Accounting Processes and Flowcharting

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Accounting Processes and Flowcharting
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Accounting Cycle

• 1. Transactions occur
• 2. Prepare documents
• 3.
• 4.
• 5. Prepare unadjusted Trial Balance
• 6.

• 7. Prepare adjusted Trial Balance
• 8.
• 9.

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Transaction Cycles

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Typical Journals and Transactions

• Type of Journal

• Transactions recorded
• Credit sales
• All cash receipts
• All purchases of goods and services except
  payroll
• All cash disbursements made by checks except
  payroll
• All payroll disbursements
• Adjusting entries and all transactions not
  recorded in another journal

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General and Subsidiary Ledgers
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Need for a Written Descriptions of an AIS

• Minimize the likelihood of an incomplete or
  ineffective accounting system. The description
  is an inexpensive way to describe the system
  before the system is developed.
• Provides a record for training new employees and
  reminding existing personnel how the system
  should operate.
• Assists in making improvements to the system.
• Provides information for accounting personnel to
  communicate with other personnel about the system
• Improves the ability to communicate with people
  outside the company.

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Items should be Described in AIS

• The origin of every document and record in the
  system.
• All processing that takes place
• The disposition of every document and record in
  the system.
• The department or personnel performing the
  duties.
• The existing internal controls

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Flowcharting Symbols for Manual System

• Document
• paper documents and reports of all types.
• Manual Operation or Process
• the performance by a human of any processing
  function which causes a change in value
• Terminal
• Beginning, ending, or interruption of flowchart
  used to indicate information entering or leaving
  system

sales invoice
prepare duplicate sales invoice
receive customer purchase order
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Flowcharting Symbols for Manual System

• Off-line Storage
• off-line storage of documents, records, and EDP
  files
• Journal/Ledger Symbol
• recording of processed information in
  journals/ledgers
• Decision
• used to indicate a decision requiring actions for
  a yes or no
• Annotation
• the addition of descriptive comments or
  explanatory notes as clarification

N
sales journal
yes
credit OK?
no
credit checked before invoice prepared
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Flowcharting Symbols for Manual System

• On-page Connector
• exit to, or entry from, another part or flowchart
  on same page keyed by using numbers.
• Off-page Connector
• exit to, or entry from, another part of flowchart
  on different page keyed by using page numbers
  and key letters
• Directional Flowlines
• direction of processing or data flow
• dotted line indicates only information flow, not
  document flow

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To B p. 4
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Types of Flowcharts

• Systems flowchart
• emphasizes the flow of documents and records in
  the organization. It does not show the
  segregation of duties.
• Internal control flowchart
• shows the segregation of duties and other
  internal controls.
• Program flowchart
• is used for computer programming.

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Steps to prepare flowcharts

• Decide on the system or process to be flowcharted
  (purchasing, sales, payroll).
• Determine information about the documents,
  records, and activities in the system through
  interviewing client personnel, observing their
  activities, and examining the documents and
  records.
• Develop a tentative organization for the
  flowchart including segregation of duties
• Draw a rough sketch of the system or process.
• Draw a flowchart, including comments and
  annotations.
• Trace the documents and results for one or two
  transactions through the flowchart to determine
  the accuracy of the flowchart