01.accounting Information System

Accounting Information
Systems
Rakesh S. Pandya
Describe an effective
accounting
information system.
Objective 1
2
Accounting Information System - 1 (RS Pandya)
Control
Compatibility
Flexibility
Cost/benefit relationship
Basic Features
3
Basic Features
Compatibility means that the system
works smoothly with operations,
personnel, and the organizational
structure.
4
Internal controls are the methods
and procedures used to authorize
transactions and safeguard assets.
Basic Features
Flexibility relates to the systems
ability to accommodate changes in the
organization.
5
A cost/benefit relationship indicates
that the cost of controls do not exceed
their value to the organization.
Company
Personnel
Hardware
Software
Computerized Accounting
System
6
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.
7
Objective 2
Understand both
computerized and manual
accounting systems.
8
Processing
Input
(Source documents)
(Financial
statements)
Output
Three Stages of
Data Processing
9
Computerized
Accounting System
entered,
edited
printed to
paper,
screen
ACCOUNTING RECORDS
Journals,
Ledgers,
Other records
SOFTWARE
PROCESSING
PERSONNEL
input transactions,
request
reports, protect
records
REPORTS DATA
INPUT OUTPUT
posted
accessed for
reports
HARDWARE
10
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.
11
Menu-Driven Accounting
System
Computer systems are organized by
function or task.
Computer systems usually have a
choice of processing options on a
menu.
12
Menu-Driven Accounting
System
General Receivables Payables Payroll Reports
Posting
Account Maintenance
COMPUTERIZED
ACCOUNTING
SYSTEM
Use arrow keys to make choice.
Press <return> to access choice.
Press F7 <escape> to leave menu.
MAIN
Inventory Utilities
Closing
13
Preparing Accounting Reports
Trial
Balance
Financial
Statements
Accounts
Receivable Detail
Accounts
Payable Detail
Daily Cash
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.
REPORTS
14
Objective 3
Understand how spreadsheets
are used in accounting.
15
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
16
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.
17
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?
18
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.
19
Spreadsheet Example
Income Statement:

Revenues 100,000

Expenses 60,000

Net Income

Row: 1

2

3

4

5
Column: A B C
Formula for B4: =B2B3
Cursor is on cell B4.
40,000
20
Objective 4
Use the sales journal,
the cash receipts journal,
and the accounts receivable
ledger.
21
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 Disbursements Purchases
22
Sales Journal
Page 5
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
120/410
Using the Sales Journal
23
Sales Journal
Page 5
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
24
Sales Journal Page 5
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
25
Subsidiary Ledger
A subsidiary ledger is often used to
provide details on individual balances
of...
customers (accounts receivable) and...
suppliers (accounts payable).
26
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.
27
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
28
Accounts Receivable
XYZ Company Subsidiary Ledger
Jrnl.
Date Ref. Debit Credit Balance
Jan. 2 S.5 900 900
11 CR.6 900 -0-
29
General Ledger
Jrnl. Debit
Date Ref. Debit Credit Balance
Jan. 31 CR.6 1,882
Cash No. 101
30
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.
31
Objective 5
Use the purchase journal, the
cash disbursements journal,
and the accounts payable
ledger.
32
Purchases Journal
This is designed to account for all
purchases of inventory, supplies,
services, and other assets on account.
33
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.
34
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
35
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
36
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.
37
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
38
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.
39
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.
40
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.
41
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