Accounting Information Systems Rakesh S.

Pandya

Objective 1 Describe an effective accounting information system.

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Basic Features
Control
Compatibility Flexibility Cost/benefit relationship
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Basic Features
Internal controls are the methods

and procedures used to authorize transactions and safeguard assets.

Compatibility means that the system

works smoothly with operations, personnel, and the organizational structure.

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Basic Features
Flexibility relates to the systems

ability to accommodate changes in the organization.

A cost/benefit relationship indicates

that the cost of controls do not exceed their value to the organization.
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Computerized Accounting System

Hardware

Software Company Personnel

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Computerized 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 both computerized and manual accounting systems.

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Three Stages of Data Processing

(Source documents) Input

Processing (Financial statements)

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Output
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Computerized Accounting System

ACCOUNTING RECORDS
PERSONNEL input transactions, request reports, protect records

Journals, Ledgers, Other records

posted

accessed for reports

HARDWARE INPUT DATA entered, edited

SOFTWARE PROCESSING

printed to paper, screen

OUTPUT REPORTS
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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 organized 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

Inventory Payroll

Reports Utilities

Posting Account Maintenance Closing

Use arrow keys to make choice. Press <return> to access choice. Press F7 <escape> to leave menu.

COMPUTERIZED ACCOUNTING SYSTEM

MAIN

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Preparing Accounting Reports

Trial Financial Accounts Accounts Daily Cash Balance Statements Receivable Detail Payable Detail Report

Income Statement Balance Sheet

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.
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REPORTS

Objective 3 Understand how spreadsheets are used in accounting.

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Integrated Accounting Systems

Computerized accounting systems are

organized by modules. These modules are separate but integrated units. A sales transaction entry will update two modules: 1 Accounts Receivable/Sales 2 Inventory/Cost of Goods Sold
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Anas 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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Anas 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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Anas Boutique Example

May cash sales

$ 50,000 Collection of Aprils credit sales 60,000 Collection of Mays credit sales 100,000 Total $210,000 Spreadsheets make computations like these easier.
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Spreadsheet Example
Formula for B4: =B2B3 Column: A Row: 1 Income Statement: 2 Revenues 3 Expenses 4 Net Income 5 B C

100,000 60,000

40,000

Cursor is on cell B4.

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Objective 4 Use the sales journal, the cash receipts journal, and the accounts receivable 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

Purchases

Cash Disbursements
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Using the Sales Journal

Page 5

Sales Journal

Invoice 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 23 Accounting Information System - 1 (RS Pandya)

Using the Sales Journal

Page 5 Sales Journal
Invoice Account Account Post Date Number Debited Number Ref. Amount Jan. 2 203 XYZ Co. 120-111 900.00 TOTAL 2,200.00 General Ledger Account: Accounts Receivable Account Number: 120 120/410 Date Description Post Ref Debit Credit Balance Jan. 2 Sales SJ5 2,200 2,200
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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. 2 Sales 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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Cash Receipts Journal Page 6

Debits
Sales Date Cash Revenue 11 30 31 Sales Accounts

Credits

Discounts Receivable Jan. 2 200 200 882 18 900 800 1,882 18 900

800 1,000
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Accounts Receivable

XYZ Company Jrnl. Date Ref. Jan. 2 S.5 11 CR.6

Subsidiary Ledger
Debit 900 Credit 900 Balance 900 -0-

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General Ledger

Cash Date Jan. 31

No. 101

Jrnl. Ref. CR.6

Debit 1,882

Credit

Debit Balance

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Cash Receipts Journal

Additional columns are provided to

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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, the cash disbursements journal, and the accounts payable 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 disbursements journal. At month end the journal is footed and crossfooted. Posting to the general ledger is similar to posting from sales and cash receipts journals.
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Cash Disbursements Journal

Most payments are by check and are

recorded in the cash disbursements journal. The cash disbursements journal is also called: check register cash payments journal
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Cash Disbursements Journal

This has columns for :

date
check number

payee
cash amount (credit) accounts payable (debit) description and amount of other debits

and credits
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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 memorandum is the document issued by the seller for a credit to a customers Accounts Receivable.

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Purchase Returns and Allowances

A 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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Thank you?