A business information system is the sum of all the tools, techniques, and procedures used by the business to process data Such a system accepts input data about the business and generates required or desired output information. These tools, techniques, and procedures may be carried out manually or by a computer. Most information systems are made up of component subsystems and applications or modules that are designed to process data in specific areas of business activity. Any business information system can be divided into processing systems of narrower scope which accept input data, process it, and interact with each other to produce output information and files of data.

Components of an Information System

The same fundamental ideas apply to both computer-based systems and to manual systems. Indeed, the component parts of computer-based systems generally parallel those of manual systems since the goals of both are fundamentally the same. It is realistic to view the activities and data of most businesses as falling into four major categories cash inflows and outflows, sales and purchases, financial accounting and budgeting, and manufacturing (cost) accounting. A computer-based information system can then be logically as viewed consisting of four component subsystems that are identifiable and distinguishable, but not isolated from one another. Each of these subsystems processes data from a certain area of business activity, however, each depends upon the other, and reformation must flow between them for the computer-based system to work.

Figure 1 illustrates the conceptual relationships and the logical flow of business information between component subsystems and their application modules. As you examine this figure, consider the following significant points:

1. The entire figure represents a computer-based business reformation system It is composed of four distinct, but interrelated component subsystems which are represented by the large curved shapes.

2. The major components of such an information system are:

a. A cash receipts and disbursements system.

b. A sales and purchases system.

c. A financial accounting/budgeting system.

d. A manufacturing system.

3. Each major component, in turn, consists of specific processing applications or modules which are represented by the rectangular figures. It is these application modules that are the basic braiding blocks of an information system.

4. It is important to note that information flow between modules is absolutely necessary in a computer-based information system. The arrows indicating reformation flow which intersect the curved shapes demonstrate that all systems interact with each other through the modules that make up the systems.

5. The conceptual differences between information systems and accounting systems should become clearer after careful study of Figure 1. Accounting systems process only certain kinds of events, called transactions, because of the basic assumptions on which accounting is based Information systems, on the other hand, are capable of processing any information (i e, more than just accounting transactions) that is useful to management or any other user of the system.

Interdependence of Components

The necessary flow of information between applications makes it unlikely that any individual module, or even any component subsystem, can successfully stand alone or operate independently. Each of these modules provide the necessary "environment" for the other. Many processing applications use the same basic data as input, but require that the data be organized or accessed differently. By the same token, the output of some applications may be used as input for other applications.

This commonality of data needs makes it possible for a business system to create a basic set of data which is available to all processing applications and flexible enough to be referenced by these modules in many different ways. Such a set of data within reach of all processing applications for their use is, of course, a data base Instead of each application organizing and storing all of its own data (which would necessarily result in redundancy and duplication throughout the system), the data base concept extracts data that is common to many application modules and makes it accessible to all. Only with the aid of a computer's speed and memory is this possible, thus, implementation of the data base idea in a manual system is generally not feasible.

Important Characteristics of an Information System

All processing applications of business reformation systems have some important characteristics in common These fundamental ideas can be summarized as follows.

Output reports From each application module some output will be generated to provide information on which decisions can be based or statements to meet the business' reporting requirements Although it is conceivable for a package to produce no printed output, this is not likely to occur very often in business processing. The ability of computer-based systems to provide information which is not available from a manual system is one of the primary reasons for their existence. Timely and useful management reports are one of the significant advantages of an information system.

Interaction with other packages The transfer of data between applications (sometimes called interface) exists to reduce duplication and redundancy in an reformation system. The capabilities of computer systems make this kind of interchange between modules relatively easy to carry out as compared to manual systems It is unusual to find an individual computer-based module that is not made more efficient by accepting some organized and (at least) partially processed data from another module. By the same token, almost all modules generate some data which can be used by other applications in the system.

Using easy to understand figures and discussion, this article provides an overview of the information, data, and transaction flows that occur in a realistic business reformation system. Thus article explains the four major subsystems - cash receipts and disbursements, sales and purchases, financial accounting and budgeting, and manufacturing - that comprise such a system as well as the individual processing modules or applications that actually carry out the system's activities. The focus of this article is on how the parts of a total system