Post on 21-Dec-2015
Accounting Information Systems
Chapter 7
Describe an effective accounting
information system.
Objective 1
Control
Compatibility
Flexibility
Cost/benefit relationship
Basic Features
Basic Features
Internal controls are the methods and procedures used to authorize transactions and safeguard assets.
Compatibility means that the system works smoothly with operations, personnel, and the organizational structure.
Basic Features
Flexibility relates to the system’s ability to accommodate changes in the organization.
A cost/benefit relationship indicates that the cost of controls do not exceed their value to the organization.
CompanyPersonnel
Hardware
Software
Computerized Accounting System
Computerized Accounting System Hardware is the electronic equipment that
makes up a computer system.
Software is a system of instructions that drive the computer to perform various functions.
Properly trained personnel are critical to the successful operations of the system.
Objective 2
Understand bothcomputerized and
manualaccounting systems.
Processing
Input
(Source documents)
(Financialstatements)Output
Three Stages ofData Processing
Computerized Accounting System
entered,edited
printed topaper,screen
ACCOUNTING RECORDS
Journals,Ledgers,
Other records
SOFTWAREPROCESSING
PERSONNELinput transactions, request
reports, protect records
REPORTSDATAINPUT OUTPUT
posted accessed forreports
HARDWARE
Designing an Accounting System
Design of the accounting system begins with the chart of accounts.
The chart of accounts lists all accounts and their account number in the ledger.
Menu-Driven Accounting System Computer systems are organized by
function or task. Computer systems usually have a choice
of processing options on a “menu.”
Menu-Driven Accounting System
General Receivables Payables Payroll Reports
Posting
Account Maintenance
COMPUTERIZEDACCOUNTING
SYSTEM
Use arrow keys to make choice.
Press <return> to access choice.
Press F7 <escape> to leave menu.
MAIN
Inventory Utilities
Closing
Preparing Accounting Reports
TrialBalance
FinancialStatements
AccountsReceivable Detail
AccountsPayable Detail
Daily CashReport
Income Statement
Balance Sheet
Statement of Owners’ Equity
Statement of Cash Flows
Use arrow keys to make choice.
Press <return> to access choice.
Press F7 <escape> to leave menu.
REPORTS
Objective 3
Understand how spreadsheets
are used in accounting.
Integrated Accounting Systems
Computerized accounting systems are organized by modules.
These modules are separate but integrated units.
A sales transaction entry will update two modules:
1 Accounts Receivable/Sales2 Inventory/Cost of Goods Sold
Ana’s Boutique Example
Ana wants to budget for expected cash collections in the month of May.
Past experience indicates that 50% of credit sales are collected in the month of sales and 50% the following month.
Ana’s Boutique Example
May sales were $250,000. $50,000 were cash sales. April credit sales amounted to $120,000. What are the expected cash collections
during the month of May?
Ana’s Boutique Example
May cash sales $ 50,000
Collection of April’s credit sales 60,000
Collection of May’s credit sales 100,000 Total
$210,000 Spreadsheets make computations like these
easier.
Spreadsheet Example
Income Statement:
Revenues 100,000
Expenses 60,000
Net Income
Row: 1
2
3
4
5
Column: A B CFormula for B4: =B2–B3
Cursor is on cell B4.
40,000
Objective 4
Use the sales journal,the cash receipts journal,
and the accounts receivableledger.
Special Journals
What are special journals? They are accounting journals used to record
one specific type of transaction. What are some examples?
Sales Cash Receipts Payroll
Cash DisbursementsPurchases
Sales Journal Page 5Invoice Account Account Post
Date Number Debited Number Ref. AmountJan. 2 201 Joe Co. 120-122 600.00Jan. 2 202 May Co. 120-033 700.00Jan. 2 203 XYZ Co. 120-111 900.00
TOTAL 2,200.00 120/410
Sales Journal Page 5Invoice Account Account Post
Date Number Debited Number Ref. AmountJan. 2 201 Joe Co. 120-122 600.00Jan. 2 202 May Co. 120-033 700.00Jan. 2 203 XYZ Co. 120-111 900.00
TOTAL 2,200.00 120/410
Using the Sales Journal
Sales Journal Page 5Invoice Account Account Post
Date Number Debited Number Ref. AmountJan. 2 203 XYZ Co. 120-111 900.00
TOTAL 2,200.00 120/410
Sales Journal Page 5Invoice Account Account Post
Date Number Debited Number Ref. AmountJan. 2 203 XYZ Co. 120-111 900.00
TOTAL 2,200.00 120/410
General Ledger Account: Accounts Receivable Account Number: 120 Date Description Post Ref Debit Credit Balance Jan. 2 Sales SJ52,200 2,200
Using the Sales Journal
Using the Sales Journal
Sales Journal Page 5Invoice Account Account Post
Date Number Debited Number Ref. AmountJan. 2 203 XYZ Co. 120-111 900.00
TOTAL 2,200.00 120/410
Sales Journal Page 5Invoice Account Account Post
Date Number Debited Number Ref. AmountJan. 2 203 XYZ Co. 120-111 900.00
TOTAL 2,200.00 120/410
General Ledger Account: Credit Sales Account Number: 410 Date Description Post Ref Debit Credit Balance Jan. 2 Sales SJ5
2,200 2,200
Subsidiary Ledger
A subsidiary ledger is often used to provide details on individual balances of...
– customers (accounts receivable) and...– suppliers (accounts payable).
A Control Account
What is a control account? It is the general ledger account. It equals the sum of the individual account
balances in a subsidiary ledger.
Debits Credits Sales Accounts Sales
Date Cash Discounts Receivable Revenue Jan. 2 200 200
11 882 18 900 30 800 800
31 1,882 18 900 1,000
(101) (420) (112) (410)
Cash Receipts Journal — Page 6
Accounts Receivable
XYZ Company Subsidiary LedgerJrnl.
Date Ref. Debit Credit BalanceJan. 2 S.5 900 900 11 CR.6 900 -0-
General Ledger
Jrnl. DebitDate Ref. Debit Credit BalanceJan. 31 CR.6 1,882
Cash No. 101
Cash Receipts Journal
Additional columns are provided to enter other account descriptions and amounts.
Cash receipts amounts affecting subsidiary ledger accounts are posted daily to keep customer balances up to date.
At month end, foot and crossfoot the journal and post to the general ledger.
Objective 5
Use the purchase journal, the
cash disbursements journal,and the accounts payable
ledger.
Purchases Journal
This is designed to account for all purchases of inventory, supplies, services, and other assets on account.
Purchases Journal
Cash purchases are recorded in the cash disbursements journal.
At month end the journal is footed and crossfooted.
Posting to the general ledger is similar to posting from sales and cash receipts journals.
Cash Disbursements Journal
Most payments are by check and are recorded in the cash disbursements journal.
The cash disbursements journal is also called:
– check register– cash payments journal
Cash Disbursements Journal
This has columns for :– date– check number– payee– cash amount (credit)– accounts payable (debit)– description and amount of other debits and
credits
General Journal
Special journals save much time in recording repetitive transactions and posting to the ledger.
However, some transactions do not fit into any of the special journals.
General Journal
Every accounting system needs a general journal.
What entries are recorded in the general journal?
– depreciation– expiration of prepaid insurance – accrual of salaries payable – adjusting and closing entries
General Journal
Many companies record sales returns and allowances and purchase returns in the general journal.
A credit memorandum is the document issued by the seller for a credit to a customer’s Accounts Receivable.
Purchase Returns and Allowances A debit memorandum is the business
document that states that the buyer no longer owes the seller for the amount of the returned purchases.
The buyer debits the Accounts Payable to the seller and credits Inventory.
Balancing the Ledgers
At the end of the accounting period: Total debits and credits of account balances
in the general ledger are equal. Control account balances are equal to the
sum of the appropriate subsidiary ledger accounts.
End of Chapter 7