01.Accounting Information System

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Accounting Information

SystemsRakesh S. Pandya


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Describe an effective

accountinginformation system.

Objective 1

2Accounting Information System - 1 (RS Pandya)


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Control

Compatibility

Flexibility

Cost/benefit relationship

Basic Features



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Basic Features

Compatibilitymeans that the system

works smoothly with operations,personnel, and the organizationalstructure.


Internal controls are the methodsand procedures used to authorize

transactions and safeguard assets.


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Basic Features

Flexibilityrelates to the systemsability to accommodate changes in the

organization.


A cost/benefit relationship indicates

that the cost of controls do not exceedtheir value to the organization.


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CompanyPersonnel

Hardware

Software

Computerized Accounting

System



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Computerized Accounting

SystemHardware is the electronic equipment

that makes up a computer system.

Software is a system of instructionsthat drive the computer to performvarious functions.

Properly trainedpersonnel are criticalto the successful operations of thesystem.



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Objective 2Understand both

computerized and manualaccounting systems.



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Processing

Input

(Source documents)

(Financialstatements)

Output

Three Stages of

Data Processing



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Computerized

Accounting System

entered,edited

printed topaper,screen

ACCOUNTING RECORDS

Journals,

Ledgers,Other records

SOFTWARE

PROCESSING

PERSONNELinput transactions,

requestreports, protectrecords

REPORTSDATA

INPUT OUTPUT

posted accessed forreports

HARDWARE



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Designing an Accounting

System

Design of the accounting system beginswith the chart of accounts.

The chart of accounts lists all accountsand their account number in theledger.



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Menu-Driven Accounting

SystemComputer systems are organized by

function or task.

Computer systems usually have achoice of processing options on amenu.



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Menu-Driven Accounting

SystemGeneral Receivables Payables Payroll Reports

Posting

AccountMaintenanceCOMPUTERIZED

ACCOUNTING

SYSTEM

Use arrow keys to make choice.

Press to access choice.

Press F7 to leave menu.

MAIN

Inventory Utilities

Closing



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Preparing Accounting ReportsTrialBalance

FinancialStatements

AccountsReceivable Detail

AccountsPayable Detail

Daily CashReport

IncomeStatement

Balance Sheet

Statement of Owners Equity

Statement of Cash Flows

Use arrow keys to make choice.

Press to access choice.

Press F7 to leave menu.

REPORTS



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Objective 3Understand how spreadsheets

are used in accounting.



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Integrated Accounting

Systems

Computerized accounting systems areorganized by modules.

These modules are separate butintegrated 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 cashcollections in the month of May.

Past experience indicates that 50% ofcredit sales are collected in the monthof sales and 50% the following month.



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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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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 likethese easier.



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Spreadsheet ExampleIncome Statement:

Revenues 100,000

Expenses 60,000

Net Income

Row: 1

2

3

4

5

Column: A B CFormula for B4: =B2B3

Cursor is on cell B4.

40,000



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Objective 4Use the sales journal,

the cash receipts journal,and the accounts receivable

ledger.



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Special JournalsWhat are special journals?

They are accounting journals used to

record one specific type of transaction.What are some examples?

Sales CashReceipts Payroll

Cash DisbursementsPurchases



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Sales JournalPage 5

Invoice Account Account PostDate 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

Using the Sales Journal



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Sales JournalPage 5

Invoice Account Account Post

Date Number Debited Number Ref.Amount

Jan. 2 203 XYZ Co. 120-111 900.00

TOTAL2,200.00

120/410

General LedgerAccount: Accounts Receivable Account Number: 120Date Description Post Ref Debit Credit BalanceJan. 2 Sales SJ5 2,200 2,200




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Sales Journal Page 5

Invoice Account Account PostDate Number Debited Number Ref. AmountJan. 2 203 XYZ Co. 120-111 900.00

TOTAL 2,200.00

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General LedgerAccount: Credit Sales Account Number: 410Date Description Post Ref Debit Credit BalanceJan. 2 Sales SJ5 2,200 2,200



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Subsidiary Ledger

A subsidiary ledger is often used toprovide 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 individualaccount balances in a subsidiaryledger.



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Debits CreditsSales Accounts

SalesDate Cash Discounts ReceivableRevenue Jan. 2 200

200

11 882 18 900

30 800 800

31 1,882 18 900 1,000

Cash Receipts Journal Page

6



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Accounts Receivable

XYZ Company Subsidiary Ledger

Jrnl.

Date Ref. Debit Credit Balance

Jan. 2 S.5 900 900

11 CR.6 900 -0-



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General Ledger

Jrnl. Debit

Date Ref. Debit Credit Balance

Jan. 31 CR.6 1,882

Cash No. 101



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Cash Receipts Journal

Additional columns are provided toenter other account descriptions and

amounts.Cash receipts amounts affecting

subsidiary ledger accounts are posted

daily to keep customer balances up todate.

At month end, foot and crossfoot thejournal and post to the general ledger.



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Objective 5Use the purchase journal, the

cash disbursements journal,and the accounts payable

ledger.



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Purchases Journal

This is designed to account for allpurchases of inventory, supplies,

services, and other assets on account.



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Purchases Journal

Cash purchases are recorded in thecash disbursements journal.

At month end the journal is footed andcrossfooted.

Posting to the general ledger is similar

to posting from sales and cash receiptsjournals.



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Cash Disbursements Journal

Most payments are by check and arerecorded in the cash disbursements

journal.The cash disbursements journal is also

called:

check register cash payments journal



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Cash Disbursements JournalThis has columns for :

date

check number payee

cash amount (credit)

accounts payable (debit)

description and amount of other debitsand credits



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General Journal

Special journals save much time inrecording repetitive transactions and

posting to the ledger.However, some transactions do not fit

into any of the special journals.



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General JournalEvery accounting system needs a

general journal.

What entries are recorded in thegeneral journal?

depreciation

expiration of prepaid insurance accrual of salaries payable

adjusting and closing entries38Accounting Information System - 1 (RS Pandya)


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General JournalMany 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 acustomers Accounts Receivable.



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Purchase Returns and

Allowances

A debit memorandum is the businessdocument that states that the buyer no

longer owes the seller for the amountof the returned purchases.

The buyer debits the Accounts Payableto the seller and credits Inventory.



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Balancing the LedgersAt the end of the accounting period:

Total debits and credits of account

balances in the general ledger areequal.

Control account balances are equal to

the sum of the appropriate subsidiaryledger accounts.



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Thank you?

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01.Accounting Information System

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