accounting information systems chapter 6 horngren ♦ harrison ♦ bamber ♦ best ♦ fraser ♦...

Accounting Information

SystemsChapter

HORNGREN ♦ HARRISON ♦ BAMBER ♦ BEST ♦ FRASER ♦ WILLETT

6 - 2Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education AustraliaHorngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia

Objectives

1. Describe the features of an effective accounting information system.

2. Understand how computerised and manual accounting systems work.

3. Understand how spreadsheets are used in accounting

4. Use the sales journal, the cash receipts journal and the accounts receivable subsidiary ledger

5. Use the purchases journal, the cash payments journal and the accounts payable subsidiary ledger

Describe the features of

an effective accounting

information system.

Objective 1

ControlControl

ComparabilityComparability

Flexibility Flexibility

Cost/benefit relationshipCost/benefit relationship

Basic Features

Internal controls are the methods and procedures used to authorise transactions and safeguard assets.

Comparability means that the system works smoothly with operations, personnel, and the organisational structure.

Basic Features

Flexibility relates to the system’s ability to accommodate changes in the organisation.

A cost/benefit relationship indicates that the cost of controls do not exceed their value to the organisation.

CompanyPersonnelCompanyPersonnel

HardwareHardware

SoftwareSoftware

Computerised Accounting System

Hardware is the electronic equipment that makes up a computer system.

Software is a system of instructions that drive the computer to perform various functions.

Properly trained personnel are critical to the successful operations of the system.

Objective 2

Understand how bothcomputerised and manualaccounting systems work.

ProcessingProcessing

InputInput (Source documents)

(Financialstatements)

OutputOutput

Three Stages ofData Processing

entered,edited

printed topaper,screen

ACCOUNTING RECORDS

Journals,Ledgers,

Other records

SOFTWAREPROCESSING

PERSONNELinput transactions, request

reports, protect records

REPORTSDATAINPUT OUTPUT

posted accessed forreports

HARDWARE

Designing an Accounting System

Design of the accounting system begins with the chart of accounts.

The chart of accounts lists all accounts and their account number in the ledger.

Menu-Driven Accounting System

Computer systems are organised by function or task.

Computer systems usually have a choice of processing options on a “menu.”

Menu-Driven Accounting System

General Receivables Payables Payroll Reports

Posting

Account Maintenance

COMPUTERISEDACCOUNTING

SYSTEM

Use arrow keys to make choice.

Press <return> to access choice.

Press F7 <escape> to leave menu.

Inventory

Closing

Preparing Accounting Reports

TrialBalance

FinancialStatements

AccountsReceivable Detail

AccountsPayable Detail

Daily CashReport

Statement of Financial Performance

Statement of Financial Position

Statement of Owners’ Equity

Statement of Cash Flows

Use arrow keys to make choice.

Press <return> to access choice.

Press F7 <escape> to leave menu.

REPORTS

Objective 3

Understand how spreadsheets

are used in accounting.

Integrated Accounting Systems

Computerised accounting systems are organised by modules.

These modules are separate but integrated units.

A sales transaction entry will update two modules:

1 Accounts Receivable / Sales2 Inventory / Cost of Goods Sold

Ana’s Boutique Example

Ana wants to budget for expected cash collections in the month of May.

Past experience indicates that 50% of credit sales are collected in the month of sales and 50% the following month.

May sales were $250,000. $50,000 were cash sales. April credit sales amounted to

$120,000. What are the expected cash collections

during the month of May?

May cash sales $ 50,000

Collection of April’s credit sales 60,000

Collection of May’s credit sales 100,000

Total $210,000

Spreadsheets make calculations like these easier.

Spreadsheet Example

Statement of Financial Performance:

Revenues 150,000

Expenses 90,000

Net Profit

Row: 1

Column: A B CFormula for B4: =B2–B3

Cursor is on cell B4.

60,000

Objective 4

Use the sales journal,the cash receipts

journal,and the accounts

receivablesubsidiary ledger.

Special Journals

What are special journals? They are accounting journals used to

record one specific type of transaction. What are some examples?

Sales Cash Receipts Payroll

Cash PaymentsPurchases

Sales Journal Page 5Invoice Account Account Post

Date Number Debited Number Ref. Amount

Jan. 2 201 Joe Co. 120-122 600.00

Jan. 2 202 May Co. 120-033 700.00

Jan. 2 203 XYZ Co. 120-111 900.00

TOTAL 2,200.00

120 / 410

Using the Sales Journal

Sales Journal Page 5Invoice Account Account Post

Jan. 2 203 XYZ Co. 120 -111 900.00

TOTAL 2,200.00

120 / 410

General Ledger Account: Accounts Receivable Account Number: 120 Date Description Post Ref Debit Credit Balance Jan. 2 Sales SJ5 2,200 2,200

Sales Journal Page 5

Invoice Account Account Post

Jan. 2 203 XYZ Co. 120-111 900.00

TOTAL 2,200.00

120/410

General Ledger Account: Credit Sales Account Number: 410 Date Description Post Ref Debit Credit Balance Jan. 2Sales SJ5 2,200 2,200

Subsidiary Ledger

A subsidiary ledger is often used to provide details on individual balances of...

– customers (accounts receivable) and...– suppliers (accounts payable).

A Control Account

What is a control account? It is the general ledger account. It equals the sum of the individual

account balances in a subsidiary ledger.

Debits Credits

Sales Accounts Sales Date Cash Discounts Receivable Revenue Jan. 2 200 200

11 882 18 900

30 800 800

31 1,882 18 900 1,000 (101) (420) (112) (410)

Cash Receipts Journal — Page 6

Accounts Receivable

XYZ Company Subsidiary LedgerJrnl.

Date Ref. Debit Credit BalanceJan. 2 S.5 900 900 11 CR.6 900 -0-

General Ledger

Jrnl. DebitDate Ref. Debit Credit BalanceJan. 31 CR.6 1,882

Cash No. 101

Cash Receipts Journal

Additional columns are provided to enter other account descriptions and amounts.

Cash receipts amounts affecting subsidiary ledger accounts are posted daily to keep customer balances up to date.

At month end, foot and crossfoot the journal and post to the general ledger.

Objective 5

Use the purchase journal, thecash payments journal,

and the accounts payablesubsidiary ledger.

Purchases Journal

This is designed to account for all purchases of inventory, supplies, services, and other assets on account.

Purchases Journal

Cash purchases are recorded in the cash payments journal.

At month end the journal is footed (totaled) and crossfooted.

Posting to the general ledger is similar to posting from sales and cash receipts journals.

Cash Payments Journal

Most payments are by check and are recorded in the cash payments journal.

The cash payments journal is also called:

– cheque register– cash disbursements journal

Cash Payments Journal

This has columns for:– Date– Cheque number (or transfer number)– Account Debited – Debits;

– Other Accounts, Accounts payable

– Credits– Discounts Received, Cash at Bank

General Journal

Special journals save much time in recording repetitive transactions and posting to the ledger.

However, some transactions do not fit into any of the special journals.

General Journal

Every accounting system needs a general journal.

What entries are recorded in the general journal?

– depreciation– expiration of prepaid insurance – accrual of salaries payable – adjusting and closing entries

General Journal

Many companies record sales returns and allowances and purchase returns in the general journal.

A credit note (or credit memo) is the document issued by the seller for a credit to a customer’s Accounts Receivable.

Purchase Returns and Allowances

A debit note or debit memorandum is the business document that states that the buyer no longer owes the seller for the amount of the returned purchases.

The buyer debits the Accounts Payable to the seller and credits Inventory.

Balancing the Ledgers

At the end of the accounting period: Total debits and credits of account

balances in the general ledger are equal.

Control account balances are equal to the sum of the appropriate subsidiary ledger accounts.

End of Chapter 6

accounting information systems chapter 6 horngren ♦ harrison ♦ bamber ♦ best ♦ fraser ♦...

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reports hardware slide

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