ACCOUNTING

INFORMATION SYSTEMS AND

BUSINESS PROCESS PART 1
Core Concepts of Accounting Information Systems
GERALD V. JADER

Chapter
7-1

BUSINESS PROCESS FUNDAMENTALS

Overview of the Financial Accounting Cycle
Journals
Ledgers
Trial Balances
Financial Statements

GERALD V. JADER

Chapter
7-2

JOURNALS
Chronological record of business events by account
General Journal

Records any type of accounting transaction

Special Journals

Captures specific types of transactions

GERALD V. JADER

Chapter
7-3

TYPES OF SPECIAL JOURNALS

Sales Journal

Record of credit sales transactions

Purchases Journal

Record of credit purchase transactions

Cash Receipts Journal

Record of transactions involving receipts of

cash

Cash Disbursements Journal

Record of transactions involving disbursements

of cash

GERALD V. JADER

Chapter
7-4

LEDGERS
General Ledger

Contains detailed monetary information

Includes the assets, liabilities, owners equity, revenues, and
expenses of the company

Chart of Accounts

Listing of all accounts used by the company

Provides organizational structure for the general ledger
Utilizes block coding structure

GERALD V. JADER

Chapter
7-5

TRIAL BALANCES
Listing of all accounts with the debit and credit balances
Timing of Preparation
After all journal entries are posted
Following the posting of adjusting entries
Following the posting of closing entries

GERALD V. JADER

Chapter
7-6

FINANCIAL STATEMENTS
Primary output of financial accounting system
Main Financial Statements

Income Statement
Balance Sheet
Statement of Owners Equity
Statement of Cash Flows

GERALD V. JADER

Chapter
7-7

STEPS IN THE ACCOUNTING CYCLE

GERALD V. JADER

Chapter
7-8

CODING SYSTEMS
Importance of Coding for AISs

Record, store, classify, and retrieve information

Utilize numeric and alphanumeric codes

Design Considerations

Must serve a useful purpose

Must be consistent
Plan for future expansion

GERALD V. JADER

Chapter
7-9

TYPES OF CODES
Mnemonic Codes

Helps user remember what they represent

Sequence Codes

Sequential set of numbers

Block Codes

Sequential codes
Blocks of numbers reserved for specific

Group Codes

Combine two or more subcodes

GERALD V. JADER

Chapter
7-10

BLOCK CODE EXAMPLE

GERALD V. JADER

Chapter
7-11

COLLECTING AND REPORTING

ACCOUNTING INFORMATION
Design Considerations

Should be effective
Expectations of outputs

Outputs of an AIS

Reports to management
Reports to investors and creditors
Files retaining transaction data
Files retaining current data about accounts

GERALD V. JADER

Chapter
7-12

DESIGNING REPORTS
Characteristics of Good Reports
Useful and convenient format
Easy to identify and consistent

Identification and Consistency

Include headings, page numbers, and dates
Emphasize consistency
Over time
Across departmental or divisional levels
With general accounting practice
GERALD V. JADER

Chapter
7-13

SOURCE DOCUMENTS
Manage flow of accounting data

Dictate type of data collected

Encourage completeness of data
Distributors of information
Establish authenticity of data

Usage today
Extensively used in AISs
Movement from paper to electronic format
GERALD V. JADER

Chapter
7-14

SAMPLE PURCHASE ORDER

GERALD V. JADER

Chapter
7-15

SAMPLE SALES INVOICE

GERALD V. JADER

Chapter
7-16

BUSINESS PROCESS
Definition
Collection of activities
Creates value for organization
AIS collects and reports data related to processes

Economic event
Impacts financial statements

Business event
Does not impact financial statements
GERALD V. JADER

Chapter
7-17

THE SALES PROCESS

Process
Begins with customer order
Ends with collection of cash

Primary Objectives of Sales Process

Process sales in a timely and efficient manner
Collect cash in a timely and efficient manner

GERALD V. JADER

Chapter
7-18

OBJECTIVES OF THE SALES

PROCESS
Tracking sales of goods and/or services to
customers
Filling customer orders
Maintaining customer records
Billing customers for goods and services
Collecting payment for goods and services
Forecasting sales and cash receipts

GERALD V. JADER

Chapter
7-19

DATA FLOW DIAGRAM OF

SALES PROCESS

GERALD V. JADER

Chapter
7-20

INPUTS TO THE SALES PROCESS

Sales Order
Created at time of sale
Used to prepare the sales invoice

Sales Invoice
Reflects information of the sale
Products purchased, price, terms of payment

Remittance Advice
May accompany payment
GERALD V. JADER

Chapter
7-21

INPUTS TO THE SALES PROCESS

Shipping Notices
Prepared when warehouse releases goods
Copy possibly included with goods
Additional copy sent to accounts receivable

Debit/Credit Memoranda
Denotes return of damaged goods
Identifies discrepancies about amount owed

GERALD V. JADER

Chapter
7-22

OUTPUTS OF THE SALES PROCESS

Financial Statements
Customer Billing Statement
Summarizes outstanding sales invoices
Total amount currently owed

Aging Report
Accounts receivable balances
Categorized based on time outstanding
GERALD V. JADER

Chapter
7-23

OUTPUTS OF THE SALES PROCESS

Bad Debt Report
Information on collection follow-up procedures
Helps manage overdue accounts

Cash Receipts Forecast

Source documents used as inputs
Prior payment experience and aging analysis aid
in preparation

GERALD V. JADER

Chapter
7-24

OUTPUTS OF THE SALES PROCESS

Approved Customer Listing Report
Identifies customers approved for sales
Includes customer information such as billing
address, credit limits, and billing terms

Sales Analysis Reports

Detailed information captured by AIS
Aid in decision-making process for production
planning and marketing efforts

GERALD V. JADER

Chapter
7-25

SALES PROCESS SUMMARY

GERALD V. JADER

Chapter
7-26

THE PURCHASING PROCESS

Process
Begins with request for goods/services
Ends with payment of cash

Primary Objectives of Purchasing Process

Purchase high-quality goods at best price
Pay vendors at the optimal time

GERALD V. JADER

Chapter
7-27

OBJECTIVES OF THE PURCHASING

PROCESS
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

GERALD V. JADER

Chapter
7-28

DATA FLOW DIAGRAM OF

PURCHASING PROCESS

GERALD V. JADER

Chapter
7-29

INPUTS TO THE PURCHASING PROCESS

Purchase Requisition
Identifies item requested
May indicate name of vendor

Purchase Order
Based on Purchase Requisition
Includes vendor information

Vendor Invoice
Includes prices, shipping terms, and discounts
GERALD V. JADER

Chapter
7-30

INPUTS TO THE PURCHASING PROCESS

Receiving Report
Count and condition of goods received

Bill of Lading
Accompanies the good sent
Carrier assumes responsibility for the goods

Packing Slip
Specific goods and quantities included in
shipment
Included in merchandise package
GERALD V. JADER

Chapter
7-31

OUTPUTS OF THE PURCHASING

PROCESS
Financial Statement Information

Vendor Checks

Supported by a voucher
Signed by a person designated by
management

Check Register

List of all checks issued for a particular period

Byproduct of batch processing

GERALD V. JADER

Chapter
7-32

OUTPUTS OF THE PURCHASING

PROCESS
Discrepancy Reports

Notes differences in quantities or amounts

Based on reconciliation of purchase order,
receiving report, and the purchase invoice

Cash Requirements Forecast

Predicts future payments and payment

dates
Utilizes multiple source documents

GERALD V. JADER

Chapter
7-33

PURCHASING PROCESS SUMMARY

GERALD V. JADER

Chapter
7-34

IT IN SALES AND PURCHASING

Electronic input

Wireless capabilities

Automated data-entry technology

Biometrics

Inventory Management Systems

RFID Tags

GERALD V. JADER

Chapter
7-35

CURRENT TRENDS IN BUSINESS

PROCESSES
Business Processes Outsourcing (BPO)
Business without boundaries
Offshoring

Business Process Management Software (BPM)

Collect corporate knowledge, data, and business rules

Accomplish business processes more efficiently

GERALD V. JADER

Chapter
7-36

BPO EXAMPLES

GERALD V. JADER

Chapter
7-37