DATA VERSUS INFORMATION. Before discussing the data sources portion of Figure 1-5, we must make an important distinction between the terms data and information. Data are facts, which may or may not be processed (edited, summarized, or refined) and have no direct effect on the user. By contrast, information causes the user to take an action that he or she otherwise could not, or would not, have taken. Information is often defined simply as processed data. This is an inadequate definition. Information is determined by the effect it has on the user, not by its physical form. For example, a purchasing agent receives a daily report listing raw material inventory items that are at low levels. This report causes the agent to place orders for more inventory. The facts in this report have information content for the purchas- ing agent. However, this same report in the hands of the personnel manager is a mere collection of facts, or data, causing no action and having no information content.
We can see from this example that one person’s information is another person’s data. Thus, informa- tion is not just a set of processed facts arranged in a formal report. Information allows users to take action to resolve conflicts, reduce uncertainty, and make decisions. We should note that action does not neces- sarily mean a physical act. For instance, a purchasing agent who receives a report showing that inventory levels are adequate will respond by ordering nothing. The agent’s action to do nothing is a conscious de- cision, triggered by information and different from doing nothing because of being uninformed.
The distinction between data and information has pervasive implications for the study of information systems. If output from the information system fails to cause users to act, the system serves no purpose and has failed in its primary objective.
Data Sources
Data sources are financial transactions that enter the information system from both internal and external sources. External financial transactions are the most common source of data for most organizations. These are economic exchanges with other business entities and individuals outside the firm. Examples include the sale of goods and services, the purchase of inventory, the receipt of cash, and the disbursement of cash (including payroll). Internal financial transactions involve the exchange or movement of resources within the organization. Examples include the movement of raw materials into work-in-process (WIP), the