Business process
a set of related, coordinated, and structured activities and tasks that are performed by a person or by a computer or a machine, and that help accomplish a specific organizational goal
Transaction
an agreement between two entities to exchange goods or services or any other event that can be measured in economic terms by an organization
Transaction processing
the process that begins with capturing transaction data and ends with informational output, such as the financial statement
the give-get exchange can be grouped into five business processes or transaction cycles, which are
the revenue cycle the expenditure cycle the production or conversion cycle the human resources/paryroll cycle the financial cycle
The revenue cycle
where goods and services are sold for cash or a future promise to receive cash
The expenditure cycle
where companies purchase inventory for resale or raw materials to use in producing products in exchange for cash or a future promise to pay in cash
The production or conversion cycle
where raw materials are transformed into finished goods
The human resources/paryroll cycle
where employees are hired, trained, compensated, evaluated, promoted, and terminated
The financial cycle
where companies sell shares in the company to investors and borrow money and where investors are paid dividends and interest in paid on loans
Accounting Information System (AIS)
it is often been said that accounting is the language of business. If that is the case, then an accounting information system (AIS) is the intelligence of the language
What are the six component of an AIS
- the people who use the system
- the procedures and instructions used to collect, process, and store data
- the data about the organization and its business activities
- the software used to process the data
- the information technology infrastructure, including the computers, peripheral devices, and network communication devices used in the AIS
- the internal controls and security measures that safeguard AIS data
These six components enable an AIS to fulfill three important business functions
- collect and store data about organizational activities, resources, and personnel.
- transform data into information so management can plan, execute, control, and evaluate activities, resources, and personnel.
- provide adequate control to safeguard the organization’s assets and data
A well-designed AIS can add value to an organization by
- improving the quality and reducing the costs of products or services
- improving efficiency
- sharing knowledge
- improving the efficiency and effectiveness of its supply chain
- improving the internal control structure
- improving decision making
An AIS can help improve decision making in several ways
- it can identify situation requiring management action
- it can reduce uncertainty and thereby provide a basis for choosing among alternative
- it can store information about the results of previous decisions
- it can provide accurate information in a timely manner
- it can analyze sales data to discover items that are purchased together
Predictive analysis
is a complex algorithm to forecast future events, based on historical trends and calculated probabilities
