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Information technology

different computer related components


Information technology components

1. Software
2. Hardware
3. Data
4. Network
5. People


Business information system (software)

- transaction processing systems
- knowledge systems and office systems
- management information systems
- decision support system
- executive information system



physical computer or computer peripheral device (mouse or printer etc)



systems and programs that process data and turn it into information.
Software can be general or very specific (developed internally for a specific company)



made up of the communication media that allows multiple computers to share data and information at the same time



have functions of initial set up and maintenance/support after initial setup



- raw facts
- production data - stored on devices, live or real data
- test or staging data - results from test processing and stored in test system. Fake data for testing purposes



organized and processed data


Roles in business operations
A business information system has primary roles:

1. Process detailed data - Transaction Processing Systems (TPS)
2. Assist in making daily decisions - Decision Support Systems (DSS)
3. Assist in developing business strategies - Executive Information systems (Long-term business decisions)


Hierarchy of roles

- lower level and more detailed business info systems serve the needs to the lower levels of the organization
- higher level and less detailed system serves the needs of the higher levels of the organization


Functional perspective

- sales and marketing systems
- manufacturing and production systems
- finance and accounting systems
- human resources system


Data capture

the first step in processing business transactions is to capture the data for each transaction that takes place and enter the data into the system


Business events

the data capture process is usually triggered by the occurrence of a business activity


Data capture techniques

1. Manual entries - physical input by individuals
2. Source data automation - devices capture transaction data in machine readable form at the time and place of their origin (bar code scanner)


Data accuracy

1. Well - designed input screens - request all required data and source data automation captures set data automatically
2. Prenumbered forms - ensures that all transactions have been recorded and that none of the documents has been misplaced


Processing data

once data about a business activity has been collected and entered into the system, the data must be processed


Functions performed on data

1. Collect
2. Process
3. Store
4. Transform
5. Distribute


Normal series of events in a business information system

1. The system is considered functional, when it is set up and configured by:
- hardware technicians
- network administrators
- software developers
2. After that an end user inputs data.
3. After the data is collected, stored and processed, the information output can be shared across a network with other end users.


Accounting Information Systems (AIS)

- a type of management information system
- it may be partly a transaction processing system and partly a knowledge system
- should have an audit trail for accounting transactions


Accounting information system

Source document - journal - ledger - trial balance - financial statements reports - file original paper source document


Objectives of an AIS

- record valid transactions
- properly classify transactions
- record transactions at their proper value
- record in the proper accounting period
- properly present the transactions and related info in the financial statements of the organization


Sequence of events in an AIS

- data input
- filling the original source document
- the transactions are recorded in the appropriate journal
- the transactions are posted to the general and subsidiary ledgers
- trial balances are prepared
- financial reports are generated


Transactions cycles of an Accounting Information System

1. Revenue cycle - customer orders, accounts receivable, cash receipts
2. Expenditure cycle - purchasing, inventory control, accounts payable, cash disbursement
3. Production cycle - product design and production planning, product manufacturing, inventory control. Conversion of resources into product and services.
4. Human resources / Payroll cycle - human resources, time and attendance, payroll disbursement, payroll tax reporting
5. Financing cycle - transactions associated with equity and debt financing including issuance of stock or debt, payment of dividends or debt service payments


Data Processing Cycle
1. Data input

1. Data input
- all transactions of interest are accounted for
- are in affected accounts
- all people originating transactions are identified
2. Input verification
- source documents
- turnaround documents - preprint data in machine readable form
3. Features of desirable data input procedures
- prenumbered source documents allow for verification of all data input
- source documents are efficiently designed to capture all required info
- data input is verified prior to acceptance by the system


Data Processing cycle
2. Data Storage

Data Storage
1. Methods
a. journals and ledgers
b. coding
- sequence codes
- block codes
- group codes
c. charts of accounts
2. Computer storage
a. Entity
b. Attributes
c. Field
d. Record
e. Data value
f. File
g. Master file
h. Transaction file
i. Database


Data Processing Cycle
3. Data Processing

A. Functions
1. Data Creation
2. Data Reading
3. Updating
4. Deleting
B. Methods
a. Batch processing
b. Online real time process


Data Processing Cycle
4. Information Output

1. Form
- Documents
- Reports: internal or external
- Query
2. Topic
- budgets
- production and delivery schedules
- performance reports


Processing Methodology

1. Batch processing
2. Online real time process


Batch processing

- input documents/transactions are collected and grouped (batch) by type of transaction
- batches are processed periodically
- batch processing system may use sequential storage device or random access storage device
- always a time delay


Steps in batch processing

1. Create a transaction file - batch file
2. Update the master file


Online real time processing

- the master files are updated as the transactions are entered
- requires random access storage device
- online processing
- immediate processing - no delay
- often used in networked systems
- point of sale systems - use scanners to capture date encoded on product bar codes and then transmit the data
- online analytical processing
- scanners- real time data collection
- importing and exporting data: data interface


Centralized processing

maintain all data and perform all data processing at a central location (mainframe and large server computers application - centralized processing)


Decentralized (Distributed) Processing

- occurs when computing power, applications, and work are spread out over many locations,
- distributed processing technique, where each remote computer performs a portion of the processing and reducing the processing burden on the central computer


Advantages of centralized processing

1. Enhanced data security
2. Consistent processing


Disadvantages of centralized processing

1. Possible high costs
2. Increased need for processing power and data storage
3. Reduction in local accountability
4. Bottlenecks
5. Delay in response time



1. Periodic scheduled reports
2. Exception reports
3. Demand reports
4. Ad hoc reports
5. Push reports
6. Dashboard reports


Periodic scheduled reports

traditional reports that display info in a predefined format and are made available on a regular basis to end users of the system


Exception reports

produced when a specific condition or exception occurs.


Demand reports

- pull report
- available on demand
- response report


Ad hoc reports

1. a report that does not currently exist but that can be created on demand without having to get a software developer or programmer involved
(capability to create a report without involving a software developer is called a user report writer)

2. Query - a set of criteria that the end user can pose to the management info system and extract all transactions or other info that meet these criteria.


Push report

- info can be "pushed" and sent to a computer screen or computer desktop.
- If a report window displays up to date reports every time an end user logs into a computer network, the reports would be considered push reports.
- it can be the specific internal report, general industry reports, or info downloaded and possibly aggregated from the Internet


Dashboard reports

used by organizations to present summary info necessary for management action


Role of information technology in business strategy

- entity approach to enterprise risk management and its degree of sophistication
- types of events affecting the entity
- entity's overall info technology architecture
- degree of centralization of supporting technology


Enterprise Risk Management

- includes a number of key components that enable an organization to identify, assess, and respond to risk.
- monitoring risk through control activities and information systems is critical to the achievement of objectives

1. Information Management Approaches
2. Availability and usefulness of data


Types of events affecting the entity

- adverse events - representing risk
- positive events - representing opportunities
Selection of information technology system and procedures are driven by strategies that capitalize on opportunities and mitigate risk


Information Technology Architecture

1. Customized systems
2. Open architecture - XBRL, XML, and Web services to facilitate data aggregation, transfer, and connectivity between multiple systems.
Make it simple to share data between different systems


Open Architecture

1. XBRL Extensible Business Reporting Language
XBRL is derived from XML (Extensible Markup Language)
2. Web Services - an Internet protocol for transporting data between different applications within a company's boundaries or across companies


Group code

- embeds intelligence into the identification numbers associated with a particular item.
- The identification of different features of an insurance policy with specific numbering scheme is an example of group coding.


Sequential code

numbers documents, transactions, or other items in order


Block code

represents assignment of blocks of numbers to broad categories of items


Object code

created by a complier and represents the intermediate instruction that takes programming source code and translates it into machine language


Major components of information technology of an organization

1. Hardware: actual physical computer or device
2. Software: systems or programs that process data and turn that data into info
3. Network: made up of the communication media that allows multiple computers to share data and info at the same time.
4. People: hardware technicians, network administrators, software developers, end users
5. Data; raw facts


Series of events in an accounting information system (AIS)

1. The transaction data from source documents is entered into the AIS by an end user
2. The original paper source documents are filed.
3. The transactions are recorded in the appropriate journal.
4. The transactions are posted to the general and subsidiary ledgers.
5. Trial balances are prepared.


Types of MIS reports

1. Periodic scheduled reports: display info in a predefined format and are made available on a regular basis to end users of the system
2. Exception reports: when exception occurs
3. Demand reports: specific reports that can be printed on demand
4. Ad hoc reports: doesn’t not currently exist but can be created on demand without having to get a software developer involved.
5. Push reports: can be “pushed” or sent to a computer screen or computer desktop


Business information systems

1. Process detailed data
2. Assist in making daily decisions
3. Assist in developing business strategies


Categories of business information systems

1. Transaction processing system
2. Decision support system
3. Management information system
4. Executive information systems


Processing used in a computerized environment

1. Batch processing - periodic processing
2. Online, real-time processing - immediate processing


Batch control data

a manually calculated total that is compared to a computer generated total as a means of testing the accuracy and completeness of the input and processing.
Batch totals are used for numbers that are normally added, such as dollar amounts. Hash totals are used for numbers that are not normally added, such as account numbers.


Centralized processing

maintains data and performs data processing at one or more central locations.


Decentralized processing

occurs when computing power and processing are spread over many locations


Advantages of centralized processing

1. Data is secured better, once received
2. Processing is consistent


Disadvantages of centralized processing

1. Cost of transmitting large numbers of detailed transactions can be high
2. There are increased processing power and data storage needs at the central location
3. There is a reduction in local accountability
4. Input/Output bottlenecks may occur at high traffic times
5. There may be a lack of ability to respond in a timely manner to information requests from remote locations


Batch processing

1. Create a transaction file:
2. Update master file