Question

Redraw the diagram presented in Problem 2. Label each element in the diagram and briefly describe its role and key features.  

Answer 1

 

End users are both external and internal. External users include creditors, stockholders, potential investors, regulatory agencies, tax authorities, suppliers, and trading partners (customers and suppliers).  Internal users include management at every level of the organization, as well as operations per¬sonnel. 

 

Data sources are financial transactions that enter the information system from either internal or external sources. External financial transactions are economic exchanges with other business entities and individuals outside the firm. Examples include the sale of goods and services, the purchase of inventory, the receipt of cash, and the dis¬bursement of cash (including payroll). Internal financial transactions involve the exchange or movement of resources within the organization. Examples include the movement of raw materials into work-in-process (WIP), the application of labor and overhead to WIP, the transfer of WIP into finished goods inventory, and the depreciation of plant and equipment.

 

Data collection is the first operational stage in the information system. The objective is to ensure that event data entering the system are valid, complete, and free from material errors. Should transaction errors pass through data collection undetected, the system may process the errors and generate erroneous and unreli¬able output resulting in incorrect actions and poor decisions by the users.

 

Data processing involves converting data into information. Examples of data processing tasks include mathematical algorithms (such as linear programming models) used for production scheduling applications, statistical techniques for sales forecasting, and posting and summarizing procedures used for accounting applications.

 

Database management is responsible for administering the organization’s data repository, which involves three fundamental tasks: storage, retrieval, and deletion. The physical form of a corporate database will vary depending upon the technology in place.  For accounting/business purposes data are organized into a logical hierar¬chy that consists of attributes, records, and files.

 

Information generation is the process of compiling, arranging, formatting, and presenting informa¬tion to users. Information may take the form of an operational document such as a sales order, a structured report, or a message on a computer screen. Regardless of physical form, useful information has the following characteristics: relevance, timeliness, accuracy, completeness, and summarization.

 

Feedback is a form of output that is sent back to the system as a source of data and is used to initiate or alter a process. For example, an inventory status report signals the inventory control clerk that items of inventory have fallen to, or below, their minimum allowable levels. Internal feedback from this information will initiate the inventory ordering process to replenish the inventories. Similarly, external feedback about the level of uncollected customer accounts may be used to adjust the organization’s credit-granting policies.