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6 - 1©2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber

Accounting Information Systems

Chapter 6


Describe the features ofan effective accounting

information system.

Objective 1


Control

Comparability

Flexibility

Cost/benefit relationship

Basic Features


Basic Features

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

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


Basic Features

Flexibility relates to the system’s 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.


CompanyPersonnel

Hardware

Software

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.


Objective 2

Understand how bothcomputerized and manualaccounting systems work.


Processing

Input (Source documents)

(Financialstatements)Output

Three Stages ofData Processing



entered,edited

printed topaper,screen

ACCOUNTING RECORDSJournals,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 organized 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 MaintenanceCOMPUTERIZED

ACCOUNTINGSYSTEM

Use arrow keys to make choice.

Press <return> to access choice.

Press F7 <escape> to leave menu. MAIN

Inventory Utilities

Closing


Preparing Accounting Reports

TrialBalance

FinancialStatements

AccountsReceivable Detail

AccountsPayable Detail

Daily CashReport

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. REPORTS


Objective 3

Understand how spreadsheetsare used in accounting.


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/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 computations like these

easier.


Spreadsheet Example

Income Statement:

Revenues 100,000

Expenses 60,000

Net Income

Row: 1

2

3

4

5

Column: A B CFormula for B4: =B2–B3

Cursor is on cell B4.

40,000


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 DisbursementsPurchases


Sales Journal Page 5Invoice Account Account Post

Date Number Debited Number Ref. AmountJan. 2 201 Joe Co. 120-122 600.00Jan. 2 202 May Co. 120-033 700.00Jan. 2 203 XYZ Co. 120-111 900.00

TOTAL 2,200.00 120/410

Using the Sales Journal



DateNumberDebited NumberRef. AmountJan. 2 203 XYZ Co. 120-111 900.00TOTAL 2,200.00

120/410

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





DateNumberDebited NumberRef. AmountJan. 2 203 XYZ Co. 120-111 900.00TOTAL 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


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 disbursements 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 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.


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


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


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 memorandum is the document issued by the seller for a credit to a customer’s Accounts Receivable.


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.


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

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