Post on 23-Dec-2015
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Overview of Business Processes2
UAA – ACCT 316 Accounting Information
Systems Dr. Fred Barbee
Ch
ap
ter
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Learning Objectives
1. Explain the three basic functions performed by an accounting information system (AIS).
2. Describe the documents and procedures used in an AIS to collect and process transaction data.
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Learning Objectives
3. Discuss the types of information that can be provided by an AIS.
4. Describe the basic internal control objectives of an AIS and explain how they are accomplished.
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Meet the players at S&S
Hi, I’m Susan.
Pleased to meet you!
I’m Scott and I’m pleased to meet ya
too!
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Meet the players . . .
Scott, our grand opening
is only two weeks away!
Yeah, it’s a good thing we
hired an accountant!
Meet the Accountant . . .
Hi folks, Ashton Fleming
here!
Among other things, I’m responsible for creating the
accounting information system for S&S.
WOW! I have a lot
of questions!
How am I going to organize things?
What information does S&S
need?
Where do I start?
How do I organize all the data that will be collected?
How am I going to collect and process data about all the types of transactions that S&S will engage in?
How should I design the AIS so that the information is reliable and accurate?
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The Three Basic Functions of an Accounting Information System
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Basic AIS Functions
Collect and store data
Provide information useful for decision making
Provide adequate controls
Detour . . .
Transaction Cycles
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Transaction Cycles
A transaction processing cycle combines one or more types of transactions having related features or similar objectives.
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Transaction Cycles
A transaction cycle consists of a set of transactions leading to the recognition of a major economic event on the financial statements
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Transaction Cycles
It is through the study of transaction cycles that we gain a clear view of a firm’s processing framework. (See Figure 2-1 p. 25)
Let’s . . .
At Something Familiar
Cost Flows in a Manufacturing FirmCost Flows in a Manufacturing Firm
DMDM
DLDL
MOHMOH
DM Inv.DM Inv.
WIP Inv.WIP Inv.
FG Inv.FG Inv.
WIPWIP
Manufacturing Costs
COGSCOGS
S&AS&A
Sales
-= Gross Margin
-Net Income=
Balance Sheet
Period Period CostsCosts
Income Statement
Pro
du
ct C
ost
sP
rod
uct
Co
sts
Unfinished
Finished
Sold
UsedUsed
Applied
Unused
Sale
EXPENDITURE CYCLE
SubsystemsPurchasing & A/P
Cash DisbursementsPayroll
CONVERSION CYCLE
SubsystemsProduction Planning
and ControlCost Accounting
REVENUE CYCLE
Subsystems
Sales Order Processing and Cash Receipts
Labor
Materials
Plant
CustomersC
ash
Cas
h
Fin
. G
oods
Fin. Goods
Cash
Let’s . . .
At Another Approach
GL & Fin Rpt Cycle
Merchandising Shipments
Cash Receipts
PP&E, Investments
Cash Disbursements
Sale of Merchandise
Purchase of Mdse, &
Labor, Etc.Merchandise
Receipts
47
The Revenue Cycle
GL & Fin Rpt Cycle
Merchandising Shipments
Cash Receipts
PP&E, Investments
Cash Disbursements
Sale of Merchandise
Purchase of Mdse, &
Labor, Etc.Merchandise
Receipts
The Revenue CycleSpans activities from “Sale” to
“Receipt of Cash
Key Transactions: Sales
Cash Receipts
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The Revenue Cycle
Includes transactions surrounding the recognition of revenue.
Sales
Accounts Receivable
Inventory (some)
General Ledger (some)
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The Revenue Cycle
Capturing and recording of customer orders;
Shipment of the goods and the recording of the cost of goods sold.
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The Revenue Cycle.
The billing process and the recording of sales and accounts receivable;
The capturing and recording of cash receipts.
47
The Expenditure Cycle
GL & Fin Rpt Cycle
Merchandising Shipments
Cash Receipts
PP&E, Investments
Cash Disbursements
Sale of Merchandise
Purchase of Mdse, &
Labor, Etc.Merchandise
Receipts
The Expenditure CycleSpans activities from the “need” for resources/services to “payment” for
that resource/service
Key Transactions: Purchases
Cash Disbursements
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The Expenditure Cycle
Includes the transactions surrounding the recognition of expenditures. Purchases
Accounts Payable
Cash Disbursements
Inventory (some)
General Ledger (some)
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The Expenditure Cycle
The preparation and recording of purchase orders;
The receipt of goods and the recording of the cost of inventory;
The receipt of vendor invoices and the recording of accounts payable;
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The Expenditure Cycle
The preparation and recording of cash disbursements.
The cycle also includes the preparation of employee paychecks and the recording of payroll activities.
Back to . . .
Basic AIS Functions
AIS Function
Collect and store data about the organization’s business activities and transactions efficiently and effectively
Up
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AIS Function #1 – Up Close
Capture transaction data on source documents.
Record transaction data in journals, which present a chronological record of what occurred.
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AIS Function #1 – Up Close
Post data from journals to ledgers, which sort data by account type.
Data Processing Cycle
The Event of Interest
The resources affected by that
event.
The agents who participate in that
event.
ProcessInput Output
SensorControl
Feedback Loop
Data Files
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Capture Transaction Data on Source Documents
Sales Invoice
Sales Order Purchase Order
O
Source documents are special forms
used to capture transaction data.
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Capture Transaction Data on Source Documents
Control over data collection is improved by prenumbering each source document.
Accuracy and efficiency in recording transaction data can be further improved if source documents are properly designed.
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System - Inputs
Input documents can be categorized into three types . . .
Source Documents
Product Documents
Turn-around Documents
Data Collectio
n
12
3
Sales System
Customer
Order
Sales Order
Creation of a Source Document
Source Document
1
Data Collectio
n
Source Document
12
3
Sales System
Bill
Remittance Advice
Product Document
Customer
Order
Sales Order
A Product Document
Data Collection
Source Document
12
3
Sales System
BillRemittance Advice
Product Document
Customer
Order
Sales Order
A Turnaround Document
Check 11
Remittance Advice
Cash Receipts System
Source Document
Function
Sales Order Record Customer Order
Delivery TicketRecord Delivery to Customer
Remittance Advice
Receive Cash
Deposit SlipRecord Amounts Deposited
Credit MemoSupport Adjustments to Customer Accounts
Common Source Documents & Functions
Revenue Cycle
Source Document Function
Purchase Requisition
Request that purchasing department order goods.
Purchase OrderRequest goods from vendors.
Receiving ReportRecord receipt of merchandise.
Check Pay for items.
Common Source Documents & Functions
Expenditure Cycle
Source Document
Function
W4 formsCollect employee withholding data.
Time cardsRecord time worked by employees.
Job time ticketsRecord time spent on specific jobs.
Common Source Documents & Functions
Human Resource Cycle
General Ledger and Reporting System
Journal Voucher
Record entry posted to general ledger.
Common Source Documents & Functions
General Ledger & Reporting System
ProcessInput Output
SensorControl
Feedback Loop
Data Files
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Data Processing
Updating previously stored information about the resources affected by the event and agents who participated in the activity.
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Data Processing
Periodic updating of the data stored is referred to as batch processing.
Immediate updating as each transaction occurs is referred to as on-line, real-time processing.
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What is an Audit Trail?
An audit trail provides a means to check the accuracy and validity of ledger postings.
ProcessInput Output
SensorControl
Feedback Loop
Data Files
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Storage . . .
Ledgers and files provide storage of data in both manual and computerized systems.
The General Ledger
The Accounts Payable Ledger
The Accounts Receivable Ledger
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Storage . . .
A ledger is . . .
. . . a book of financial accounts, which reflect the financial effects of the firm’s transactions after they are posted from the various journals.
Sales Order
Customer
Order
Flow of Information From the Economic Event to the General
LedgerJournal
EntrySales
Journal
General Ledger
AR Sub Ledger
Periodically reconcile subsidiary ledger to General Ledger
PostPost
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Storage . . .
A file is an organized collection of data.
Files may be
Manual
Computer (magnetic)
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Storage . . .
A transaction file is . . .
. . . a collection of transaction input data - normally temporary in nature.
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Storage . . .
A master file is . . .
. . . a collection of data that are of a more permanent or continuing interest
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Storage . . .
A reference (table) file . . .
. . . contains data that are necessary to support data processing
AIS Function
To provide management with information useful for decision making.
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AIS Function #2 – Up Close
This information is provided in the form of reports that fall into two main categories:
financial statements
managerial reports
AIS Function
Provide adequate controls to ensure that data are recorded and processed accurately
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AIS Function #3 – Up Close
Ensure that the information produced by the system is reliable.
Safeguard organizational assets.
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AIS Function #3 – Up Close
Ensure that business activities are performed efficiently and in accordance with management’s objectives.
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Internal Control Considerations
What are two important methods for accomplishing these objectives?
Provide for adequate documentation of all business activities.
Design the AIS for effective segregation of duties.
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Adequate Documentation
Documentation allows management to verify that assigned responsibilities were completed correctly.
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What is Segregation of Duties?
Segregation of duties refers to dividing responsibility for different portions of a transaction among several people.
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What is Segregation of Duties?
What functions should be performed by different people?
– authorizing transactions
– recording transactions
– maintaining custody of assets
Segregation of Duties
Authorization Recording Custody
Types of Internal Controls
Preventive Detective Corrective