Chapter 5-1

AIS and Business Processes: Part II

Chapter 5

Introduction The Resource Management Process The Production Process The Financing Process Business Processes In Special Industries Monitoring Business Processes
Chapter 5-2

Introduction
Many organizations need

typical AIS requirements and some specialized information also

Focus of AISs

formerly transaction processing presently capturing data around business processes

Two important transaction processing cycles are

the production and financing cycles.

Chapter 5-3

The Resource Management Process

Organizations use resources
to produce goods, to provide services, and to generate revenues.

An AIS must pay attention to

the inventory, human resources, and fixed assets.
Chapter 5-4

Human Resource Management

An organizations human resource management activity includes the personnel function

hires employees, trains employees, and maintains personnel records maintains payroll records for employees
Chapter 5-5

Human Resource Management

the payroll function

pays employees for their work maintains records of employees paychecks, complies with employee tax, reports on various deduction categories, and interacting with the personnel function
Chapter 5-6

Human Resource Management Objectives

Hiring, training, and employing workers Maintaining employee earnings records Complying with regulatory reporting requirements Reporting on payroll deductions Making timely and accurate payments to employees Providing an interface for personnel and payroll activities
Chapter 5-7

Human Resource Management Inputs

Personnel Action Forms

document the hiring of new employees or changes in employee status used to track hours worked authorize the payroll system to deduct certain amounts

Time Sheets

Chapter 5-8

Payroll Deduction Authorizations

Tax Withholding Forms
authorize payroll to reduce gross pay by the appropriate withholding tax.

Human Resource Management Outputs

Financial Statement Information Employee Listings

shows current employees and may contain address and other demographic information

Paychecks

the final documents in the process; subject to strict internal controls used to make journal entries for salary and payroll tax expenses

Check Registers

Chapter 5-9

Human Resource Management Outputs

Deduction Reports

contain summaries of deductions for employees as a group

Tax (Regulatory) Reports

reports the government requires for income tax, social security tax, and unemployment tax information
used by management in analyzing expenses

Payroll Summaries

Chapter 5-10

HUMAN RESOURCE MANAGEMENT FUNCTION

All of the following activities are common to the human resource management function except: a. Hiring, training and employing workers b. Reporting on payroll deductions c. Maintaining employee earnings records d. Certified financial planning for employees

Chapter 5-11

Fixed Asset Management

Fixed assets

assets with usable lives of more than one year.

A fixed-asset management system has to manage the assets in terms of their

purchase, maintenance, valuation, and disposal.

Chapter 5-12

Fixed Asset Management Function.

Chapter 5-13

Fixed Asset Management Objectives

Tracking the purchase, maintenance, valuation, and disposal of the fixed assets Calculating the depreciation for a companys financial statements Tracking repair costs, distinguishing between revenue and capital expenditures Calculating the gain or loss upon disposal of individual fixed assets.
Chapter 5-14

Fixed Asset Management Inputs

Purchase Requisition

requiring approval by one or more managers upon receipt of a fixed asset when it ships the asset

Receiving Report

Supplier Invoice

Chapter 5-15

Fixed Asset Management Inputs

Construction Work Orders

if the company builds the asset update of expense accounts for repairs and maintenance basis for transferring fixed assets from one location to another, retiring, selling or trading-in fixed assets

Repairs and Maintenance Reports

Fixed Asset Change Forms

Chapter 5-16

Fixed Asset Management Outputs

Financial Statement Information

gives the details of the valuation of the fixed assets lists identification numbers and location for each fixed asset shows depreciation expense and accumulated depreciation

Fixed Asset Register

Depreciation Register

Chapter 5-17

Fixed Asset Management Outputs

Repair and Maintenance Reports

show the repair and maintenance expenses and history shows all assets disposed of during the accounting period

Retired Assets Report

Chapter 5-18

FIXED ASSET MANAGEMENT

What is the objective of the fixed asset management function? a. To track purchases of fixed assets b. To manage the purchase, management valuation, and disposal of an organizations fixed assets c. To record maintenance and depreciation of fixed assets d. To keep a current list of approved vendors Chapter
5-19

The Production Process

The production process

begins with a request for raw material and

ends with the transfer of finished goods to warehouses

concerns the capture of data and the reporting of information

This cycle, associated with producing goods

Chapter 5-20

The Production Process

Chapter 5-21

Production Process - Objectives

Track purchases and sales of inventories
Monitor and control manufacturing costs

Control and coordinate the production process

Control inventory Provide input for budgets
Chapter 5-22

Cost Accounting Subsystem

The cost accounting subsystem
is an important part of the production process provides important control information for the budget can vary depending upon the type of business manufacturing can have a

job costing system process costing system activity-based costing system

Chapter 5-23

Just-in-Time (JIT) Inventory Systems

A Just-in-Time (JIT) Inventory System
is a make-to-order inventory system ensures that the production cycle processes inventory transactions appropriately attempts to minimize inventory carrying costs.

Chapter 5-24

Just-in-Time (JIT) Inventory Systems

JIT depends upon AIS: to help minimize inventory costs to ensure that the manufacturing processes have the raw materials to keep a continuous work flow. or, to be proactive and reengineer the process.
Chapter 5-25

Production Process - Inputs

Material Requisition Form

directs stores to issue materials or parts to designated work centers or authorized persons

Bill of Materials

shows the types and quantities of parts needed to make a single unit of product shows the quantities of goods needed to meet sales demands

Master Production Schedule

Chapter 5-26

Production Process - Inputs

Production order

shows prices charged for raw materials.

incorporates data from sales orders or forecasts, operates lists and bills of materials in order to authorize the production of an order or batch shows the distribution of labor costs to specific jobs or production orders

Job Time Card

Chapter 5-27

PRODUCTION PROCESSES TECHNOLOGICAL ASSISSTANCE

ERP Barcode scanners Radio frequency technology (RFID) Advanced electronic tags

Chapter 5-28

Production Process - Outputs

Financial Statement Information

gives details of the costs and pricing

shows prices charged for raw materials provides managerial information on use of raw materials

Materials Price List

Periodic Usage Report

Inventory Reconciliation Report

Chapter 5-29

reconciles physical inventory with perpetual records

Production Process - Outputs

Inventory Status Report

allows purchasing and production managers to monitor inventory levels details the actual costs for each production operation, each cost element, and/or each separate job

Production Cost Report

Manufacturing Status Report

Chapter 5-30

provides managers with information about the status of various jobs

The Financing Process

The financing process

is where a company acquires and uses financial resources

cash other liquid assets investments

The financing process

includes the activities of;

borrowing cash selling ownership shares.

Chapter 5-31

The Financing Process

Chapter 5-32

Financing Process - Objectives

Effective cash management

making use of lockbox systems and electronic funds transfer (EFT). reducing the cost of obtaining financial resources

Minimizing cost of capital

Chapter 5-33

Financing Process - Objectives

Maximizing return on investments

using financial planning models Consists of a cash receipts forecast and a cash disbursements forecast.

Project cash flows

Chapter 5-34

Financing Process - Inputs

Remittance Advices

accompanies a customers payment

Deposit Slips

banks provide to document account deposits

companies receive and issue checks

Checks

Chapter 5-35

Financing Process - Inputs

Bank Statements

used to reconcile the cash balance in the companys ledger against the cash balance in the bank account

Stock Market Data Interest Data Financial Institution Profiles

Chapter 5-36

Financing Process - Outputs

Financial Statement Information

Cash Budget
Investment Reports

Debt and Interest Reports

Financial Ratios Financial Planning Model Reports
Chapter 5-37

Business Processes in Special Industries

Vertical market

refers to markets or industries

services they provide or the goods they produce.

These organizations

may require more information than is typically output from a traditional AIS.

Examples of specialized information needs include

time and billing systems, activity based costing systems, and point-of-sale systems.
Chapter 5-38

Industries with Specialized AISs

Professional service organizations have several unique operating characteristics:
a. b. c. d. No merchandise inventory Professional employees Difficulty in measuring output Small size

Not-for-profit
a. Professional employees and volunteers b. Usually not affected by the market c. Sometimes have a political environment Chapter
5-39

INDUSTRIES WITH SPECIALIZED AISs

Health care
a. Share many of the professional and notfor-profit organizations special AIS needs b. Special accounting needs because of thirdparty billing (private and government)

Chapter 5-40

Business Process Reengineering

AISs

were concerned with accounting transactions earlier are more concerned with business events now

Business events

include important activities that affect the business are not captured by the financial accounting system

Business process reengineering (BPR)

Chapter 5-41

concerns redesigning business processes from scratch

Business Process Reengineering

Business process reengineering a. Is an incremental approach to redesigning business processes. b. Involves redesigning business processes from scratch. c. Is rarely successful in cutting an organizations costs. d. Is usually welcomed by an organizations employees.

Chapter 5-42

Copyright
Copyright 2008 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make backup copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

Chapter 5-43

Chapter 5

Chapter 5-44