 Hello and welcome to this session in which we would look at information technology as it relates to the CPA exam to be more specific the BEC section. IT is an important topic on the BEC section, so before you sit for the exam you want to make sure you are comfortable with this topic. In this session specifically I will focus on the IT information technology, what's information technology, then I will talk a little bit more about management information system and under management information system would look at accounting information system as well as ERP which is enterprise resource planning. Now before we start if you are a CPA candidate and most likely if you are listening to me right now you are a CPA candidate. So if you are a CPA candidate please take a look at my website farhatlectures.com. I don't replace your CPA review course, any course that you are taken that you see on your screen. I can't replace it, I won't be able to, I would love to but I can't. 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Let's go ahead and get started. What is information technology? What is this IT? Well IT is basically the use of computers to do what? To store information, to retrieve that information, to transmit that information and to manipulate this information this data into some useful usable business decision. So basically it will help it will help support our business decision and communicate this information either people within the company or outside party. This is what basically an IT structure would look like. And simply an IT when we say an IT we're looking at computers, computers network and the use of computer programs that run those computers and computers networks themselves. Now what's the purpose of an IT? Well obviously is to help us human in routine processing transaction. So transaction processing that's one thing that they do. So rather than manually enter the transaction, maybe you'll find a faster way to do it through an IT and assist us in decision making. And this is important when because it's going to provide us report and it's going to provide more than reports but usually reports will assist us we can look at data and aggregate and make the appropriate decision. Now there are five basic components of IT and those are basic terms you might be familiar with them but you want to be one before setting for the exam. The first one is hardware. What is a hardware? Well it's there are physical items you can touch that compromise a computer system. Now what could they be? Well think of hardware as what? Anything that you can see and touch. Look this is a picture of them. Okay so printers, zip drive, keyboards, a mouse, a video camera, the monitor everything that you can touch is called a hardware. Now also we need software. What is software? Well think of software, Excel, Windows, those are software, Chrome, PowerPoint. What is a software? Well it's something intangible you cannot really touch. Okay what it does it's a collection of instruction that's going to help run the hardware so that's what it do. It's going to instruct the hardware what to do. Examples are right in front of you. Any software is is a software like I'm trying to explain it but in a circle so it's instructions that help you do something on the computer it runs the computer for you. Also we need to be familiar with the idea of a network. What is a network? Well it's two or more computers two or billions of computers for that matter that are linked in order to share resources, exchange files and allow electronic communication. Well the most obvious example of a network is the internet. The internet is a bunch of computers connected together that can share all sorts of things. Files, videos, audio, pictures, you name it, data. Okay so network may be linked through cables, telephone lines. I remember when the internet started it was linked through telephone line that's the only way you would get to the internet could be through radio waves, satellites, infrared, light beams and who knows in the future what it's going to look like. Okay but this is what the internet now you want to differentiate between the internet and intranet. Intranet are also computer network for sharing information same purpose collaborating operational system and other computing services it's just simply put it's a computer network but it's only accessible to the people at a certain location or a certain company so outsiders cannot access intranet intranet so it's basically it's a network within your own company okay data what is data and we're going to talk a lot about data down the road there's a lot to learn in BEC about data. Data is basically information stored on a hardware it doesn't have to be on a hardware it could be on a paper then you can transfer it so data is not instruction data is not a software you the data you know you would take the data and input the data into the software but the data is not a software so basically raw data this is just basically numbers raw data sales figures inventory figures number of likes on on a picture number of clicks on a page so on and so forth again we'll talk about data much much later on and obviously the fifth component is people anyone who uses a computer which is any hardware but simply what we are dealing with computers you and I are our computer users our people you have IT professional accounting HR payroll so on and so forth so those are the five basic components of IT now here's what's going to happen if we take those five basic components hardware software data people plus procedures to achieve and you know apply procedures to achieve organizational objective we're going to call this business information system now we have a business information system computer hardware software all working together and BIS and BIS serve all levels of a company HR payroll advertising recruiting sales anyone would like to have an a BIS system okay so the BIS system they have really three strategic functions it's going to help assist business processes like creating a sales order it's going to assist with decision making for example if you have a list of receivables and you can you can age them and you know of anyone that's that said they're not paying their bill you may not grant them sales on credit so it will assist you in decision making it assists you in planning for for the future like budgeting and long-term planning and strategic planning so any information any information system or business information system usually perform four tasks okay and let's go through them manually they're common sense but you really want to know them first it has an input task so the first thing in it for a business information system is to capture this data from the outside of the entity now how do you capture the data you either scan it you you you type it on a keyboard you sometime voice recognition can input the data the first you have to input the data to once you once the data is inside the system then through the software you can start to do processing and transformation it's going to convert the data into some useful information for decision making but that's not good enough we want this data we want this output you have to communicate the results to interested parties either internal or external through a screen or through a paper or through an email or through a file you have to communicate this information and obviously you have to store this information store this data preserve it before you import it during the input and we'll talk about this later on how do you make sure it's you're importing the right data and after processing whether you want to keep it temporarily or permanently okay so this is what BIS a generally speaking a business information system is okay now we have various types of business information system and now we're going to be a little bit a little bit more specific we might have you know for example management information system is a type of business information system we have accounting information system we're going to see it's part of the management information system and we have an enterprise resource planning which is basically in a different type of MIS okay so those are the three type of business information system that you will need to be familiar with for the CPA exam starting with MIS or management information system what is a management information system it's a computer system consisting of hardware and software just like the BIS hardware software and people that serves the backbone of the organization operation it's serving what your need okay what could be your need you want to gather data analyze the information and report the data for the help and business decision just the same as business information system now we are a little bit more specific management information system so the purpose is to improve decision-making by providing up-to-date accurate data on the variety of organizational assets including you want to make sure you have information about your accounting information about financial like capital budgeting and we'll talk about the accounting part in a moment because we're going to have accounting information system as a subsystem inventory a personnel like payroll benefit manufacturing you want to know about your raw material work and process inventory maybe we'll go under manufacturing as well marketing you want to know about sales forecasting so on and so forth so simply put MIS collects the data stores it that makes it accessible to managers who want to use this data to run report and run the company now this is what an MIS is now you will notice here we said one of them it's going to be ERP we're going to see the difference between MIS and an ERP we'll see that in a moment okay now let's talk about accounting information system accounting information system is a subset so here what we're dealing with is a subset of the management information system of the company so accounting information system is a subsystem of MIS that perform routine highly structured financial transaction relevant to the financial and managerial accounting aspect of the company so we can break AIS in two or three main parts we could have a general ledger component of it which is the financial reporting system and this would record transaction with external parties like sales purchases that's going to be reflected in the financial statements that are prepared in accordance with gap like what income statement balance sheet statement of cash flow so on and so forth it could also have a management reporting system and from the name management reporting system it'll provide information useful for the internal management for example we want to know how much something is costing us for our own purposes that will be in our cost accounting system and the preparation of related reports that we can run the company like pro forma financial statements budget cost volume profit analysis and other internal reports so it can be broken down into those two components and the third component is transaction processing which we'll need to talk about this more down the road we'll have one more recording about transaction processing but let's talk about ERP so remember AIS is a subunit so this could be AIS like a subunit of the system now what is an ERP well this is an ERP an ERP simply put all those systems all those subsystem whether it's accounting information system finance manufacturing purchases customer web portal they're all interconnected together once they are all interconnected we call the MIS an enterprise resource planning it's basically an advanced system of an MIS so why why would we say this for example I'm not going to say back in the old days some companies still use this for example the company might have a quick books it's a software so for example their accounting information system is called quick books then for finance they would use I don't know they I'm just going to make this up to kind of make the point quick in okay no companies will use that unless you're a skiler at break and bad right they would use quick in for their finances and quick books for their accounting so notice they're the same company but let's assume you know obviously you can integrate them if you want to but let's assume they're not integrable so you they're using two different software they're using two different software and they might use for purchasing they might use pro purchase there there's no such a thing they just made up the software so notice they're using one for purchasing this is which is one part of the MIS they're using the software quick books is a different software quick in is a third software so notice they they're like kind of separated ARP will solve this problem ARP is one integrated system so when you heard the word ERP think of integration it's it's a system that's integrated of the main business processes the point is it's everything is integrated so when the customer comes into the customer portal and input the information that information will go to sales that automatically because all the systems communicate with each other they will go to finance it if they place an order it will go to the manufacturing it so this whole thing it's all integrated that's that's the beauty of it you can think of SAP Oracle and JD Edward those are the big ERPs that are known on the market and it will continuously in real time update what's going on within the business so once once and once a customer place the order it goes to manufacturing purchasing finance so we know what's going on what we need to do okay it uses common database maintained by a database management system and it's common it means you have to put the information once and share this information with everybody else it can try the business resources all continuously cash raw material production so as soon as we need to buy something let's assume we need to buy something because at a customer place a customer places an order we made the sale it goes to sales it tells us we made the sale now we need to manufacture the item it will tell the manufacturing unit or the manufacturing software we need to manufacture this item the manufacturer software might place a purchase order for that for that transaction because we need raw material and and it might tell us it might tell financing that we need to finance this transaction so notice one transaction keeping track of all this continuously up to date so management know what's going on within their orders purchases payroll so on and so forth that's the beauty of ERP so the whole system communicate with each other when we say back office function in ERP it's the application that connect all these systems together within the company itself it's called back office function versus a front end functions think of front front end function if we're looking at this picture is your customer web portal because the customer the customer web portal is it's it's it's a portal it's a it's a door or it's a window whatever you want to call it a door or a window that connect your external parties now when you input your simply put when you buy something online what you do is your input your name your address your credit card information what you are doing is you are using a front office function you're inputting this information in the company's database and if they have an ERP that information will go to different places all at once but the it's called front office functions okay so it's external parties inputting the information and the beauty of ERP you're using one system one application with unified interface so it looks the same everywhere and frankly when I was in audit when when when we were dealing with SAP it will be very easy because it easy for us easy for people who are pulling report because using SAP you can pull any report you want to because SAP is an ERP all the functions of the business are integrated so whatever you're looking for one person as long as they have access by the way of course they have to have access versus if you are dealing with different software I still remember the story where where the manager they had to use two different computers to pull two different reports because they had one old system on one computer and one new system on a new computer and they don't communicate therefore it's like it's like two different computers they have to have two in order to pull all the reports that we wanted versus SAP just one click you get everything that you need at the end of this recording I'm going to invite you again to visit my website farhatlectures.com once again I don't replace your beloved CPA review course I can't I wish but I can't not not not I wish it's fine I'm not going to wish for that but I can be a useful addition consider uh consider subscribing it's worth it good luck and stay safe until we get those vaccines