Copyright © 2007 Prentice-Hall. All rights reserved 1 Accounting Information Systems Chapter 7

Copyright © 2007 Prentice-Hall. All rights reserved 1

Accounting Information Accounting Information SystemsSystems

Accounting Information Accounting Information SystemsSystems

Chapter 7


Objective 1Objective 1Objective 1Objective 1

Describe an effective accounting

information system


Basic FeaturesBasic FeaturesBasic FeaturesBasic Features

• Control – – Internal controls are established to ensure

that your assets are safeguarded and not being wasted.

– They are also established to ensure that employees follow company procedures

• Compatibility - Use an accounting system that is appropriate for the size of the company and the complexity of transactions


Basic FeaturesBasic FeaturesBasic FeaturesBasic Features

• Flexibility- Can your company respond to change effectively?

• Cost/benefit relationship – The cost of an accounting system should not outweigh the benefits



Understand both computerized and manual accounting systems


Computerized Accounting Computerized Accounting SystemSystem

Computerized Accounting Computerized Accounting SystemSystem

• Hardware – equipment (computers, printers, monitors, network that links computers)

• Software - programs that tells the computer what to do (store data, generate reports)


Processing

Input

Output

Three Stages ofThree Stages ofData ProcessingData ProcessingThree Stages ofThree Stages ofData ProcessingData Processing

Come from source documents like invoices

Journalizing, posting

Financial statements and other reports


Computerized Computerized Accounting SystemAccounting System

ACCOUNTING RECORDS

Journals,Ledgers,

Other records

SOFTWAREPROCESSING REPORTS

OUTPUT

HARDWARE

INPUTDATA


Assets

Current (11)

Plant (12)

Other (13)

Cash in Bank (111)

Accounts Receivable

(115)

Inventory (120)

Customer A (115001)

Customer B (115002)

Customer C (115003)

Designing a System – Designing a System – Chart of AccountsChart of Accounts


E7-13E7-13E7-13E7-13Number Account

101 Cash102 Accounts receivable103 Inventory104 Supplies105 Computer equipment106 Accumulated depreciation201 Accounts payable221 Note payable, long-term301 Jerry Mobile, capital321 Jerry Mobile, withdrawals401 Sales revenue501 Cost of goods sold521 Depreciation expense


Processing Transactions – Processing Transactions – Manual SystemManual System

Processing Transactions – Processing Transactions – Manual SystemManual System

• Similar transactions are grouped together and recorded in special journals– Sales journal (all sales on account)– Purchases journal (all purchases on account)– Cash receipts journal– Cash disbursements journal– General journal


Processing Transactions – Processing Transactions – Computerized SystemComputerized System

Processing Transactions – Processing Transactions – Computerized SystemComputerized System

• Menu Driven

• Menu organized by function or task

• Posting is automatic– On-line processing– Batch processing


Menu-Driven Accounting Menu-Driven Accounting SystemSystem

Ledger InventoryReceivables Payables Payroll Reports

Posting

Account Maintenance

COMPUTERIZEDACCOUNTING

SYSTEM

COMPUTERIZEDACCOUNTING

SYSTEM

Use arrow keys to make choice

Press <return> to access choice

Press F7 <escape> to leave menu

Utilities

Closing

Transactions

MAIN


ERP SystemsERP SystemsERP SystemsERP Systems

• “Enterprise Resource Planning Systems”

• Integrates all departments and functions across a company into a single unified system



Understand how spreadsheets

are used in accounting


Integrated Accounting Software: Integrated Accounting Software: SpreadsheetSpreadsheet


• Computer program designed to perform computational tasks

• Organized by cells, defined by a row and a column




A B C123 Account Title Dr. Cr.4 Cash 9,400 5 Supplies 700 6 Accounts payable 200 7 Salaries payable 8 Suzanne Byrd, capital 6,000 9 Service revenue 8,000 10 Rent expense 4,000 11 Supplies expense 12 Depreciation expense 13 Interest expense 100 14 Totals 14,200 14,200

Trial Balance

Cell B4

Labels

Numbers

Formulas


E7-15E7-15E7-15E7-15 A B C1

2

3

4

5

6

7

8 Years of Life 209 Equipment 60,000 10

Annual Depreciation = Cost / Years of Life

Annual Depreciation = B9/C8



Use the sales journal, the cash receipts journal, and the accounts receivable ledger


Special JournalsSpecial Journals

• Accounting journals used to record one specific type of transaction

• Save time

• Save money


Special JournalsSpecial Journals

Transaction Special Journal Posting Abbreviation

Sales on account Sales journal S

Cash receipts Cash receipts journal CR

Purchases on account Purchases journal P

Cash payments Cash payments journal

CP

All others General journal J


Sales JournalSales JournalSales JournalSales Journal

Sales Journal

DATEINVOICE

NO. ACCOUNT DEBITEDPOSTREF

ACCOUNTS RECEIVABLE DR.

SALES REVENUE CR.

COST OF GOODS SOLD DR.

INVENTORY CR.

Debit Accounts Receivable and credit Sales Revenue. Debit Cost of

Goods Sold and credit Inventory


Cash Receipts JournalCash Receipts JournalCash Receipts JournalCash Receipts Journal

Cash Receipts Journal

DATE

DEBITS CREDITS

COST OF GOODSSOLD DR.

INVENTORY CR.CASHSALESDISC

ACCTSREC

SALESREV

OTHER ACCOUNTS

ACCOUNTTITLE PR AMT

Debit Cash and credit some other account


Subsidiary LedgerSubsidiary LedgerSubsidiary LedgerSubsidiary Ledger

• Provides details on individual balances– Customers (accounts receivable)– Suppliers (accounts payable)


Control AccountControl AccountControl AccountControl Account

• The general ledger account

• Equals the sum of the individual account balances in a subsidiary ledger


ACCOUNT ST. JOHN’S CAFE

BALANCE

DATE ITEM JREF DEBIT CREDIT DEBIT CREDIT

Jan 1 S7 500 500

ACCOUNT ACCOUNTS RECEIVABLE

BALANCE

DATE ITEMJRNLREF DEBIT CREDIT DEBIT CREDIT

Jan

S7 1,500 1,500

Jan

Cr3 500 1,000

ACCOUNT MARKET STREET GRILL

BALANCE


Jan 8 S7 300 300

ACCOUNT WELLWOOD INN

BALANCE


Jan 5 S7 700 700

Jan 10 CR3 500 200

Controlling Account

Subsidiary Accounts



Use the purchase journal, the cash disbursements journal, and the accounts

payable ledger


Purchases JournalPurchases JournalPurchases JournalPurchases Journal

Purchases Journal

DATEACCOUNT CREDITED TERMS PR

CREDITS DEBITS

ACCOUNTSPAYABLE INVENTORY SUPPLIES

OTHER ACCOUNTS

ACCOUNTTITLE PR AMOUNT

Debit Inventory or some other account and credit Accounts

Payable


Cash Payments JournalCash Payments JournalCash Payments JournalCash Payments Journal

Cash Payments Journal

DATECKNO

ACCOUNT DEBITED PR

DEBITS CREDITS

OTHERACCOUNTS

ACCOUNTSPAYABLE INVENTORY CASH

Credit Cash….debit other accounts


ACCOUNT FAVER EQUIPMENT COMPANY

BALANCE


Jan 1 P7 500 500

ACCOUNT ACCOUNTS PAYABLE

BALANCE

DATE ITEMJRNLREF DEBIT CREDIT DEBIT CREDIT

Jan

P7 800 800

Jan

CP3 100 700

ACCOUNT REAL TECHNOLOGIES

BALANCE


Jan 8 P7 100 100

ACCOUNT NOTTINGHAM SALES

BALANCE


Jan 5 P7 200 200

Jan 10

CP3 100 100

Controlling Account

Subsidiary Accounts


General JournalGeneral JournalGeneral JournalGeneral Journal

• Used for transactions that do not fit into any of the special journals including adjusting and closing entries


Balancing the LedgersBalancing 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


S7-6S7-6S7-6S7-6

Transactions:

a. Cash sale of inventory

b. Payment of rent

c. Depreciation of computer equipment

d. Purchases of inventory on account

e. Collection of accounts receivable

f. Expiration of prepaid insurance

g. Sale on account

JJ

SS

CRCR

PP

CPCP

CRCR

JJ


S7-6S7-6S7-6S7-6

Transactions: h. Payment on account i. Cash purchase of inventory j. Collection of dividend revenue

earned on an investment k. Prepayment of insurance l. Borrowing money on a long-term

note payable m. Purchase of equipment on account n. Cost of goods sold along with a

credit saleSS

CRCR

PP

CPCP

CRCRCPCP

CPCP


P7-34B (March 2)P7-34B (March 2)P7-34B (March 2)P7-34B (March 2)

Sales Journal Page 1

DATEINVOICE



SALES REVENUE CR.


INVENTORY CR.

Mar 2 L E Wooten 2,350 1,390191

L E Wooten

Mar 2 S1 2,350 2,350



Purchases Journal Page 1

DATEACCOUNT CREDITED TERMS PR

CREDITS DEBITS

ACCOUNTSPAYABLE INVENTORY SUPPLIES

OTHER ACCOUNTS

ACCOUNTTITLE PR AMOUNT

Mar 3 Delwood3/10,n/60 5,900 5,900

Delwood Plaza

Mar 3 P1 5,900 5,900




DATE

DEBITS CREDITS



ACCTSREC

SALESREV

OTHER ACCOUNTS

ACCOUNTTITLE PR AMT

Mar 4 3,410 1,8203,410




DATECKNO

ACCOUNT DEBITED PR

DEBITS CREDITS

OTHERACCOUNTS


Mar 5 473 Furniture 1,0801,080




DATE

DEBITS CREDITS



ACCTSREC

SALESREV

OTHER ACCOUNTS

ACCOUNTTITLE PR AMT

Mar 4 3,410 1,8203,410

8 120 120Interest Revenue



Sales Journal Page 1

DATEINVOICE



SALES REVENUE CR.


INVENTORY CR.

Mar 2 L E Wooten 2,350 1,390191

Cortez Co

Mar 9 S1 6,250 6.250

9 Cortez Co 6,250 3,300192




DATECKNO

ACCOUNT DEBITED PR

DEBITS CREDITS

OTHERACCOUNTS


Mar 5 473 Furniture 1,0801,080

10 474 770770Inventory


P7-34B (March 12)P7-34B (March 12)P7-34B (March 12)P7-34B (March 12)Cash Receipts Journal

DATE

DEBITS CREDITS



ACCTSREC

SALESREV

OTHER ACCOUNTS

ACCOUNTTITLE PR AMT

Mar 4 3,410 1,8203,410

8 120 120Interest Revenue

12 2,303 Wooten2,35047L E Wooten

Mar 2 S1 2,350 2,350Mar 12 CR1 2,350 -0-


End of Chapter 7End of Chapter 7End of Chapter 7End of Chapter 7

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Copyright © 2007 Prentice-Hall. All rights reserved 1 Accounting Information Systems Chapter 7