What Is a System?The term system has been so overused since the personal computer has become popular that many people assume that all systems must include a computer. The correct use o f the word “system” merely implies the orderly grouping of interdependent components, linked together according to a plan, to achieve a specific objective.

CHARACTERISTICS 1. An assembly of components - multiple components--more than one2. Components are interdependent - Dependent on each other3. Differentiation – components have specific fxns 4. Process5. Goal Seeking – purpose

A system is a set of interdependent / interrelated components that interact to achieve a goal. Each component has specific functions.

EXAMPLE: ECONOMIC SYSTEMMay be composed of such components as manufacturing industries retailing industries

service industries government consumers

MANUFACTURING INDUSTRIES exhibit attributes such as: purchasing raw materials converting raw materials to finish goods marketing finished goods to potential buyers

Interact with other entities: service industries government

consumers

During the course of purchasing, producing and marketing.

System objective All systems are created to meet a specific objective or purpose. All of the components of the system are related to one another by a common objective. When the components of a system no longer share the same objective, a condition of ‘sub-optimality' is said to exist.

The system operates to achieve its designated / inherent objective(s).

The objective of the Economic System maybe defined by economic policymakers as the achievement of full employment and price stability.

The objective of an organization maybe defined by its leaders as the maximization of economic gains for members of the organization.

TYPES OF SYSTEMSAlthough systems have many different forms, they have certain things in common.

1) Physical / Abstract Systems - are tangible entities that may be static/dynamic in operation.

Ex. A Computer Center - Composed of officers, desks, and chairs.- Desks and chairs are static which assists/facilitate the operation of the center.

Abstract System - the data, programs/applications can be change according to the user’s demands. - conceptual - they maybe formulas, representations / models of a real system.

The use of models/representations makes it easier for the analyst to visualize relationships in the system under study. The object is to point out the significant elements and the key interrelationship of a complex system.

2) Open / Closed Systems - Open System interacts with their environment; Has many interfaces with the environment

- can adapt to changing environmental conditions.- can receives input from and deliver output to the outside

Ex: Organization

Closed System - isolated from environmental influences.- This system exist in concept only. Since practically most of the systems are open systems.

3) Man-made Information Systems - the main purpose of IS is to manage data for the organization. IS produces customized information depending upon the need of the organization. These are usually a) formal b) informal c) computer based.

a) Formal IS – based on the organizational representation by the organizational chart. That is, it deals with the flow of information from top management to bottom management.Info flows in the form of memos or the like. But feedback can be given from the lower authorities to the top management.

b) Informal IS – employee-based. These are made to solve the day-to-day work related problems. It also funnels information upward through indirect channels.

c) Computer-based IS – depends on the use of computer for managing business applications. Computer is now a required source of information.

SYSTEM ARCHITECTURE- the conceptual model that that describes and represents a system.

A system can be reconstructed by utilizing the following elements: a) Input and output b) Process c) Control d) Feedback e) Environment f) Boundaries

Input – elements that are fed to the system for processing.

Output – the result that is produced after processing.

Process(s) - conversion activity is carried out with the aim of adding value to the input to produce an output. Example: Sorting, storing, calculating

Control - regulates / guides system operations; -the decision-making subsystem that controls the activities related to input, processing and output; Ex: Management

Feedback - measures output against set standards; - helps to adjust the system to changes so that the system operates in a balanced state; output information is

fed back to the system as input for deliberation. Positive Feedback - Reinforce in nature; It causes the system to continue in the direction it is currently operating.Negative Feedback - Corrective feedback; Controlling in nature, causing systems to operate within specific standard

limits;

Environment - the “suprasystem” within which an organization operates; the source of external elements that makes an impact on the systemBoundaries - are the limits that identify the system’s components, processes & interrelationship when it interacts with

other systems - determines the system’s sphere of influence and control

The input triggers the process and the process controls the output.It is important to point out that determining the output is the 1 st step in specifying the nature of output required/needed to operate a system.

NATURE OF INFORMATION- Derives from the latin informare, which means “to give form, shape, or character to” something.- That is, a formative principle of something, that is, something with a specific character or quality.

VIEWS OF INFORMATION:a) Economists such as Machlup, Porat, and Bell pioneered the idea of information economy with information as the

transforming resource for postindustrial society.b) Authors such as Horton viewed information as corporate resource, which like resources such as people, raw

materials and equipment; should be managed to give a corporate edge.

These authors help develop the idea of information as a resource.

c) In the wake of information and communication technologies, Hawkins confirmed that information has become a commodity.

d) Many viewed information as one of the most important resource needed for development.

Information is different from data.

Information data that is accurate and timely, specific and organized for a purpose, presented within a context that gives meaning and relevance, and can lead to an increase in understanding and decrease in uncertainty.

Data are facts that are collected, recorded, stored, and processed by an information system.

• Usually, more information and better information translates into better decisions.• However, when you get more information than you can effectively assimilate, you suffer from information

overload.• Example: Final exams week!

• When you’ve reached the overload point, the quality of decisions declines while the costs of producing the information increases.

CATEGORIES OF INFORMATION1. Strategic Information – 1st level

o Long-rage planning policies that are of direct interest to upper management.o This type is achieved with the aid of Decision Support System (DSS).

2. Managerial Information – 2nd levelo It is of direct use to middle management and department heads for implementation and control.o Short and intermediate – range planning.o Maintained with the aid of management information system (MIS).

3. Operational Information – 3rd levelo Short-term, daily information used to operate departments and enforce the day-to-day rules and regulations

of the business.o Established by data processing systems (DPS).

ATTRIBUTES OF INFORMATION1. Completeness - Information must be complete, else it leads to incorrect decision-making.

- It doesn’t leave out anything that’s important.2. Accuracy - Accurate information is the best kind of information. Accurate information is one, which is reliable and

from a correct source. 3. Timeliness - "Timely" means, "appearing at the right moment”. Information needs to be available when it's

needed. Also, information needs to be up-to-date. - You get it in time to make your decision.

4. Consistency - The source of information should not change at different places, or contradicts itself. It is the sign that it is untrustworthy. - It’s dependable, i.e., free from error or bias and faithfully portrays events and activities

5. Validity - To be valuable, information should be unbiased, representative and verifiable. If information neglects key topics or issues, it might not represent the full knowledge base you need to know. If information cannot be independently verified, it should be treated with utmost caution.

- A consensus notion—the nature of the information is such that different people would tend to produce the same result.

6. Appropriateness - Information should be presented in a way that is meaningful, relevant and formatted to suit the user’s needs

7. Relevance - The Information should be relevant to the user quires. Information is not universally relevant and valuable, it is valuable and relevant only to a person who needs it and can use it.

- It reduces uncertainty by helping you predict what will happen or confirm what already has happened.

8. Usability - The information has to be presented to the users to understand and explore it during decision-making activities.

9. Accessibility - Up-to-date information should be accessible at any time to authorized or relevant users only. - You can get to it when you need it and in a format you can use.

HUMAN INFORMATION PROCESSING (HIP)

People are active, dynamic systems capable of great flexibility in the ways they choose to handle and transform information. From the HIP perspective, the human mind is understood as a system that processes incoming information from the environment.

HIP is an abstraction of the set of processes involved in several aspects of human behavior including problem solving and decision making in both everyday and professional environments.

This system can be described as a set of memories and processors together with a set of operational principle.

HIP can be generally divided into 3 interacting subsystems: 1. A perceptual system2. A motor system3. A cognitive system

Perceptual System which includes all of our sensors- Consists of sensors and associated short-term memories related to the sensorial input received from the

environment (visual, auditory, olfactory, etc.). Short-term memories hold input from the sensory system while it is being encoded symbolically (translated from a physical form of a signal to a symbol mental representation).

- Main Function is to convert the sensations of the physical world captured by the sensory systems into internal representations that can be processed by the cognitive system.

Sensory memory – holds a great deal of detailed information for a short period of time regarding the physical aspects of a sensation. This information is stored for a brief time -- less than one second -- after which it MUST ENTER WORKING MEMORY OR BE LOST.

For example: The visual memory representation of the number “3” contains features of curvature and size.

Cognitive System which receives symbolically encoded information from sensory stores and its working memory, and responds using information from our long-term memory

- Receives the symbolic information from the sensory system and stores it in the working memory. This is a short-term storage that is also used to process information.

- Uses previous stored information in long-term memory to process information, solve problems, and make decisions.

- Composed of a set of subsystems that includes memories, operations, and principles.

- THREE MEMORY SUBSYSTEMS: - Sensory - Working or short-term memory

Information from sensory storage must be transferred to working memory or short term memory. Through REHEARSAL information can be maintained in working memory.

- the capacity of short-term memory is small -- information will disappear within 20 seconds unless it is repeated or practiced

- minimize the amount of information in working memory. - Long-term memory

- once information is transferred to long term memory, it is there forever

- the problem is accessibility/retrieval.

- the basic debate is how info is located and retrieved, and how many long term memory subsystems exist.

Attention Process – modulates the coordination and capacity of the different subsystems.

Motor System which carries out responses to the cognitive system- Carries out the response by sending signals to the corresponding “output channels” (motor movements, voice,

etc.), which results in an execution of a response to the environment.- Main function is to translate the decisions from the cognitive system into action by activating patterns of

voluntary muscles.

Feedback – An important part of cognitive system that process suggests that the responses made today become part of our memories to be retrieve in the future. The feedback process constitutes the main form of learning by humans and other types of animals.

------------------------------INPUT CHANNELS:

vision (sight) - audition (hearing) - kinesthesis (touch) - gustation (taste) - balance (vestibular/inner ear equilibrium) - olifaction (smell)STORAGE AND PROCESSING SYSTEMS - short term sensory store very short duration, brought into working memory by attention

- short term (working) memory maintained by auditory rehearsal, used for cognitive processing

- long-term memory high-capacity, storage by elaboration, content addressable

OUTPUT CHANNELS - Speech - Motor Control anthropometry and performanceSOME TERMS:

chunking –grouping and organizing information to fit into meaningful units. The size of chunks does affect ability to remember.

rote rehearsal – repeating info over and over to remember good for retention in short term memory.

constructive rehearsal – info must be linked to facts and concepts already in long term memory.

Coding – compressing information into abbreviated form.physical -- short term retention is based on how something looks or sounds.

semantic -- long term retention based on the meaning of words.

Forgetting – simple forgetting/time bound.

Interference – information gets mixed up with other information.proactive inhibition--occurs when earlier learning gets into the way of later learningretroactive inhibition--occurs when later learning gets into the way of earlier learning.trace decay--the passing of time will cause the strength of memory to decrease, thereby making it harder to remember.

memory trace – a sensory experience. If strengthened in some way (re:repetition) it becomes an actual chemical or structural change in the nervous system.

primacy/recency effect– when people memorize long lists of nonsense syllables, they remember more of the syllables at the beginning of the list (primacy effect) and at the end of the list (recency effect) than in the middle.

AN INFORMATION SYSTEMS FRAMEWORK

Information system is the set of formal procedures by which data are collected, stored, processed into information, and distributed to users.

The information system accepts input, called transactions, which are converted through various processes into output information that goes to users. Transactions fall into two classes: financial transactions and nonfinancial transactions.

A transaction is an event that affects or is of interest to the organization and is processed by its information system as a unit of work.

A financial transaction is an economic event that affects the assets and equities of the organization, is reflected in its accounts, and is measured in monetary terms. Every business organization is legally bound to correctly process these types of transactions.

- Sales of products to customers, purchases of inventory from vendors, and cash disbursements and receipts are examples of financial transactions.

Nonfinancial transactions are events that do not meet the narrow definition of a financial transaction. For example, adding a new supplier of raw materials to the list of valid suppliers is an event that may be processed by the enterprise’s information system as a transaction. Important as this information obviously is, it is not a financial transaction, and the firm has no legal obligation to process it correctly—or at all.

2 key classes of systems: accounting information systems (AIS) and management information systems (MIS).

INFORMATION SYSTEM: Accountant’s PerspectiveAccounting as Information:Viewing accounting as an information system focuses attention on the information accounting provides the users of the information, and the support for financial decisions that is provided by the information. External users of accounting information are individuals and other enterprises that have a financial interest in the reporting enterprise. External users of the financial information as owners, creditors, labors unions, governmental agencies, suppliers, customers, trade associations and public.

What is AIS?It is a system that collects, records, stores, and processes data to produce information for decision makers.

Management Information System:Management often requires information that goes beyond the capability of AIS. As organizations grow in size and complexity, specialized functional areas emerge, requiring additional information for production planning and control,

sales forecasting, inventory warehouse planning, market research, and so on. The MIS processes nonfinancial transactions that are not normally processed by traditional AIS.

AIS Subsystems:Transaction Processing System- The TPS deals with business events that occur frequently.

2 types of TPS: Batch processing and On-line Processing

Batch Batch Processing Transactions is the processing as the collection/storage of data at the time of the event with actual updating of the database later when it is scheduled or there is enough data.

- A system whereby business transactions are accumulated over a period of time and prepared for processing as a single unit or batch.

An example may be the accounts which are not able to be easily stored and updated due to the amount and type of data used. Examples of this may be a telephone account, which accumulates over a period of time.

Online Real time transaction processing as the immediate processing of data with the database updated as the transaction is being carried out.

A system whereby each transaction is processed immediately, without the delay of accumulating transactions into a batch

An example may be the Bank ATM and POS terminal, both of which have user input which requires immediate feedback.

data warehousing is the collection of data from a range of data sources.

DECISION SUPPORT SYSTEM

Although it does not appear on a Balance Sheet, information is one of the most valuable assets most organizations possess. Without good, accurate, and timely information, good decisions cannot be made.

MANUAL PROCESS As the name implies, this is the old manual approach to recording accounting transactions. Because it is easier to visualize the flow of accounting information in a manual system, it is very beneficial to study such systems, although few exist in practice.

FLAT-FILE MODEL When accounting applications were first computerized, different applications were developed separately with files created for individual applications – even if other parts of the organization had use for the same information. The department that developed the application owned the data and typically did not share it with other units.

Describes the environment in which each end-user own their data files rather than share them with others. Thus, stand-alone applications rather than integrated systems perform data processing.

When multiple users need the same data for different purposes, they must obtain separate data sets structured to their specific needs. Figure 1-12 illustrates how customer sales data might be presented to three different users in a durable goods retailing organization. The accounting function needs customer sales data organized by account number and structured to show outstanding balances. This is used for customer billing, AR maintenance, and financial statement preparation. Marketing needs customer sales history data organized by demographic keys. They use this for targeting

new product promotions and for selling product upgrades. The product services group needs customer sales data organized by products and structured to show scheduled service dates. Such information is used for making after-sales contacts with customers to schedule preventive maintenance and to solicit sales of service agreements.

The data redundancy demonstrated in this example contributes to three significant problems in the flat-file environment: data storage, data updating, and currency of information. These and other problems associated with flat files are discussed in the following sections.

data storage An efficient information system captures and stores data only once and makes this single source available to all users who need it. In the flat-file environment, this is not possible. To meet the private data needs of users, organizations must incur the costs of both multiple collection and multiple storage procedures. Some commonly used data may be duplicated dozens, hundreds, or even thousands of times.

Data Updating Organizations have a great deal of data stored in files that require periodic updating to reflect changes. For example, a change to a customer’s name or address must be reflected in the appropriate master files. When users keep separate files, all changes must be made separately for each user. This adds significantly to the task and the cost of data management.

Currency of Information In contrast to the problem of performing multiple updates is the problem of failing to update all the user files affected by a change in status. If update information is not properly disseminated, the change will not be reflected in some users’ data, resulting in decisions based on outdated information.

PROBLEMS: 1. data redundancy

DATABASE MODEL Many of the weaknesses of a flat-file system are overcome by a database model. This model centralized an organization’s data so that it can be shared by other users. Because all data should not be accessible by all users, the database management system (DBMS) serves as a gatekeeper, limiting access to particular data sets to users who are authorized.

The database model can solve many of the problems of the flat-file system through elimination of data redundancy, single updates, and maintenance of current values.

Elements of the Database Environment4 primary elements: users, the DBMS, the database administrator, and the physical database

USERS access the database in 2 ways1. via user application programs that systems professionals prepare.2. via direct query, which requires no formal user programs.

The DBMS has a built-in query facility that allows authorized users to process data independent of professional programmers. The query facility provides a friendly environment for integrating and retrievingdata to produce ad hoc management reports. This feature has been an attractive incentive for users toadopt the database approach.

DATABASE MANAGEMENT SYSTEM provides a controlled environment to assist (or prevent) user access to the database and to efficiently manage the data resource.

PHYSICAL DATABASE This is the lowest level of the database. The physical database consists of magnetic spots on magnetic disks. The other levels of the database (for example, the user view, conceptual view, and internal view) are abstract representations of the physical level.

At the physical level, the database is a collection of records and files.

REA MODEL The REA model is based on the premise that data can be represented with a framework that identifies the organization’s resources, events, and agents. With this approach to organizing accounting and non-accounting data, user views can be developed as needed to support all decision-making. Follow carefully the example developed in the text. It is simple, but complete.

Resources Economic resources are the assets of the organization. They are defined as objects that are both scarce and under the control of the enterprise.

Events Economic events are phenomena that affect changes in resources. They can result from activities such as production, exchange, consumption, and distribution.

Agents Economic agents are individuals and departments that participate in an economic event. They are parties both inside and outside the organization with discretionary power to use or dispose of economic resources. Examples of agents include sales clerks, production workers, shipping clerks, customers, and vendors.

ERP (Enterprise Resource Planning) SYSTEMS ERP systems permit an organization to fully integrate its key business processes – thus eliminating some of the so-called silos. Data sharing and information flows can facilitate common business practices across the organization.