The output of an information system
The foregoing discussion has served to indicate how important are the needs of users of accounting information, for they determine the objectives of an accounting information system.
There are several groups of people who have vested interests in a business organization-managers, shareholders, employees, customers and creditors. Additionally, the community at large has economic and social interests in the activities of business organizations. This interest is expressed at national level by the concern of government in various aspects of firms' activities, such as their economic well-being, their contribution to welfare, their part in the growth of the national product, to mention but a few obvious examples; and at local level by the concern of local authorities and bodies in the direct socio-economic impact of the activities of local businesses.
It is quite evident that an examination of the types of decisions usually made by various users of accounting information may be taken as a basis for stipulating the objectives of an accounting information system and therefore, for evolving a normative theory of accounting by which to judge the relevance and usefulness of the information produced by accountants. We discuss the nature of theory construction in accounting elsewhere, and we discuss in detail the problems associated with the formulation of normative theories of accounting in respect of the needs of different user-groups in Part 4. In this website, we initiate these discussions by stating the general nature of the needs of different groups of information users.
In general terms, users of accounting information should be regarded as decision makers interested in determining the sacrifices which must be made for the benefits which are expected to flow from the decisions to which they commit themselves. Since all the sacrifices and the benefits necessarily materialize in the future, by reason of the nature of the decision-making process, uncertainty plays a critical role in assessing the sacrifices and benefits associated with particular decisions. It will be argued in Part 4, that rational decision makers will seek to maximize long-run returns consistent with the degree of risk which they are willing to accept.
The boundaries of an information system
An important aspect of the study of accounting as an information system is the definition of its boundaries. A system exists as an independent entity in an environment, and the nature of its relationship with that environment is clearly very important. We have already made reference to the distinction which exists between 'open' and 'closed' systems. We must now turn our attention to a closer examination of the boundaries of a system, by which we mean identifying a system in such a way that we are able to distinguish it from its environment.