Transcript Accounting First

Chapter 4
Accounting Information Systems and
Business Processes: Part I
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Introduction
Business Process Fundamentals
Collecting and Reporting Accounting
Information
Core Business Processes
Introduction
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AISs depend on the flow of data
through various organizational
subsystems.
Effective processing systems ensure
capture of appropriate data and
accurate information reporting.
Transaction processing cycles
organize transactions related to an
organization’s business processes.
Business Process Fundamentals
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The accounting cycle begins when
accounting personnel analyze a transaction
from a source document.
A source document is a piece of paper or
electronic form that records a business
activity such as the purchase or sale of
goods.
Journals
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Accounting personnel record transactions in a
journal.
The journal is a chronological record of business
events by account.
A journal may be a general journal or a special
journal.
– A general journal allows any type of accounting
transaction to be recorded.
– A special journal captures specific types of
transactions.
Ledgers
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A ledger may be a general ledger or a subsidiary
ledger.
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A general ledger is a collection of detailed monetary
information about an organization’s assets, liabilities,
revenues, and expenses.
A subsidiary ledger contains detailed records pertaining to a
particular account in the general ledger.
Trial Balances
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Once an AIS records journal entries and posts them
to the general ledger, the system can create a trial
balance.
Three end of period trial balances are needed:
– A preadjusting trial balance after all entries have
been posted;
– An adjusted trial balance after adjustments have
been recorded and posted;
– A postclosing trial balance after temporary
accounts have closing entries have been
recorded and posted.
Financial Statements
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Financial statements are the primary output of
a financial accounting system.
These statements include:
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Income Statement
Statement of Owners Equity
Balance Sheet
Statement of Cash Flows
Coding Systems
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AISs depend on coding to record, store, classify and
retrieve financial data.
Computer systems most often use numeric or
alphanumeric codes for processing accounting
transactions.
Purposes of coding:
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Uniquely identify transactions
and accounts
Compress data
Aid in classification process
Convey special meanings
Types of Codes
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Mnemonic Codes give visible clues concerning the objects
they represent.
Sequence Codes assign numbers or letters in consecutive
order.
Block Codes are sequential codes in which specific blocks of
numbers are reserved for particular uses.
Group Codes reveal two or more
dimensions or facets pertaining to
an
object.
Design Considerations in Coding
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Codes should serve some useful purpose.
Codes should be consistent.
Codes should be standardized throughout the
organization.
Codes should plan for future expansion.
Collecting and Reporting Accounting
Information
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Design of an effective AIS begins by
considering outputs from the system.
Outputs of an AIS include:
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reports to management
reports to investors and creditors
files that retain transaction data
files that retain current
data about accounts
Considerations in Report Design
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Reports that only list exceptional conditions are
exception reports.
Reports should be useful to managerial decisionmaking without creating information overload.
Format should be convenient, contain fundamental
identification, and be consistent.
Core Business Processes
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An AIS collects and reports data related to an
organization’s business processes.
An economic event is an economic activity that
involves an increase and/or decrease in dollar
amounts in the financial statements.
Since economic events impact financial statements,
they are often called accounting transactions.
A business event is one that does not impact financial
statements, but is nevertheless important to the
business.
The Sales Process
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The sales process begins with a customer order for
goods or services and ends with the collection of
cash from the customer.
The primary objective is to achieve
timely and efficient revenue collection.
An organization that generates revenues,
but fails to collect these revenues on a timely basis,
may find itself in a position where it cannot pay its
bills.
Objectives of the Sales Process
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Tracking sales of goods and/or services to
customers.
Filling customer orders.
Billing customers for goods and services
Collecting payment for goods and services.
Forecasting sales and cash receipts.
Inputs to the Sales Process
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Sales Order - prenumbered and usually prepared in
multiple copies; used to prepare sales invoice
Sales Invoice - prepared after shipment of goods or
providing of a service
Remittance Advice - serve as source document for
credits to accounts receivable
Shipping Notice - warehouse prepares after goods are
released for shipment
Debit/Credit memo - issued for sales returns and
allowances; debit memos increase amount customer
owes
Outputs of the Sales Process
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Financial Statement Information
Customer Billing Statement - includes customer
account activity such as sales, returns, and cash
receipts
Accounts Receivable Aging Report - contains data
concerning the status of open balances of all active
credit customers arranging the overdue
amounts by time periods
Outputs of the Sales Process
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Bad Debt Report - customer accounts written off.
Cash Receipts Forecast - all data gathered from source
documents in revenue transactions are inputs to this
forecast.
Customer Listing - shows customer codes, contacts,
shipping and billing addresses, credit limits, and billing
terms.
Sales Analysis Reports - captures detailed data about
each sale in order to monitor sales activities and plan
production and marketing efforts.
Most Important Control of the
Credit Sales Process
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Credit check must be performed by someone
other than the salesperson.
Credit check may even be automated.
Check for credit approval, documentation,
credit limit and current state of balances.
Most important Control in the
Cash Sales Process
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Most important control in a Cash Sale is to
ensure that the transaction (event) is
originally recorded.
May use scanners or other mechanical
devices.
Most important is customer audit.
What are some examples of Customer Audit?
The Purchasing Process
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The purchasing process begins with a
request for goods or services and ends with
the payment of cash to the vendor.
Purchase may be for either goods
or services and for cash or on
credit.
Objectives of the Purchasing Process
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Tracking purchases of goods and/or services from
vendors
Tracking amounts owed
Maintaining vendor records
Controlling inventory
Making timely and accurate vendor payments
Forecasting purchases and cash outflows
Inputs to the
Purchasing Process
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Purchase Requisition - shows items requested by stores
and may indicate the name of the vendor
Purchase Order - based on purchase requisition but also
includes vendor information and payment terms
Vendor Invoice - includes items shipped by vendors,
prices, shipping terms and discounts provided
Receiving Report - reflects the count and condition of
received goods
Bill of lading – accompanies the goods sent
Packing slip – included in the merchandise package
Debit/Credit Memoranda - debits or credits accounts
payable
Outputs of the Purchasing Process
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Financial Statement Information
Vendor Checks - should be supported by a voucher and
signed by a person designated by management
Check Register - lists all checks issued for a particular
period
Discrepancy Reports - used to identify any differences
among quantities on the purchase order, receiving report,
and vendor invoice
Cash Requirements Forecast - predicts future payments
and payment dates by reference to outstanding purchase
order, unbilled receiving reports and vendor invoices
Most Important Control in the
Purchasing Process
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The most important control of the Purchasing
process is to control the relationship between
the purchasing agent and the vendor.
This is done by using a Master Vendor List.
Request for Bid (RFB) or Request for
Proposal (RFP).