CH 06

Accounting Information Systems Chapter 6
2002 Prentice Hall, Inc.
Business Publishing
Accounting, 5/E
Horngren/Harrison/Bamber
6-1
Objective 1
Describe the features of an effective accounting information system.
Business Publishing
Accounting, 5/E
6-2
Basic Features
Control
Comparability Flexibility Cost/benefit relationship
2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 6-3
Basic Features
Internal controls are the methods and procedures used to authorize transactions and safeguard assets. Comparability means that the system works smoothly with operations, personnel, and the organizational structure.
Business Publishing
Accounting, 5/E
6-4
Basic Features
Flexibility relates to the systems ability to accommodate changes in the organization.

A cost/benefit relationship indicates that the cost of controls do not exceed their value to the organization.
Business Publishing
Accounting, 5/E
6-5
Computerized Accounting System

Hardware
Software Company Personnel

2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 6-6
Hardware is the electronic equipment that makes up a computer system.

Software is a system of instructions that drive the computer to perform various functions. Properly trained personnel are critical to the successful operations of the system.
Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 6-7
Objective 2
Understand how both computerized and manual accounting systems work.
Business Publishing
Accounting, 5/E
6-8
Three Stages of Data Processing

(Source documents) Input
Processing (Financial statements)

Horngren/Harrison/Bamber 6-9
Output
2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E

ACCOUNTING RECORDS PERSONNEL
input transactions, request reports, protect records
Journals, Ledgers, Other records accessed for reports
posted
HARDWARE INPUT DATA

entered, edited
SOFTWARE PROCESSING
Accounting, 5/E
printed to paper, screen
OUTPUT REPORTS
6 - 10
Business Publishing
Designing an Accounting System

Design of the accounting system begins with the chart of accounts. The chart of accounts lists all accounts and their account number in the ledger.
Business Publishing
Accounting, 5/E
6 - 11
Menu-Driven Accounting System

Computer systems are organized by function or task. Computer systems usually have a choice of processing options on a menu.
Business Publishing
Accounting, 5/E
6 - 12
Menu-Driven Accounting System

General Receivables Payables Inventory Payroll Reports Utilities
Posting Account Maintenance Closing Use arrow keys to make choice. Press <return> to access choice. Press F7 <escape> to leave menu.
2002 Prentice Hall, Inc. Business Publishing
COMPUTERIZED ACCOUNTING SYSTEM
MAIN
Accounting, 5/E
6 - 13
Preparing Accounting Reports

Trial Financial Accounts Accounts Daily Cash Balance Statements Receivable Detail Payable Detail Report
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.
2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 6 - 14
REPORTS
Objective 3
Understand how spreadsheets are used in accounting.
Business Publishing
Accounting, 5/E
6 - 15
Integrated Accounting Systems

Computerized accounting systems are organized by modules. These modules are separate but integrated units. A sales transaction entry will update two modules: 1 Accounts Receivable/Sales 2 Inventory/Cost of Goods Sold
Anas Boutique Example

Ana wants to budget for expected cash collections in the month of May. Past experience indicates that 50% of credit sales are collected in the month of sales and 50% the following month.
Business Publishing
Accounting, 5/E
6 - 17

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?
Business Publishing
Accounting, 5/E
6 - 18

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 like these easier.
Business Publishing
Accounting, 5/E
6 - 19
Spreadsheet Example
Formula for B4: =B2B3 Column: A Row: 1 Income Statement: 2 Revenues 3 Expenses 4 Net Income 5 B C
100,000 60,000
40,000
Cursor is on cell B4.

Objective 4 Use the sales journal, the cash receipts journal, and the accounts receivable subsidiary ledger.
Business Publishing
Accounting, 5/E
6 - 21
Special Journals
What are special journals? They are accounting journals used to record one specific type of transaction. What are some examples?
Sales
Cash Receipts
Payroll
Purchases
2002 Prentice Hall, Inc. Business Publishing
Cash Disbursements
Accounting, 5/E Horngren/Harrison/Bamber 6 - 22
Using the Sales Journal

Sales Journal
Invoice Date Number Jan. 2 201 Jan. 2 202 Jan. 2 203 Account Debited Joe Co. May Co. XYZ Co. TOTAL Account Number 120-122 120-033 120-111 120/410
Page 5
Post Ref. Amount 600.00 700.00 900.00 2,200.00

Sales Journal Page 5
Invoice Account Account Post Date Number Debited Number Ref. Amount Jan. 2 203 XYZ Co. 120-111 900.00 TOTAL 2,200.00 120/410 General Ledger Account: Accounts Receivable Account Number: 120 Date Description Post Ref Debit Credit Balance Jan. 2 Sales SJ5 2,200 2,200

Sales Journal Page 5
Invoice Account Account Post Date Number Debited Number Ref. Amount Jan. 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
Subsidiary Ledger

A subsidiary ledger is often used to provide details on individual balances of... customers (accounts receivable) and... suppliers (accounts payable).
Business Publishing
Accounting, 5/E
6 - 26
A Control Account
What is a control account? It is the general ledger account. It equals the sum of the individual account balances in a subsidiary ledger.
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Accounting, 5/E
6 - 27
Cash Receipts Journal Page 6

Debits
Date Cash Jan. 2 200 11 882 30 800 31 1,882 (101)
Credits
Sales Revenue 200 800 1,000 (410)
6 - 28
Sales Accounts Discounts Receivable 18 18 (420) 900 900 (112)

Accounting, 5/E
Business Publishing
Accounts Receivable
XYZ Company Jrnl. Date Ref. Jan. 2 S.5 11 CR.6
Subsidiary Ledger
Debit 900 Credit 900 Balance 900 -0-
Business Publishing
Accounting, 5/E
6 - 29
General Ledger
Cash Date Jan. 31
No. 101
Jrnl. Ref. CR.6
Debit 1,882
Credit
Debit Balance
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Accounting, 5/E
6 - 30
Cash Receipts Journal

Additional columns are provided to enter other account descriptions and amounts. Cash receipts amounts affecting subsidiary ledger accounts are posted daily to keep customer balances up to date. At month end, foot and crossfoot the journal and post to the general ledger.
Objective 5
Use the purchase journal, the cash disbursements journal, and the accounts payable subsidiary ledger.
Business Publishing
Accounting, 5/E
6 - 32
Purchases Journal
This is designed to account for all purchases of inventory, supplies, services, and other assets on account.
Business Publishing
Accounting, 5/E
6 - 33
Purchases Journal
Cash purchases are recorded in the cash disbursements journal. At month end the journal is footed and crossfooted. Posting to the general ledger is similar to posting from sales and cash receipts journals.
Cash Disbursements Journal

Most payments are by check and are recorded in the cash disbursements journal. The cash disbursements journal is also called: check register cash payments journal
Business Publishing
Accounting, 5/E
6 - 35
Cash Disbursements Journal

This has columns for : date check number payee cash amount (credit) accounts payable (debit) description and amount of other debits and credits
Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 6 - 36
General Journal
Special journals save much time in recording repetitive transactions and posting to the ledger. However, some transactions do not fit into any of the special journals.
Business Publishing
Accounting, 5/E
6 - 37
General Journal
Every accounting system needs a general journal. What entries are recorded in the general journal? depreciation expiration of prepaid insurance accrual of salaries payable adjusting and closing entries
General Journal
Many 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 a customers Accounts Receivable.
Business Publishing
Accounting, 5/E
6 - 39
Purchase Returns and Allowances

A debit memorandum is the business document that states that the buyer no longer owes the seller for the amount of the returned purchases. The buyer debits the Accounts Payable to the seller and credits Inventory.
Business Publishing
Accounting, 5/E
6 - 40
Balancing 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.
Business Publishing
Accounting, 5/E
6 - 41
End of Chapter 6
Business Publishing
Accounting, 5/E
6 - 42

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Accounting Information Systems Chapter 6

2002 Prentice Hall, Inc.

2002 Prentice Hall, Inc.

2002 Prentice Hall, Inc.

Flexibility relates to the systems ability to accommodate changes in the organization.

2002 Prentice Hall, Inc.

Computerized Accounting System

Software Company Personnel

Computerized Accounting System

Hardware is the electronic equipment that makes up a computer system.

2002 Prentice Hall, Inc.

2002 Prentice Hall, Inc.

Three Stages of Data Processing

Processing (Financial statements)

Computerized Accounting System

Journals, Ledgers, Other records accessed for reports

HARDWARE INPUT DATA

printed to paper, screen

2002 Prentice Hall, Inc.

Designing an Accounting System

2002 Prentice Hall, Inc.

Menu-Driven Accounting System

2002 Prentice Hall, Inc.

Menu-Driven Accounting System

COMPUTERIZED ACCOUNTING SYSTEM

Preparing Accounting Reports

Income Statement Balance Sheet

Statement of Owners Equity Statement of Cash Flows

Understand how spreadsheets are used in accounting.

2002 Prentice Hall, Inc.

Integrated Accounting Systems

2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 6 - 16

Anas Boutique Example

2002 Prentice Hall, Inc.

Anas Boutique Example

2002 Prentice Hall, Inc.

Anas Boutique Example

2002 Prentice Hall, Inc.

Cursor is on cell B4.

2002 Prentice Hall, Inc.

Using the Sales Journal

Using the Sales Journal

Using the Sales Journal

2002 Prentice Hall, Inc.

2002 Prentice Hall, Inc.

Cash Receipts Journal Page 6

Sales Accounts Discounts Receivable 18 18 (420) 900 900 (112)

XYZ Company Jrnl. Date Ref. Jan. 2 S.5 11 CR.6

2002 Prentice Hall, Inc.

Cash Date Jan. 31

Jrnl. Ref. CR.6

2002 Prentice Hall, Inc.

Cash Receipts Journal

2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 6 - 31

2002 Prentice Hall, Inc.

2002 Prentice Hall, Inc.

2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 6 - 34

Cash Disbursements Journal

2002 Prentice Hall, Inc.

Cash Disbursements Journal

2002 Prentice Hall, Inc.

2002 Prentice Hall, Inc.

2002 Prentice Hall, Inc. Business Publishing Accounting, 5/E Horngren/Harrison/Bamber 6 - 38