Chapter 4-1

Accounting Information Systems and Business Processes: Part I

Chapter 4

Introduction Business Process Fundamentals Collecting and Reporting Accounting Information Two Core Business Processes Business Processes and Businesses-WithoutBoundaries
Chapter 4-2

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

Chapter 4-3

organize transactions related to an organizations business processes.

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 4-4

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 4-5

Special Journals for AISs

Sales Journal

Record of credit sales transactions Record of credit purchase transactions Record of transactions involving receipts of cash Record of transactions involving disbursements of cash

Purchases Journal

Cash Receipts Journal

Cash Disbursements Journal

Chapter 4-6

Ledgers
Ledger
general ledger

contains detailed monetary information about an organizations

assets, liabilities, revenues, and expenses.

subsidiary ledger

Chapter 4-7

contains detailed records pertaining to a particular account in the general ledger.

Trial Balances
AIS

records journal entries posts them to the general ledger, the system creates a trial balance. A preadjusting trial balance after all entries have been posted; An adjusted trial balance after adjustments have been recorded and posted; A postclosing trial balance after closing entries have been recorded and posted.

Three end of period trial balances:

Chapter 4-8

Steps in the accounting cycle

Chapter 4-9

Financial Statements
Financial statements
are the primary output of a financial accounting system include the following statements:

Chapter 4-10

Income Statement Statement of Owners Equity Balance Sheet Cash Flow Statement

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 4-11

Coding Systems
AISs depend on coding to

record, store, classify and retrieve financial data.

Computer codes for processing accounting transactions are

Chapter 4-12

numeric or alphanumeric codes

Coding Systems
Codes are necessary to

Uniquely identify transactions and accounts Compress data Aid in classification of accounts or transactions Communicate special meaning

Chapter 4-13

Types of Codes
Mnemonic Codes

give visible clues concerning the objects they represent. assign numbers or letters in consecutive order. are sequential codes in which specific blocks of numbers are reserved for particular uses. combining of two or more subcodes.

Sequence Codes
Block Codes Group Codes

Chapter 4-14

Design Considerations in Coding

Codes
should serve some useful purpose. should be consistent. should plan for future expansion.

Chapter 4-15

Collecting and Reporting Accounting Information

The design of an AIS should

be effective consider outputs from the system. reports to management reports to investors and creditors files that retain transaction data files that retain current data about accounts

Outputs of an AIS include:

Chapter 4-16

Considerations in Report Design

Reports

should be useful for managerial decisionmaking, should not create information overload. contain fundamental identification, be convenient, and be consistent.

Format of the reports should

Reports that only list exceptional conditions are exception reports. Chapter
4-17

Collecting the Data for Output 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 in recording data
encourage the completeness of accounting data serve as distributors of information for individuals or departments.

Chapter 4-18

Collecting the Data for Output 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 4-19

Core Business Processes

An AIS

collects and reports data related to business processes which are collections of activities that create value. is an economic activity impacts financial statements (accounting transactions). is important to the business, does not impact financial statements.

An economic event

A business event

Chapter 4-20

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 4-21

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 4-22

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 4-23

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 providing of a service

Remittance Advice
served as source document for credits to accounts receivable
Chapter 4-24

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; debit memos increase amount customer owes

Chapter 4-25

The Sales Process - Outputs

Financial Statement Information Customer Billing Statement includes

sales, returns, and cash receipts contains data concerning the status of open balances of all active credit customers arranges the overdue amounts by time periods

Accounts Receivable Aging Report

Chapter 4-26

The Sales Process - Outputs

Bad Debt Report

contains info about collection follow-up procedures for overdue customer accounts data from source documents in revenue transactions are inputs

Cash Receipts Forecast

Chapter 4-27

The Sales Process - Outputs

Approved Customer Listing

list of customer codes, contacts, shipping and billing addresses, credit limits, and billing terms detailed data about each sale in order to monitor sales activities and plan production and marketing efforts

Sales Analysis Reports

Chapter 4-28

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

Chapter
4-29

either goods or services by cash or on credit

Purchase can be

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 4-30

Purchasing Process - Inputs

Purchase Requisition
shows 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 4-31

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
Chapter 4-32

debits or credits accounts payable.

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 4-33

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.
predicts future payments and payment dates

Cash Requirements Forecast

Purchases analysis reports

Chapter 4-34

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 4-35

IT in Sales and Purchase

Successful organizations need
to use accounting and enterprise software solutions at all levels to have inputs and outputs in sales and purchase in electronic form to save money with automated data-entry technology

IT has also made it possible for them

to work anywhere in the world at any time of the day Chapter
4-36

Businesses-Without-Boundaries
In Businesses-Without-Boundaries
employees may be located anywhere

India, China, Canada, Mexico, or Malaysia.

employees may work on various business processes

HR, accounting, production, and so on

Chapter 4-37

Businesses-Without-Boundaries
The important point for accountants is costs and benefits of keeping a business process

in-house

what software solution the company should use to automate how to integrate data and applications into business systems.

or outsourcing the function

Chapter 4-38

what will be the many costs and what will be the benefits/concerns associated with the decision.

Business Process Outsourcing

Business processes outsourcing
for 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 4-39

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 purchaser may 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 4-40

Chapter 4

Chapter 4-41