The Hindu Business Line : From data to info

Philip E. Dunn defines data and information, considers the information hierarchy within organisations, and outlines the attributes of quality information

ACCOUNTING technicians need to develop knowledge and understanding of the operation of systems and procedures found within an information technology environment. The terms `data' and `information' are commonly used interchangeably but they can be distinguished from each other.

Data is defined as the raw material for data processing and relates to facts, events and transactions.

Data can also be classified as: quantitative; qualitative; discrete; continuous; primary; and secondary.

Quantitative data is that capable of being measured numerically — for example, the standard labour hours required to produce one unit of output.

Qualitative data is that not capable of being measured numerically but may reflect distinguishing characteristics — for example, the grade of labour used to produce the unit of output.

Data is said to be discrete when it can only take on specific fixed values — for example, the actual number of vehicles through a car wash per day could be 35 but not 35.3. Whereas continuous data takes on any numerical value and we could, in an eight hour day, measure the throughput of cars as 4.375 per hour, that is, 35 cars / 8 hours.

Data needs to be collected and summarised to the form required by the user.

Primary data is collected for a particular enquiry; for example by observation, employees would be observed performing a 'value adding' activity when establishing a standard time for the activity.

Data collected by a trade association from a number of firms and comprising trade association statistics would become secondary data when used by a firm in the sector making an enquiry of its own.

Data vs information

Information is defined as "data that has been processed in such a way that it is meaningful to the end-user".

Within organisations information has a defined hierarchy.

Information is classed as:

Strategic — that information relating to the longer term planning and strategic focus of the business.

Tactical — that used in short-term planning and decision-making within an organisation.

Operational — that relevant to day-to-day decision-making.

From bottom up, the following example refers to capital equipment utilisation:

Operational information would include a current week's report for a cost centre on the capacity of the plant utilised in the period. Such a measure may include: actual machine hours/budgeted machine hours x 100/1

That is, the percentage capacity utilised.

Tactical information could include the short-term budget for 12 months and would show the budgeted machine utilisation in terms of machine hours for each item of plant. The total machine hours being predetermined from the production budget for the period.

Strategic information would relate to the longer term strategy on the company's market share, which in turn informs the production plan. This plan would be used to predetermine the level of investment required in capital equipment in the longer term.

Attributes of information

Quality information is that which, when used, `adds value'. Research suggests that information should possess numerous attributes.

The attributes which `add value' and together underpin quality of information are examined below.

Relevant for purpose: Information should always be relevant to the issue being considered. It is often the case that memos, reports and schedules contain irrelevant sections, which can have an adverse effect on the understanding of the issue by the user.

Completeness: It is desirable that all information required for decision-making is made available. There must be close co-operation between the information provider and the end user.

Therefore, all factors influencing decision-making should be included.

Accurate for purpose: Managers rely on information to effectively manage their `value adding' activities. For example, to satisfy the VAT regulations, a VAT invoice must be accurate to the nearest penny.

Reputable source: For information to be used effectively by managers, the users must have confidence in its source.

This would be supported by the fact that the source was reliable in the past and that there is a good and clear channel of communication between the provider and the user of the information.

(Edited extracts from Student Accountant, a journal of ACCA, London. www.accaglobal.com)

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