Computerized Accounting Information Systems OVERVIEW

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Computerized Accounting Information
SystemsOVERVIEW
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Transaction Processing System Architectures

• A firms transaction processing systems may
  either be manual or computerized

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Computerized Transaction Processing System
T1
T2
T3
T4
T5
T6
T7
D1
D3
D4
D5
D1
D2
D6
M1
A1
D9
P1
D8
P2
D2
D3
D7
Display
T8
T9
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Components of the Transaction Processing System

• What are some examples of inputs?
• customer orders
• sales slips
• invoices
• purchase orders
• employee time cards

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Components of the Transaction Processing System

• Processing involves the use of journals and
  registers to provide a permanent and
  chronological record of inputs.
• Journals are used to record financial accounting
  transactions.
• Registers are used to record other types of
  data not directly related to accounting.

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Components of the Transaction Processing System

• Special journals are used to record similar and
  recurring transactions.
• What are examples of special journals?
• sales journal
• purchase journal
• cash receipts journal
• cash disbursements journal

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Components of the Transaction Processing System
Source Documents
Cash Receipts Journal
Cash Disbursements Journal
General Journal
Purchases Journal
Sales Journal
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Components of the Transaction Processing System

• Ledgers and files provide storage of data in
  both manual and computerized systems.
• Ledgers provide summaries of a firms financial
  accounting transactions.
• A file is an organized collection of data.
• transaction file
• master file
• reference or table file

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Components of the Transaction Processing System

• What is an output?
• It is any document generated in the system.
• What are some examples of outputs?
• trial balance
• financial reports
• operational reports
• paychecks

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Designing Double-Entry Systems

• An accounting system must fit a particular
  organization.
• What must be taken into account in designing an
  accounting system?
• the nature and purpose of the organization
• its structural and functional characteristics
• its physical layout, products, and services
• the personnel who operate the system

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Designing Double-Entry Systems
Hierarchical Model of an Accounting System
Financial Statements
Chart of Accounts
Cycles Revenue Expenditure Production
Sales
Purchasing
Inventory
Application Systems
Payroll
Property
Accounts Receivable
Standard Journal Entries
Identify accounts affected by each application
system
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Designing Double-Entry Systems
Hierarchical Model of an Accounting System
Financial Statements
Chart of Accounts
Cycles Finance Financial Reporting
Cash
General Ledger
Application Systems
Consolidation
Standard Journal Entries
Identify accounts affected by each application
system
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Designing Double-Entry Systems

• What are the four stages involved in the design
  of an accounting system?
• Design a rough classification of accounts, or
  chart of accounts, and related financial
  statements and reports.
• Review this with management and operating
  personnel.

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Designing Double-Entry Systems

• Finalize statements, chart of accounts, and other
  reports.
• Prepare a plan of journalizing and design the
  necessary business papers and procedures to
  implement and operate the system.

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Designing Double-Entry Systems

• The chart of accounts is a listing of all asset,
  liability, revenue, expense, and equity accounts
  used in an accounting system.
• It is used to achieve an organizations
  objectives for financial reporting and control.

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Designing Double-Entry Systems

• A plan for journalizing and posting transactions
  involves several steps.
• Step 1 Analyze the natures of activities within
  the four basic transaction cycles.
• Revenue cycle
• Expenditure cycle
• Finance cycle
• Production cycle

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Designing Double-Entry Systems

• It is common to identify a fifth major
  transaction cycle to group accounts that are
  not directly affected by transactional activity.
• The financial reporting cycle does not process
  transactions involving external parties.

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Designing Double-Entry Systems

• Step 2 Group activities within each major
  transaction cycle into application systems.
• An application system processes a logically
  related set of transactions.
• Step 3 Develop a complete set of standard or
  recurring journal entries.

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Designing Double-Entry Systems

• What are standard journal entries?
• They are pro forma or hypothetical entries that
  are expected to occur in the normal operation of
  the system.
• They should indicate three items.
• The accounts affected by the entry
• The source of the entry
• The date or period of the entry

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Designing Double-Entry Systems
Journal and Journal-Entry Relationship
Sales Journal Page 1
Debits Credits Accounts
Receivable
Sales Date Reference Customers Other Class 1
Class 2 Services Tax Number
120 121 511 512 520
550 Standard
Journal Entry No.
15 Monthly DR. 120 Accounts
ReceivableCustomers DR. 121 Accounts
ReceivableOthers CR. 511 SalesClass 1 CR.
512 SalesClass 2 CR. 520 SalesServices CR.
550 SalesTax
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Designing Double-Entry Systems

• The flow of processing in a manual accounting
  system is from source documents to journals,
  journals to ledgers, and from ledgers to
  financial statements.
• Multiple transaction techniques become essential
  as the volume of transactions grows.

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Designing Double-Entry Systems

• What is a one-write system?
• It is a device that both posts a transaction and
  journalizes it in the same operation.
• A writing board is designed to allow simultaneous
  recording on several documents arranged and held
  on a special board.

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Designing Double-Entry Systems

• What is ledgerless bookkeeping?
• It is a form of processing in which source
  documents are sorted and filed rather than posted
  to ledgers.
• The file of source documents replaces a separate
  ledger.

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Designing Double-Entry Systems

• Accounts receivable and accounts payable systems
  are typically best suited for ledgerless
  bookkeeping applications.
• Ledgerless bookkeeping systems have less
  redundancy, and therefore less inherent control.

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Designing Double-Entry Systems

• When computers are used to process transactions,
  two different modes of processing accounting
  transactions are possible.
• Batch processing
• Direct processing

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Designing Double-Entry Systems

• Batch processing is a form of processing in
  which batches of transactions are accumulated and
  processed as a group.
• Direct processing is a form of processing in
  which individual transactions are processed
  separately.

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Designing Double-Entry Systems

• What is data validation?
• It is the process of reviewing transaction
  details for accuracy and completeness during
  input.

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Designing Double-Entry Systems

• The basic double-entry accounting model contains
  just three accounts assets, liabilities, and
  equity.
• Block coding is a way to organize a chart of
  accounts.
• It sets aside a block or group of sequential
  account numbers for each major group of accounts.

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Form Design and Records Retention Considerations

• Accounting-related forms and papers serve several
  functions.
• What are these functions?
• They serve as a physical medium to store and
  transmit data.
• They transmit authority and responsibility.
• They assist employees by indicating what data
  should be recorded.

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Form Design and Records Retention Considerations

• The fundamental consideration in form design is
  the user.
• Concerning paper forms, optional design features
  such as multiple colors, prenumbering, and rigid
  specifications for size and quality of the paper
  stock are often desirable.

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Form Design and Records Retention Considerations

• Records retention requirements must be considered
  in the design of an accounting system.
• Various government and tax regulations set
  specific guidelines and legal requirements over
  records retention.

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Form Design and Records Retention Considerations

• Records retention must also be considered from
  the internal viewpoint of information storage and
  usage.