Chapter 4-1

Chapter 4-2

Chapter 4Accounting Information Systemsand Business Processes: Part I

Introduction

Business Process Fundamentals

Collecting and Reporting Accounting Information

Two Core Business Processes

Business Processes and Businesses-Without-Boundaries

Chapter 4-3

Introduction

AISs depend on the flow of data through

various organizational subsystems

Effective processing systems ensure capture of appropriate

data and accurate information

Transaction processing cycles organize transactions related to an

organization’s business processes.

Chapter 4-4

Business Process Fundamentals

The accounting cycle Analysis of a transaction from a source

document.

A source document records a business activity such as the purchase

or sale of goods, can be a piece of paper, or can be in electronic form.

Chapter 4-5

Journals

The journal is a chronological record of business events by account. Account structure of an organization is its chart of accounts.may be a general journal or a special journal a general journal allows any type of

accounting transaction to be recorded, a special journal captures specific

types of transactions.

Chapter 4-6

Special Journals for AISs

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

Chapter 4-7

Ledgers

Ledgergeneral ledger contains detailed monetary information about an

organization’s assets, liabilities, revenues, and expenses.

subsidiary ledger contains detailed records pertaining to a particular

account in the general ledger.

Chapter 4-8

Trial Balances

AIS • records journal entries • posts them to the general ledger, • the system creates a trial balance.

Three end of period trial balances:A preadjusting trial balance after all entries have been posted;

An adjusted trial balance after adjustments have beenrecorded and posted;

A postclosing trial balance after closing entries havebeen recorded and posted.

Chapter 4-9

Steps in the accounting cycle

Chapter 4-10

Financial Statements

Financial statements are the primary output of a financial accounting system

include the following statements: Income Statement Statement of Owners’ Equity Balance Sheet Cash Flow Statement

Chapter 4-11

BUSINESS PROCESS FUNDAMENTALS

Which of the following provides the organizational structure for the general ledger?

a. Special journals.

b. A source document.

c. General Journals.

d. The chart of accounts.

Chapter 4-12

Coding Systems

AISs depend on coding to record, store, classify and retrieve financial data.

Computer codes for processingaccounting transactions are numeric or alphanumeric codes

Chapter 4-13

Coding Systems

Codes are necessary to Uniquely identify transactions and accounts Compress data Aid in classification of accounts or transactions Communicate special meaning

Chapter 4-14

Types of Codes

Mnemonic Codes give visible clues concerning the objects they represent.

Sequence Codes assign numbers or letters in consecutive order.

Block Codes are sequential codes in which specific blocks

of numbers are reserved for particular uses. Group Codes combining of two or more subcodes.

Chapter 4-15

Design Considerations in Coding

Codes should serve some useful purpose.

should be consistent.

should plan for future expansion.

Chapter 4-16

Collecting and Reporting Accounting Information

The design of an AIS should be effective consider outputs from the system.

Outputs of an AIS include: reports to management reports to investors and creditors files that retain transaction data files that retain current

data about accounts

Chapter 4-17

Considerations in Report Design

Reports should be useful for managerial decision-

making, should not create information overload.

Format of the reports should contain fundamental identification, be convenient, and be consistent.

Reports that only list exceptional conditions are exception reports.

Chapter 4-18

Collecting the Data forOutput Reports

Source Documents

help manage the flow of accounting data by• dictating the kinds of data to be collected and help

ensure legibility, consistency, and accuracy inrecording dataencourage the completeness of accounting data

serve as distributors of information for individualsor departments.

Chapter 4-19

Collecting the Data forOutput Reports

help to establish the authenticity of accounting data in

establishing an audit trail, testing for authorization of cash disbursement

checks testing for inventory disbursements, and establishing accountability for the collection or

distribution of money.

Chapter 4-20

Core Business Processes

An AIS collects and reports data related to business processes which are

collections of activities that create value.

An economic event is an economic activity impacts financial statements (accounting transactions).

A business event is important to the business, does not impact financial statements.

Chapter 4-21

Core Business Processes

What is (are) a collection of activities or flow of work in an organization that creates value?

a. An economic event.

b. An accounting transaction.

c. A business process.

d. A chart of accounts.

Chapter 4-22

The Sales Process

The sales process begins with a customer order for goods or services and

ends with the collection of cash from the customer.

The primary objective is to achieve timely and efficient revenue collection.

An organization that generates revenues, but fails to collect these revenues on a timely basis, may find itself in a position where it cannot pay its bills.

Chapter 4-23

Objectives of the Sales Process

Tracking sales of goods and/or services to customers

Filling customer orders

Billing customers for goods and services

Collecting payment for goods and services

Forecasting sales and cash receipts

Chapter 4-24

The Sales Process - Inputs

Sales Order Prenumbered, usually prepared in multiple copies,and used to prepare sales invoice

Sales Invoice prepared after shipment of goods or providingof a service

Remittance Adviceserved as source document for credits to accounts receivable

Chapter 4-25

The Sales Process - Inputs

Shipping Notice prepared after goods are released for shipment, and may serve as a packing slip

Debit/Credit memo issued for sales returns and allowances; debitmemos increase amount customer owes

Chapter 4-26

The Sales Process - Outputs

Financial Statement Information Customer Billing Statement includes sales, returns, and cash receipts

Accounts Receivable Aging Report contains data concerning the status of open

balances of all active credit customers arranges the overdue amounts by time periods

Chapter 4-27

Bad Debt Report contains info about collection follow-up procedures

for overdue customer accounts

Cash Receipts Forecast data from source documents in revenue

transactions are inputs

The Sales Process - Outputs

Chapter 4-28

Approved Customer Listing list of customer codes, contacts, shipping and

billing addresses, credit limits, and billing terms

Sales Analysis Reports detailed data about each sale in order to monitor

sales activities and plan production and marketing efforts

The Sales Process - Outputs

Chapter 4-29

The Purchasing Process

The purchasing process begins with a request for goods or services

and ends with the payment of cash to the vendor.

Purchase may be for either goods or services

Purchase can be by cash or on credit

Chapter 4-30

Purchasing Process - Objectives

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

Chapter 4-31

Purchasing Process - Inputs

Purchase Requisitionshows items requested by stores, indicates names of vendors

Purchase Order is based on purchase requisition including vendor information

Vendor Invoice includes prices, shipping terms and discounts

Receiving Report reflects the count and condition of goods received

Chapter 4-32

Purchasing Process - Inputs

Bill of lading accompanies the goods sent and given by the freight carrier to the supplier as a receipt.

Packing slip indicates the specific quantities and items in the shipment and those items that are on back order. It is sometimes included in the merchandise package.

Debit/Credit Memoranda debits or credits accounts payable.

Chapter 4-33

Purchasing Process - Outputs

Financial Statement Information Vendor Checks supported by a voucher and signed by a person designated by management

Check Register list of all checks issued for a particular period

Chapter 4-34

Purchasing Process - Outputs

Discrepancy Reports used to identify any differences between

quantities or amounts on the purchase order, the receiving report, and the purchase invoice.

Cash Requirements Forecast predicts future payments and payment dates

Purchases analysis reports

Chapter 4-35

IT in the Sales and Purchase Process

Which of the following reports is common to both the sales and the purchasing processes?

a. Cash receipts forecast and cash requirements forecast.

b. Financial statement information.

c. Discrepancy and bad debts reports.

d. None of the above.

Chapter 4-36

IT in Sales and Purchase

Successful organizations needto use accounting and enterprise softwaresolutions at all levelsto have inputs and outputs in sales and purchase in electronic formto save money with automated data-entry technology

IT has also made it possible for themto work anywhere in the worldat any time of the day

Chapter 4-37

Businesses-Without-Boundaries

In Businesses-Without-Boundariesemployees may be located anywhere India, China, Canada, Mexico, or Malaysia.

employees may work on various business processes HR, accounting, production, and so on

Chapter 4-38

Businesses-Without-Boundaries

The important point for accountants is costs and benefits of keeping a businessprocess in-house

what software solution the company should use to automate

how to integrate data and applications into business systems.

or outsourcing the function what will be the many costs and what will be the benefits/concerns associated with the

decision.

Chapter 4-39

Business Process Outsourcing

Business processes outsourcingfor strategic advantages Competitiveness, Revenue generation, and cost savings.

Business processes outsourced are human resources, finance and accounting, customer services, learning services and training, and information technology

Chapter 4-40

Copyright

Copyright 2008 John Wiley & Sons, Inc. All rights reserved.

Reproduction or translation of this work beyond that permitted in

Section 117 of the 1976 United States Copyright Act without the

express written permission of the copyright owner is unlawful.

Request for further information should be addressed to the

Permissions Department, John Wiley & Sons, Inc. The purchasermay make backup copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.

Chapter 4-41

Chapter 4