Transcript Overview of Business Processes

Acct 316 Acct 316 Acct 316 Acct 316 Acct 316 Acct 316
Chapter
2
Overview of
Business Processes
Acct 316 Acct 316 Acct 316
UAA – ACCT 316
Accounting Information Systems
Dr. Fred Barbee
Learning Objectives
Acct 316 Acct 316 Acct 316
1. Explain the three basic
functions performed by an
accounting information system
(AIS).
2. Describe the documents and
procedures used in an AIS to
collect and process transaction
data.
Learning Objectives
Acct 316 Acct 316 Acct 316
3. Discuss the types of
information that can be
provided by an AIS.
4. Describe the basic internal
control objectives of an AIS
and explain how they are
accomplished.
Meet the players at S&S
Hi, I’m Susan. Pleased
to meet you!
Acct 316 Acct 316 Acct 316
I’m Scott and I’m
pleased to meet ya too!
Meet the players . . .
Scott, our grand opening is
only two weeks away!
Acct 316 Acct 316 Acct 316
Yeah, it’s a good thing we
hired an accountant!
Meet the Accountant . . .
Hi folks, Ashton
Fleming here!
Among other things, I’m responsible for creating the
accounting information system for S&S.
WOW! I have a lot
of questions!
Where do I start?
How am I going to
organize things?
What information
does S&S need?
How do I organize all the
data that will be
collected?
How am I going to collect and process
data about all the types of transactions
that S&S will engage in?
How should I design the AIS so that
the information is reliable and accurate?
Acct 316 Acct 316 Acct 316 Acct 316 Acct 316 Acct 316
Acct 316 Acct 316 Acct 316
The Three Basic Functions
of an Accounting Information
System
Basic AIS Functions
Collect and store data
Acct 316 Acct 316 Acct 316
Provide information useful for
decision making
Provide adequate controls
Detour . . .
Transaction Cycles
Transaction Cycles
Acct 316 Acct 316 Acct 316
A transaction processing cycle
combines one or more types of
transactions having related
features or similar objectives.
Transaction Cycles
Acct 316 Acct 316 Acct 316
A transaction cycle consists
of a set of transactions
leading to the recognition of a
major economic event on the
financial statements
Transaction Cycles
Acct 316 Acct 316 Acct 316
It is through the study of
transaction cycles that we gain a
clear view of a firm’s processing
framework. (See Figure 2-1 p. 25)
Let’s . . .
At Something Familiar
Cost Flows in a Manufacturing Firm
Manufacturing Costs
Balance Sheet
Unused
DM
DL
Used
WIP
DM Inv.
Unfinished
MOH
FG Inv.
Sales
-
Income
Statement
WIP Inv.
COGS
=
Gross Margin
-
S&A
=
Net Income
Period
Costs
Customers
Materials
Plant
Cash
Fin.
Goods
Cash
Labor
EXPENDITURE
CYCLE
CONVERSION
CYCLE
REVENUE
CYCLE
Subsystems
Purchasing & A/P
Cash Disbursements
Payroll
Subsystems
Production Planning
and Control
Cost Accounting
Subsystems
Fin. Goods
Cash
Sales Order Processing
and Cash Receipts
Let’s . . .
At Another Approach
Merchandising
Shipments
Sale of
Merchandise
Cash Receipts
GL &
Fin Rpt
Cycle
Purchase of
Mdse, &
Labor, Etc.
PP&E,
Investments
Cash
Disbursements
Merchandise
Receipts
The Revenue Cycle
47
Merchandising
Shipments
Sale of
Merchandise
Cash Receipts
GL &
The Revenue
Cycle PP&E,
Fin Rpt
Investments
Spans activities
from
“Sale”
to
Cycle
“Receipt of Cash
Purchase of
Mdse, &
Labor, Etc.
Key
Cash
Transactions:Disbursements
Merchandise
Sales
Receipts
Cash Receipts
The Revenue Cycle
Includes transactions surrounding the
recognition of revenue.
Acct 316 Acct 316 Acct 316
Sales
Accounts Receivable
Inventory (some)
General Ledger (some)
The Revenue Cycle
Capturing and recording of
customer orders;
Acct 316 Acct 316 Acct 316
Shipment of the goods and the
recording of the cost of goods
sold.
The Revenue Cycle.
Acct 316 Acct 316 Acct 316
The billing process and the
recording of sales and accounts
receivable;
The capturing and recording of
cash receipts.
The Expenditure Cycle
47
The Expenditure Cycle
Spans activities
from the “need” for
Merchandising
Shipmentsto “payment” for
resources/services
that resource/service
Sale of
Merchandise
Cash Receipts
Key Transactions:
GL &
Purchases
PP&E,
Fin Rpt
Investments
Cash Disbursements
Cycle
Purchase of
Mdse, &
Labor, Etc.
Cash
Disbursements
Merchandise
Receipts
The Expenditure Cycle
Includes the transactions surrounding
the recognition of expenditures.
Acct 316 Acct 316 Acct 316

Purchases


Accounts Payable


Cash
Disbursements
Inventory (some)
General Ledger
(some)
The Expenditure Cycle
The preparation and recording of
purchase orders;
Acct 316 Acct 316 Acct 316
The receipt of goods and the
recording of the cost of inventory;
The receipt of vendor invoices and
the recording of accounts payable;
The Expenditure Cycle
The preparation and recording of
cash disbursements.
Acct 316 Acct 316 Acct 316
The cycle also includes the
preparation of employee paychecks
and the recording of payroll
activities.
Back to . . .
Basic AIS Functions
AIS Function
Up
And personal
Collect and store data about the
organization’s business activities
and transactions efficiently and
effectively
AIS Function #1 – Up Close
Capture transaction data on
source documents.
Acct 316 Acct 316 Acct 316
Record transaction data in
journals, which present a
chronological record of what
occurred.
AIS Function #1 – Up Close
Acct 316 Acct 316 Acct 316
Post data from journals to
ledgers, which sort data by
account type.
Data Processing Cycle
The resources
affected by that
event.
The agents who
participate in that
event.
The Event of
Interest
Data Files
Input
Output
Process
Feedback Loop
Control
Sensor
Capture Transaction Data on
Source Documents
Purchase Order
Sales Order
Acct 316 Acct 316 Acct 316
O
Source documents
are special forms
used to capture
transaction data.
Sales Invoice
Capture Transaction Data on
Source Documents
Acct 316 Acct 316 Acct 316
Control over data collection is
improved by prenumbering each
source document.
Accuracy and efficiency in
recording transaction data can
be further improved if source
documents are properly designed.
System - Inputs
Input documents can be
categorized into three types . . .
Acct 316 Acct 316 Acct 316
Source Documents
Product Documents
Turn-around Documents
Creation of a Source Document
Order
Data
Collectio
n
Source 11
Document
2
3
Sales
Order
Customer
Sales
System
A Product Document
Order
Data
Collectio
n
Source 1
Document
2
3
Sales
Order
Customer
Bill
Remittance
Advice
Product
Document
Sales
System
A Turnaround Document
Data
Collection
Order
Source 1
Document
2
3
Sales
Order
Customer
Check 1
Bill
Remittance
Advice
Product Document
1
Remittance Advice
Sales
System
Cash Receipts
System
Common Source Documents & Functions
Source Document
Function
Sales Order
Record Customer Order
Delivery Ticket
Record Delivery to Customer
Remittance
Advice
Receive Cash
Deposit Slip
Record Amounts Deposited
Credit Memo
Support Adjustments to
Customer Accounts
Revenue Cycle
Common Source Documents & Functions
Source Document
Function
Purchase
Requisition
Request that purchasing
department order goods.
Purchase Order
Request goods from vendors.
Receiving Report
Record receipt of
merchandise.
Check
Pay for items.
Expenditure Cycle
Common Source Documents & Functions
Source Document
W4 forms
Time cards
Job time tickets
Function
Collect employee
withholding data.
Record time worked by
employees.
Record time spent on
specific jobs.
Human Resource Cycle
Common Source Documents & Functions
General Ledger and Reporting System
Record entry posted to
Journal Voucher
general ledger.
General Ledger & Reporting System
Data Files
Input
Output
Process
Feedback Loop
Control
Sensor
Data Processing
Acct 316 Acct 316 Acct 316
Updating previously stored
information about the resources
affected by the event and agents
who participated in the activity.
Data Processing
Acct 316 Acct 316 Acct 316
Periodic updating of the data
stored is referred to as batch
processing.
Immediate updating as each
transaction occurs is referred to
as on-line, real-time processing.
What is an Audit Trail?
Acct 316 Acct 316 Acct 316
An audit trail provides a
means to check the accuracy
and validity of ledger
postings.
Data Files
Input
Output
Process
Feedback Loop
Control
Sensor
Storage . . .
Acct 316 Acct 316 Acct 316
Ledgers and files provide storage
of data in both manual and
computerized systems.
The General Ledger
The Accounts Payable Ledger
The Accounts Receivable Ledger
Storage . . .
A ledger is . . .
Acct 316 Acct 316 Acct 316
. . . a book of financial accounts,
which reflect the financial
effects of the firm’s
transactions after
they are posted from
the various journals.
Flow of Information From the Economic
Event to the General Ledger
Order
Sales
Order
Journal
Entry
Sales
Journal
Customer
Post
AR Sub
Ledger
Post
General
Ledger
Periodically reconcile
subsidiary ledger to General
Ledger
Storage . . .
A file is an organized collection
of data.
Acct 316 Acct 316 Acct 316
Files may be
Manual
Computer (magnetic)
Storage . . .
A transaction file is . . .
Acct 316 Acct 316 Acct 316
. . . a collection of transaction
input data - normally
temporary in nature.
Storage . . .
A master file is . . .
Acct 316 Acct 316 Acct 316
. . . a collection of data that are
of a more permanent or
continuing interest
Storage . . .
A reference (table) file . . .
Acct 316 Acct 316 Acct 316
. . . contains data that are
necessary to support data
processing
AIS Function
Up
And personal
To provide management with
information useful for decision
making.
AIS Function #2 – Up
Close
Acct 316 Acct 316 Acct 316
This information is provided
in the form of reports that
fall into two main categories:
financial statements
managerial reports
AIS Function
Up
And personal
Provide adequate controls to
ensure that data are recorded
and processed accurately
AIS Function #3 – Up Close
Acct 316 Acct 316 Acct 316
Ensure that the information
produced by the system is
reliable.
Safeguard organizational assets.
AIS Function #3 – Up Close
Acct 316 Acct 316 Acct 316
Ensure that business activities
are performed efficiently and in
accordance with management’s
objectives.
Internal Control Considerations
What are two important methods for
accomplishing these objectives?
Acct 316 Acct 316 Acct 316
Provide for adequate documentation
of all business activities.
Design the AIS for effective
segregation of duties.
Adequate Documentation
Acct 316 Acct 316 Acct 316
Documentation allows
management to verify that
assigned responsibilities were
completed correctly.
What is Segregation of Duties?
Acct 316 Acct 316 Acct 316
Segregation of duties refers to
dividing responsibility for
different portions of a
transaction among several people.
What is Segregation of Duties?
What functions should be
performed by different people?
Acct 316 Acct 316 Acct 316
–
authorizing transactions
–
recording transactions
–
maintaining custody of assets
Segregation of Duties
Authorization
Recording
Custody
Types of Internal Controls
Preventive
Detective
Corrective