ex: automobile manufacturer receives & handles steel, glass & rubber
Operation activities: transform inputs into final products or services
• Ex: assembly line activities convert raw materials into finished car
Outbound logistics: activities distribute finished products/services to customers
• Ex: shipping automobiles to car dealers
Marketing & Sales Activities: help customers buy organization’s products/services
• Ex: Advertising
Service activities: provide post-sale support to customers
Support activities: value chain activities that enable primary activities to be performed efficiently and
effectively
• 4 support activities: firm infrastructure, technology, purchasing, and human resources
Firm infrastructure: accounting, finance, legal & admin activities that allow organization to function
• AIS is part of firm infrastructure
Human resources activities: recruiting, hiring, training and compensating employees
Technology activities: improve a product or service
, • Ex: R&D, product design, investments in IT
Purchasing activities: procure raw materials, supplies, machinery & buildings used to carry out primary
activities
Supply chain: an extended system that includes an organization’s value chain and suppliers, distributors and
customers
• Value chain is part of supply chain
Chapter 2: Overview of Transaction Processing & Enterprise Resource Planning Systems
Data processing cycle: four operations performed on data to generate meaningful & relevant information
1) Data Input
2) Data Storage
3) Data Processing
4) Information Output
Data input
• 3 facets of each business activity:
1) Each activity of interest
2) Resource affected by each activity
3) People who participate in each activity
• Most business use paper source documents to collect data about business activities
• Source documents: documents used to capture transaction data at its source, when transaction
occurring
o Ex: Sales orders, purchase orders, employee time cards
• Turnaround documents: records of company data in machine-readable form sent to external party and
then returned to system as input
o Ex: utility bill sent to customer and then returned with payment
• Source data automation: collection of transaction data in machine-readable form at time and place of
origin
o Ex: point-of-sale terminals & ATMs
• Steps in processing input:
1) Capture transaction data and enter them into system (3 facets)
2) Ensure captured data are accurate and complete (automation, well-designed turnaround
documents, and data entry screens)
3) Ensure company policies followed
Data Storage
• General ledger: contains summary-level data for every asset, liability, and other accounts of
organization
• Subsidiary ledger: contains detailed data for any G/L with many individual subaccounts
• Control account: title given to a G/L account that summarizes the total amounts recorded in a
subsidiary ledger
o Ex: A/R control account in the G/L represents the total amount owed by all customers, whereas
balances in A/R subsidiary ledger have amounts owed by each specific customer
• Coding: systematic assignment of numbers/letters to items to classify and organize them
o Sequence codes: Items numbered consecutively so that gaps in sequence code indicate missing
items that should be investigated
▪ Ex: prenumbered checks invoices, and POs
o Block code: blocks of numbers that are reserved for specific categories of data (to help organize
data)
