Accounting Information Systems

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Chapter 7

• Accounting Information Systems

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In this Chapter well learn about

• Principles of Accounting System Design
• Special Purpose Journals
• Sales
• Purchases
• Cash Receipts
• Cash Disbursements
• Control Accounts Subsidiary Ledgers

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Principles of Accounting System Design

• Applies to both manual computerized accounting
  systems
• computerized systems perform same functions as
  manual ones
• quicker - some steps that are a separate
  procedure in a manual system are done
  automatically in the background by computerized
  ones
• Efficient ways to process data (accounting
  information)

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Principles of Accounting System Design

• Four General Principles
• Cost-Benefit Principle
• Control Principle
• Compatibility Principle
• Flexibility Principle

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Cost-Benefit Principle

• Benefits derived from the accounting system
  (amount, accuracy, usefulness, and timeliness)
  must exceed the cost of providing the information
• Costs include
• Hard Dollars
• Soft Dollars

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Control Principle

• System provides elements of internal control to
  protect the firms assets
• uniform processing of similar transactions
• segregate incompatible duties
• authorization
• recordkeeping
• access to assets
• provide information which allows for periodic
  independent verification

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Compatibility Principle

• harmonious with the business operation
• accounting system serves the business and not the
  business serving the accounting system
• comprehensible by the employees who must utilize
  it after adequate training provided

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Flexibility Principle

• Can grow with changes in volume
• some computer packages are limited as to the
  number of transactions
• adaptable as organization changes
• new departments, divisions, regions

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Special Purpose Journals

• Up till now used only a general journal to record
  all transactions
• useful for handling a small volume of
  transactions
• inefficient when handling moderate to large
  volumes of transactions
• Group similar types of transactions together
• efficiencies in summarizing posting

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Special Purpose Journals

• If used appropriately, substantially diminishes
  the use of the General Journal
• Common Examples
• Sales
• Purchases
• Cash Receipts
• Cash Disbursements
• Payroll

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Special Purpose Journals

• Facilitates the division of labor
• Similar transactions handled by one individual or
  team
• No competition for General Journal

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Special Purpose Journals

• balanced off prior to posting
• total of debit accounts must equal total of
  credit accounts
• simplifies postings
• generally once a day, week, or month depending on
  volume
• multiple columns to accommodate various different
  accounts

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Control Accounts Subsidiary Ledgers

• Used for accounts that have many detailed
  components that need to be kept track of
• Accounts Receivable
• Accounts Payable
• Property Equipment

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Subsidiary Ledger

• Not part of the General Ledger per se
• Contains a separate record for each individual
• customer account
• vendor
• piece of equipment
• shows all the detailed transactions

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Control Accounts

• On General Ledger
• Balance represents total of all the individual
  subsidiary accounts
• Contains totals of all transactions that affect
  the subsidiary accounts
• Periodically need to test the agreement of the
  subsidiary accounts to the control accounts
• computers are not exempt