Chapter 1- Accounting Information Systems and Firm Value

Key terms:
Relevance- affects a business decision

Reliability- information that is depended on to be free from bias or error

Attributes of relevance- predictive value, feedback value, and timeliness

Attributes of reliability- verifiability, representational, faithfulness, and neutrality

Information overload- the difficulty a person faces in understanding a problem

and making a decision as a consequence of too much information

Discretionary information- information that has no law requiring it to be

provided to management

Mandatory information- information that is required to be generated or provided

by law or regulation

Accounting information system (AIS)- a system that records, processes, and

reports on transactions to provide financial and non-financial information to
make decisions and have appropriate levels of internal controls for those
transactions

Role of accountants in AISs- designer, implementer, user, evaluator, and manager

Designer- person who designs AISs; business system design team, producer of
financial information, systems analyst

Implementer- person who puts the AIS into action

User- person who may input journal entries into the accounting system, using a
financial spreadsheet to calculate the cost of a product, or using anti-virus
software to protect the system
Evaluator- IT auditor, assessor of internal controls, tax advisor, general auditor,
consultant

Inbound logistics- are the activities associated with receiving and storing raw
materials and other partially completed materials, and distributing those
materials to manufacturing when and where they are needed.

Operations- are the activities that transform inputs into finished goods and
services (e.g. turning wood into furniture for a furniture manufacturer; building a
house for a home builder).

Outbound logistics- are the activities that warehouse and distribute the finished
goods to the customers.

Marketing and sales activities- identify the needs and wants of their customers to
help attract them to the firm’s products and buy them.

Service activities- provide the support of customers after the products and
services are sold to them (e.g. warranty repairs, parts, instruction manuals, etc.).

Enterprise systems- a centralized database that collects data from throughout the
company including orders, customers, sales, inventory and employees

Supply chain- refers to the flow of materials, information, payments, and services
from suppliers all the way through the customer

Supply chain management software- software that can be used to optimize

processes within the supply chain

Customer relationship management- the software used to manage and nurture a

firm's interactions with its current and potential clients

Firm infrastructure activities- are all of the activities needed to support the firm,
including the CEO, finance, accounting, and legal.

Human resource management activities- include recruiting, hiring, training and

compensating employees.
Technology activities- include all of the technologies to support value-creating
activities. These technologies also include research and development to develop
new products or research and development to determine ways to produce
products at a cheaper price.

Procurement activities- involve purchasing inputs such as raw materials, supplies,

and equipment.