Download - Accounting Information Systems Chapter 6 HORNGREN ♦ HARRISON ♦ BAMBER ♦ BEST ♦ FRASER ♦ WILLETT
Accounting Information
SystemsChapter
6
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
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Describe the features of
an effective accounting
information system.
Objective 1
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ControlControl
ComparabilityComparability
Flexibility Flexibility
Cost/benefit relationshipCost/benefit relationship
Basic Features
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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.
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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.
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CompanyPersonnelCompanyPersonnel
HardwareHardware
SoftwareSoftware
Computerised Accounting System
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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.
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Objective 2
Understand how bothcomputerised and manualaccounting systems work.
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ProcessingProcessing
InputInput (Source documents)
(Financialstatements)
OutputOutput
Three Stages ofData Processing
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Computerised Accounting System
entered,edited
printed topaper,screen
ACCOUNTING RECORDS
Journals,Ledgers,
Other records
SOFTWAREPROCESSING
PERSONNELinput transactions, request
reports, protect records
REPORTSDATAINPUT OUTPUT
posted accessed forreports
HARDWARE
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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.
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Menu-Driven Accounting System
Computer systems are organised by function or task.
Computer systems usually have a choice of processing options on a “menu.”
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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.
MAIN
Inventory
Closing
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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
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Objective 3
Understand how spreadsheets
are used in accounting.
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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
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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.
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Ana’s Boutique Example
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?
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Ana’s Boutique Example
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.
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Spreadsheet Example
Statement of Financial Performance:
Revenues 150,000
Expenses 90,000
Net Profit
Row: 1
2
3
4
5
Column: A B CFormula for B4: =B2–B3
Cursor is on cell B4.
60,000
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Objective 4
Use the sales journal,the cash receipts
journal,and the accounts
receivablesubsidiary ledger.
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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
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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
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Sales Journal Page 5Invoice Account Account Post
Date Number Debited Number Ref. Amount
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
Using the Sales Journal
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Using the Sales Journal
Sales Journal Page 5
Invoice Account Account Post
Date Number Debited Number Ref. Amount
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
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Subsidiary Ledger
A subsidiary ledger is often used to provide details on individual balances of...
– customers (accounts receivable) and...– suppliers (accounts payable).
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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.
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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
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Accounts Receivable
XYZ Company Subsidiary LedgerJrnl.
Date Ref. Debit Credit BalanceJan. 2 S.5 900 900 11 CR.6 900 -0-
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General Ledger
Jrnl. DebitDate Ref. Debit Credit BalanceJan. 31 CR.6 1,882
Cash No. 101
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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.
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Objective 5
Use the purchase journal, thecash payments journal,
and the accounts payablesubsidiary ledger.
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Purchases Journal
This is designed to account for all purchases of inventory, supplies, services, and other assets on account.
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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.
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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
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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
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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.
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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
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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.
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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.
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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.
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End of Chapter 6