01.Accounting Information System.ppt

Accounting Information Accounting Information SystemsSystems

Rakesh S. Rakesh S. PandyaPandya

Describe an effective Describe an effective accountingaccounting

information system.information system.

Objective 1Objective 1

22Accounting Information System - 1 (RS Accounting Information System - 1 (RS Pandya)Pandya)

Control

Compatibility

Flexibility

Cost/benefit relationship

Basic FeaturesBasic Features


Basic FeaturesBasic Features

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


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

Basic FeaturesBasic Features FlexibilityFlexibility relates to the system’s relates to the system’s

ability to accommodate changes in ability to accommodate changes in the organization.the organization.


A A cost/benefit relationshipcost/benefit relationship indicates that the cost of controls indicates that the cost of controls do not exceed their value to the do not exceed their value to the organization.organization.

CompanyPersonnel

Hardware

Software

Computerized Accounting Computerized Accounting SystemSystem


Computerized Accounting Computerized Accounting SystemSystem HardwareHardware is the electronic equipment is the electronic equipment

that makes up a computer system.that makes up a computer system. Software Software is a system of instructions is a system of instructions

that drive the computer to perform that drive the computer to perform various functions.various functions.

Properly trained Properly trained personnelpersonnel are critical are critical to the successful operations of the to the successful operations of the system.system.



Understand bothUnderstand bothcomputerized and computerized and

manualmanualaccounting accounting

systems.systems.


Processing

Input (Source documents)

(Financialstatements)Output

Three Stages ofThree Stages ofData ProcessingData Processing


Computerized Computerized Accounting SystemAccounting System

entered,entered,editededited

printed toprinted topaper,paper,screenscreen

ACCOUNTING RECORDSACCOUNTING RECORDS

Journals,Journals,Ledgers,Ledgers,

Other recordsOther records

SOFTWARESOFTWAREPROCESSINGPROCESSING

PERSONNELPERSONNELinput transactions, input transactions,

requestrequestreports, protect reports, protect

recordsrecords

REPORTSREPORTSDATADATAINPUTINPUT OUTPUTOUTPUT

postedposted accessed foraccessed forreportsreports

HARDWAREHARDWARE


Designing an Accounting Designing an Accounting SystemSystem Design of the accounting system Design of the accounting system

begins with the chart of accounts.begins with the chart of accounts. The chart of accounts lists all The chart of accounts lists all

accounts and their account accounts and their account number in the ledger.number in the ledger.


Menu-Driven Accounting Menu-Driven Accounting SystemSystem Computer systems are organized Computer systems are organized

by function or task.by function or task. Computer systems usually have a Computer systems usually have a

choice of processing options on a choice of processing options on a “menu.”“menu.”


Menu-Driven Accounting Menu-Driven Accounting SystemSystem

General Receivables Payables Payroll Reports

PostingAccount Maintenance

COMPUTERIZEDACCOUNTING

SYSTEM

Use arrow keys to make choice.

Press <return> to access choice.

Press F7 <escape> to leave menu.

MAIN

Inventory Utilities

Closing


Preparing Accounting Preparing Accounting ReportsReports

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



Understand how Understand how spreadsheetsspreadsheetsare used in are used in accounting.accounting.


Integrated Accounting Integrated Accounting SystemsSystems Computerized accounting systems Computerized accounting systems

are organized by modules.are organized by modules. These modules are separate but These modules are separate but

integrated units.integrated units. A sales transaction entry will update A sales transaction entry will update

two modules:two modules:1 Accounts Receivable/SalesAccounts Receivable/Sales2 Inventory/Cost of Goods SoldInventory/Cost of Goods Sold


Ana’s Boutique ExampleAna’s Boutique Example Ana wants to budget for expected Ana wants to budget for expected

cash collections in the month of cash collections in the month of May.May.

Past experience indicates that 50% Past experience indicates that 50% of credit sales are collected in the of credit sales are collected in the month of sales and 50% the month of sales and 50% the following month.following month.


Ana’s Boutique ExampleAna’s Boutique Example May sales were $250,000.May sales were $250,000. $50,000 were cash sales.$50,000 were cash sales. April credit sales amounted to April credit sales amounted to

$120,000.$120,000. What are the expected cash What are the expected cash

collections during the month of collections during the month of May?May?


Ana’s Boutique ExampleAna’s Boutique Example

May cash salesMay cash sales $ $ 50,00050,000

Collection of April’s credit salesCollection of April’s credit sales 60,00060,000

Collection of May’s credit salesCollection of May’s credit sales 100,000100,000

TotalTotal$210,000$210,000

Spreadsheets make computations like Spreadsheets make computations like these easier.these easier. 1919Accounting Information System - 1 (RS Accounting Information System - 1 (RS

Pandya)Pandya)

Spreadsheet ExampleSpreadsheet 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



Use the sales Use the sales journal,journal,

the cash receipts the cash receipts journal,journal,

and the accounts and the accounts receivablereceivableledger.ledger. 2121Accounting Information System - 1 (RS Accounting Information System - 1 (RS

Pandya)Pandya)

Special JournalsSpecial Journals What are special journals?What are special journals? They are accounting journals used They are accounting journals used

to record one specific type of to record one specific type of transaction.transaction.

What are some examples?What are some examples?Sales Cash Receipts Payroll

Cash DisbursementsPurchases2222Accounting Information System - 1 (RS Accounting Information System - 1 (RS

Pandya)Pandya)

Sales Journal Sales Journal Page 5Page 5InvoiceInvoice AccountAccountAccountAccountPostPost

DateDate NumberNumber DebitedDebited NumberNumber Ref. AmountRef. AmountJan. 2Jan. 2 201 201 Joe Co. Joe Co. 120-122120-122 600.00 600.00Jan. 2Jan. 2 202 202 May Co.May Co. 120-033120-033 700.00 700.00Jan. 2Jan. 2 203 203 XYZ Co.XYZ Co. 120-111120-111 900.00 900.00TOTALTOTAL 2,200.00 2,200.00

120/410120/410

Using the Sales JournalUsing the Sales Journal


Sales Journal Page Sales Journal Page 55InvoiceInvoice AccountAccountAccountAccountPostPost

DateDate NumberNumber DebitedDebited NumberNumber Ref. AmountRef. AmountJan. 2Jan. 2 203 203 XYZ Co.XYZ Co. 120-111120-111 900.00 900.00TOTALTOTAL 2,200.00 2,200.00

120/410120/410 General Ledger

Account: Accounts Receivable Account Number: 120 Date Description Post Ref Debit Credit Balance Jan. 2 Sales SJ52,200 2,200

Using the Sales JournalUsing the Sales Journal


Using the Sales JournalUsing the Sales Journal Sales Journal Page 5

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

TOTAL 2,200.00 120/410

General Ledger Account: Credit Sales Account Number: 410 Date Description Post Ref Debit Credit Balance Jan. 2 Sales SJ5

2,200 2,200 2525Accounting Information System - 1 (RS Accounting Information System - 1 (RS Pandya)Pandya)

Subsidiary LedgerSubsidiary Ledger A subsidiary ledger is often used to A subsidiary ledger is often used to

provide details on individual provide details on individual balances of...balances of...

– customers (accounts receivable) customers (accounts receivable) and...and...

– suppliers (accounts payable).suppliers (accounts payable).


A Control AccountA Control Account What is a control account?What is a control account? It is the general ledger account.It is the general ledger account. It equals the sum of the individual It equals the sum of the individual

account balances in a subsidiary account balances in a subsidiary ledger.ledger.


Debits Credits Debits Credits SalesSales Accounts Sales Accounts Sales

DateDate Cash Cash Discounts Discounts Receivable Revenue Receivable Revenue Jan. 2 Jan. 2 200 200 200 200

1111 882882 1818 900900 3030 800 800 800 800 31311,8821,882 1818 900900 1,000 1,000 (101) (101) (420) (420) (112) (112) (410) (410)

Cash Receipts Journal — Cash Receipts Journal — Page 6Page 6


Accounts ReceivableAccounts Receivable

XYZ Company Subsidiary LedgerJrnl.

Date Ref. Debit Credit BalanceJan. 2 S.5 900 900 11 CR.6 900 -0-


General LedgerGeneral Ledger

Jrnl. DebitDate Ref. Debit Credit BalanceJan. 31 CR.6 1,882

Cash No. 101


Cash Receipts JournalCash Receipts Journal Additional columns are provided to enter Additional columns are provided to enter

other account descriptions and amounts.other account descriptions and amounts. Cash receipts amounts affecting Cash receipts amounts affecting

subsidiary ledger accounts are posted subsidiary ledger accounts are posted daily to keep customer balances up to daily to keep customer balances up to date.date.

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



Use the purchase Use the purchase journal, thejournal, the

cash disbursements cash disbursements journal,journal,

and the accounts and the accounts payablepayableledger.ledger. 3232Accounting Information System - 1 (RS Accounting Information System - 1 (RS

Pandya)Pandya)

Purchases JournalPurchases Journal This is designed to account for all This is designed to account for all

purchases of inventory, supplies, purchases of inventory, supplies, services, and other assets on services, and other assets on account.account.


Purchases JournalPurchases Journal Cash purchases are recorded in the Cash purchases are recorded in the

cash disbursements journal.cash disbursements journal. At month end the journal is footed At month end the journal is footed

and crossfooted.and crossfooted. Posting to the general ledger is Posting to the general ledger is

similar to posting from sales and similar to posting from sales and cash receipts journals.cash receipts journals.


Cash Disbursements Cash Disbursements JournalJournal Most payments are by check and Most payments are by check and

are recorded in the cash are recorded in the cash disbursements journal.disbursements journal.

The cash disbursements journal is The cash disbursements journal is also called:also called:

– check registercheck register– cash payments journalcash payments journal


Cash Disbursements Cash Disbursements JournalJournal This has columns for :This has columns for :– datedate– check numbercheck number– payeepayee– cash amount (credit)cash amount (credit)– accounts payable (debit)accounts payable (debit)– description and amount of other debits description and amount of other debits

and credits and credits


General JournalGeneral Journal Special journals save much time in Special journals save much time in

recording repetitive transactions recording repetitive transactions and posting to the ledger.and posting to the ledger.

However, some transactions do not However, some transactions do not fit into any of the special journals.fit into any of the special journals.


General JournalGeneral Journal Every accounting system needs a Every accounting system needs a

general journal.general journal. What entries are recorded in the What entries are recorded in the

general journal?general journal?– depreciationdepreciation– expiration of prepaid insurance expiration of prepaid insurance – accrual of salaries payable accrual of salaries payable – adjusting and closing entriesadjusting and closing entries


General JournalGeneral Journal Many companies record sales Many companies record sales

returns and allowances and returns and allowances and purchase returns in the general purchase returns in the general journal.journal.

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


Purchase Returns and Purchase Returns and AllowancesAllowances A A debit memorandumdebit memorandum is the is the

business document that states that business document that states that the buyer no longer owes the seller the buyer no longer owes the seller for the amount of the returned for the amount of the returned purchases.purchases.

The buyer debits the Accounts The buyer debits the Accounts Payable to the seller and credits Payable to the seller and credits Inventory.Inventory.


Balancing the LedgersBalancing the Ledgers At the end of the accounting period:At the end of the accounting period: Total debits and credits of account Total debits and credits of account

balances in the general ledger are balances in the general ledger are equal.equal.

Control account balances are equal Control account balances are equal to the sum of the appropriate to the sum of the appropriate subsidiary ledger accounts.subsidiary ledger accounts.


Thank you?Thank you?

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01.Accounting Information System.ppt

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