Accounting Information Systems

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Accounting Information Systems

• Chapter 6

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Objective 1

• Describe the features of
• an effective accounting
• information system.

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Basic Features
Control
Comparability
Flexibility
Cost/benefit relationship
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Basic Features

• Internal controls are the methods and procedures
  used to authorize transactions and safeguard
  assets.
• Comparability means that the system works
  smoothly with operations, personnel, and the
  organizational structure.

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Basic Features

• Flexibility relates to the systems 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.

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Computerized Accounting System
Hardware
Software
Company Personnel
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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.

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Objective 2

• Understand how both
• computerized and manual
• accounting systems work.

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Three Stages ofData Processing
Input
(Source documents)
Processing
(Financial statements)
Output
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Computerized Accounting System
ACCOUNTING RECORDS
Journals, Ledgers, Other records
PERSONNEL input transactions, request reports,
protect records
posted
accessed for reports
HARDWARE
printed to paper, screen
SOFTWARE PROCESSING
INPUT
OUTPUT
entered, edited
REPORTS
DATA
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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.

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Menu-Driven Accounting System

• Computer systems are organized by function or
  task.
• Computer systems usually have a choice of
  processing options on a menu.

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Menu-Driven Accounting System
General
Receivables
Payables
Payroll
Reports
Inventory
Utilities
Posting
COMPUTERIZED ACCOUNTING SYSTEM
Account Maintenance
Closing
Use arrow keys to make choice.
MAIN
Press ltreturngt to access choice.
Press F7 ltescapegt to leave menu.
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Preparing Accounting Reports
Trial Balance
Financial Statements
Accounts Receivable Detail
Accounts Payable Detail
Daily Cash Report
Income Statement
Statement of Owners Equity
Balance Sheet
Statement of Cash Flows
Use arrow keys to make choice.
REPORTS
Press ltreturngt to access choice.
Press F7 ltescapegt to leave menu.
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Objective 3

• Understand how spreadsheets
• are used in accounting.

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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
• Accounts Receivable/Sales
• Inventory/Cost of Goods Sold

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Anas 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.

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Anas 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?

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Anas Boutique Example

• May cash sales 50,000
• Collection of Aprils credit sales 60,000
• Collection of Mays credit sales 100,000
• Total 210,000
• Spreadsheets make computations like these easier.

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Spreadsheet Example
Formula for B4 B2B3
Column A B C
Income Statement Revenues 100,000 Expenses
60,000 Net Income
Row 1 2 3 4 5
40,000
Cursor is on cell B4.
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Objective 4

• Use the sales journal,
• the cash receipts journal,
• and the accounts receivable
• subsidiary ledger.

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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 Disbursements
Purchases
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Using the Sales Journal

• Sales Journal
  Page 5
• Invoice Account Account Post
• Date Number Debited Number Ref. Amount
• Jan. 2 201 Joe Co. 120-122 ? 600.00
• Jan. 2 202 May Co. 120-033 ? 700.00
• Jan. 2 203 XYZ Co. 120-111 ? 900.00
• TOTAL 2,200.00
• 
  120/410

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Using the Sales Journal

• Sales Journal
  Page 5
• Invoice Account Account Post
• Date Number Debited Number Ref. Amount
• Jan. 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 SJ5 2,200 2,200
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Using the Sales Journal
Sales Journal
Page 5 Invoice Account Account Post Date
Number Debited Number Ref. Amount Jan. 2
203 XYZ Co. 120-111 ? 900.00 TOTA
L 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
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Subsidiary Ledger

• A subsidiary ledger is often used to provide
  details on individual balances of...
• customers (accounts receivable) and...
• suppliers (accounts payable).

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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.

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Cash Receipts Journal Page 6

• 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)
  

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Accounts Receivable
XYZ Company Subsidiary Ledger Jrnl. Date Ref.
Debit Credit Balance Jan. 2 S.5 900
900 11 CR.6 900 -0-
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General Ledger
Cash No. 101
Jrnl. Debit Date Ref. Debit Credit Balan
ce Jan. 31 CR.6 1,882
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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.

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Objective 5

• Use the purchase journal, the
• cash disbursements journal,
• and the accounts payable
• subsidiary ledger.

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Purchases Journal

• This is designed to account for all purchases of
  inventory, supplies, services, and other assets
  on account.

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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.

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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

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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

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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.

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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

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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 customers Accounts
  Receivable.

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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.

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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.

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End of Chapter 6