1

Chapter 1

Introduction to Accounting Information

Systems

Chapter 11

The Billing/Accounts

Receivable/Cash Receipts (B/AR/CR)

Process

Learning Objectives• Understand relationship between B/AR/CR

and its environment

• Understand relationship between B/AR/CR and management problem solving

• Be familiar with technology re B/AR/CR

• Understand logical & physical characteristics

• Understand ERP impact on B/AR/CR

• Know some operation system and information system control goals and plans

3

Horizontal Information Flows • Shipping informs A/R (billing) of

shipment

• A/R send invoice to customer

• A/R informs GL that invoice sent to customer

• Customer may default, sending message to credit

• Credit changes CR limit; informs sales dept. to terminate sales to customer Cont..

4

Horizontal Information Flows (2)

• A/R informs GL of write-off

• Customer makes payment on account

• Cashier informs A/R of payment

• Cashier informs GL of payment

5

B/AR/CR Context DiagramOE/S

process

Customer

Receivingdepartment

Bank

Generalledger

B/AR/CRprocess

Customer

Sales ordernotification

Shipping's billingnotification

Check& RA

Sales returnnotification

Invoice

Creditmemo

Periodiccustomer

statements

Deposit slips &endorsed checks

GL cashreceipts undate

GL salesreturn update

GL write-offupdate

GL estimatedbad debts update

GL invoiceupdate

6

OE/Sprocess

Customer

ReceivingDepartment

GeneralLedger

Customer Bank

1.0PerformBilling

2.0Manage

CustomerAccounts

3.0Receive

Payment

Cash receiptsdata

Customer Master Data

Invoice Data

Sales Event Data

A/R Master Data

A/R Adjustmentsdata

Salesorder

Notification

Shipping'sBilling

Notification

Periodic CustomerStatements

CreditMemo

Invoice

Deposit slips

& checks

Check &

RA

G/L cash receipts updateG/L customer receipt

Update

G/Lsales

returnupdate

G/LWriteoffUpdate

G/L est.bad debts

update

Sales return notification

G/LInvoiceupdate

B/AR/CR Level 0 DFD

7

Data Descriptions in B/AR/CR

• A/R master data– balance only - current balance, past due, fin. chgs.– balance-forward - above fields + details of current

charges; aging of past-due balances– open-item - details of open invoices (invoices not

paid); customer can pay by invoice.

• Sales event data– one or more invoice records (details contained in

invoice data)Cont...

8

Data Descriptions in B/AR/CR (2)

• Invoice data - copies of invoice documents

• A/R adjustments data

– write-offs, estimated doubtful a/c, sales returns, etc.

– Journal voucher #, trans. code, authorization

• Cash receipts data

– details of customer payments

• Remittance advice data - copies of RAs

9

E-R diagram for B/AR/CR

10

11

12

Control Goals of theOperations Process

Control Goals of theInformation Process

For completed shippingnotice inputs, ensure:

For the ARMaster

Data, ensure:

IV IC IA UC UA

Ensureeffectiveness

of operations byensuring the

followingprocess goals:

Ensureefficient

employmentof

resources

Ensuresecurity ofresources

A BRecommendedControl Plans

Control Goals of the Business Process

Key:IV = Input validityIC = Input completenessIA = Input accuracyUC = Update completenessUA = Update accuracy

A = Bill customers promptly on evidence of shipment

B = Provide query & reporting functions that support accountability andmeet specific problem-solving requirements

M-1: Employ prebillingsystem

M-1 M-1 M-1

P-1: Independentbilling authorizationM-2: Confirm cust.accounts regularlyM-3: Ck for prices,terms, freight, disc.P-2: Edit ship. notifi-cation - accuracyP-3: Tickler of S.O.notifications - billingP-4: Tickler of bills oflading in billing

P-1

M-2 M-2 M-2

M-3 M-3

P-2

P-3 P-3

P-4 P-4

13

Control Goals of theOperations Process

Control Goals of theInformation Process

For completedshilpping notice inputs,

ensure:

For the ARMaster

Data, ensure:

IV IC IA UC UA

Ensureeffectiveness

of operations byensuring the

followingsystems goals:

Ensureefficient

employmentof

resources

Ensuresecurity ofresources

A BRecommendedControl Plans

Control Goals of the Business Process

Key:IV = Input validityIC = Input completenessIA = Input accuracyUC = Update completenessUA = Update accuracy

A = Bill customers promptly on evidence of shipment

B = Provide query & reporting functions that support accountabilityand meet specific problem-solving requirements

P-5: 1/1 cking SOs- ship noticesP-6: 1/1 cking SOs -invoices

P-7: Manual agreementbatch totals

M-4: Computer agreementbatch totals

M-5: Batch sequencecheckP-8: Cum. batchsequence checkP-9: Keyverification

P-5 P-5

P-6 P-6

M-4

P-7 P-7 P-7 P-7

M-4 M-4 M-4 M-4 M-4

M-5 M-5

P-8 P-8

P-9

P-7

14

P-1

Customer

Checks

RAs

Endorsechecks;prepare

batch toals

Checks

RAs

BT

Scan CR data; capturecustomer a/c with OCR

Entereddata

RAs Checks

To A/R A

Mailroom

Edit data, compute batchtotals; update AR master

Exceptionreport

ARmaster

data

CR eventdata

Preparereports

Preparedeposit

slip

Variouscash reports

2

Deposit 1slip

Data Processing Dept. Cashier

2

Deposit 1slip Checks

A

Compare

Deposit 2slipChecks

To Bank

Deposit 1slip

B

BT

B

Compare

Depositslip

M-1P-10

P-3

P-4

P-9

P-8

P-5

P-6

P-2

M-2

15

Control Goals of theOperations Process

Control Goals of theInformation Process

For remittance adviceinputs, ensure:

For the ARmaster data,

ensure

IV IC IA UC UA

Ensure effectivenessof operations by

ensuring thefollowing

systems goals:

Ensureefficient

employmentof

resources

Ensuresecurity ofresources

A BRecommendedControl Plans

Control Goals of the Business Process

Key:IV = Input validityIC = Input completenessIA = Input accuracyUC = Update completenessUA = Update accuracy

A = Optimize cash flow by minimizing overdue a/c & reducing A/RB = Provide query & reporting functions

P-1: Immediate endorseincoming checks

P-2: Deposit slip file

M-1: Immed. separatechecks & RAsM-2: Reconcile bank a/c regularlyP-3: Enter CR close towhere cash rec'dP-4: Edit CR foraccuracyP-5: Tickler filefor checks

P-1

P-2

M-1M-1 M-1

M-2 M-2 M-2

P-3P-3

P-4 P-4 P-4

P-5

C = Comply with compensating balance requirement with bank

16

Control Goals of theOperations Process

Control Goals of theInformation Process

For remittance adviceinputs, ensure:

For the ARmaster data,

ensure:

IV IC IA UC UA

Ensure effectivenessof operations by

ensuring thefollowing

systems goals:

Ensureefficient

employmentof

resources

Ensuresecurity ofresources

A BRecommendedControl Plans

Control Goals of the Business Process

Key:IV = Input validityIC = Input completenessIA = Input accuracyUC = Update completenessUA = Update accuracy

A = Optimize cash flow by minimizing overdue a/c & reducing A/RB = Provide query & reporting functions

P-6: 1/1 cking of depositslips & checks

P-7: Computer agreementof batch totals

P-8: RejectionproceduresP-9: Computer prep.of documentsP-10: Use turnarounddocuments

P-6 P-6

P-7 P-7 P-7 P-7 P-7

P-8 P-8

P-9

P-10 P-10 P-10

C= Comply with compensating balance requirements at bank

Learning Objectives• Understand relationship between B/AR/CR

and its environment

• Understand relationship between B/AR/CR and management problem solving

• Be familiar with technology re B/AR/CR

• Understand logical & physical characteristics

• Understand ERP impact on B/AR/CR

• Know some operation system and information system control goals and plans