Page 267 - DCOM302_MANAGEMENT_ACCOUNTING

Management Accounting

Notes Information that originates outside the organisation is referred to as external information.
Such information is often required by top level managers to plan and guide the organisation
successfully.
Some examples of external information are:

1. Demand for new products or services.
2. Information describes customer satisfaction with products and services. Information
describing change in policies of suppliers.
3. Knowledge of promotional campaigns, price changes, or products planned by competing
fi rms.
4. Details of changes in government regulations.

In many instances, firms have to provide information to external users. Some of these are:
1. Prices of items and services offered (to customers)
2. Quantity of items needed for manufacturing (to suppliers)
3. Sales revenues and profit earned (to the government).

Only an effective information system can provide managers with both internal and external
information that is timely and accurate.

Figure 14.2: Different Levels of Information Systems

Senior level
managers

Executive Information
System
Middle level managers
Decision Support System or operating level managers
Marketing Information System
Office Automation System
Transaction Processing System Front end personnel

Management information system can be developed as an act of interrelated components that
collect (or retrieve), process, store and distribute information to support decision-making,
coordinate and control in an organisation. Information means that data have been shaped into
a form that is meaningful and useful to human being. Data are a stream of raw facts reporting
events occurring in an organization or physical environment before they have been organised
and rearranged into a form that people can understand and use.
The importance of Management Information System has increased in recent times because of the
following:
1. Emergence of global economy
2. Transformation of industrial economies – knowledge and information intense products
have become available

3. Transformation of multinational enterprises
4. Emergence of digital form

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