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Chapter 4-1
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Chapter 4-2
Chapter 4Accounting Information Systemsand Business Processes: Part I
Introduction
Business Process Fundamentals
Collecting and Reporting Accounting Information
Two Core Business Processes
Business Processes and Businesses-Without-Boundaries
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Chapter 4-3
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 organize transactions related to an
organization’s business processes.
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Chapter 4-4
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.
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Chapter 4-5
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.
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Chapter 4-6
Special Journals for AISs
Sales Journal Record of credit sales transactions
Purchases Journal Record of credit purchase transactions
Cash Receipts Journal Record of transactions involving receipts of cash
Cash Disbursements Journal Record of transactions involving disbursements of
cash
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Chapter 4-7
Ledgers
Ledgergeneral ledger contains detailed monetary information about an
organization’s assets, liabilities, revenues, and expenses.
subsidiary ledger contains detailed records pertaining to a particular
account in the general ledger.
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Chapter 4-8
Trial Balances
AIS • records journal entries • posts them to the general ledger, • the system creates a trial balance.
Three end of period trial balances:A preadjusting trial balance after all entries have been posted;
An adjusted trial balance after adjustments have beenrecorded and posted;
A postclosing trial balance after closing entries havebeen recorded and posted.
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Chapter 4-9
Steps in the accounting cycle
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Chapter 4-10
Financial Statements
Financial statements are the primary output of a financial accounting system
include the following statements: Income Statement Statement of Owners’ Equity Balance Sheet Cash Flow Statement
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Chapter 4-11
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.
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Chapter 4-12
Coding Systems
AISs depend on coding to record, store, classify and retrieve financial data.
Computer codes for processingaccounting transactions are numeric or alphanumeric codes
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Chapter 4-13
Coding Systems
Codes are necessary to Uniquely identify transactions and accounts Compress data Aid in classification of accounts or transactions Communicate special meaning
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Chapter 4-14
Types of Codes
Mnemonic Codes give visible clues concerning the objects they represent.
Sequence Codes assign numbers or letters in consecutive order.
Block Codes are sequential codes in which specific blocks
of numbers are reserved for particular uses. Group Codes combining of two or more subcodes.
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Chapter 4-15
Design Considerations in Coding
Codes should serve some useful purpose.
should be consistent.
should plan for future expansion.
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Chapter 4-16
Collecting and Reporting Accounting Information
The design of an AIS should be effective consider outputs from the system.
Outputs of an AIS include: reports to management reports to investors and creditors files that retain transaction data files that retain current
data about accounts
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Chapter 4-17
Considerations in Report Design
Reports should be useful for managerial decision-
making, should not create information overload.
Format of the reports should contain fundamental identification, be convenient, and be consistent.
Reports that only list exceptional conditions are exception reports.
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Chapter 4-18
Collecting the Data forOutput 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 inrecording dataencourage the completeness of accounting data
serve as distributors of information for individualsor departments.
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Chapter 4-19
Collecting the Data forOutput 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.
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Chapter 4-20
Core Business Processes
An AIS collects and reports data related to business processes which are
collections of activities that create value.
An economic event is an economic activity impacts financial statements (accounting transactions).
A business event is important to the business, does not impact financial statements.
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Chapter 4-21
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.
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Chapter 4-22
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.
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Chapter 4-23
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
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Chapter 4-24
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 providingof a service
Remittance Adviceserved as source document for credits to accounts receivable
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Chapter 4-25
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; debitmemos increase amount customer owes
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Chapter 4-26
The Sales Process - Outputs
Financial Statement Information Customer Billing Statement includes sales, returns, and cash receipts
Accounts Receivable Aging Report contains data concerning the status of open
balances of all active credit customers arranges the overdue amounts by time periods
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Chapter 4-27
Bad Debt Report contains info about collection follow-up procedures
for overdue customer accounts
Cash Receipts Forecast data from source documents in revenue
transactions are inputs
The Sales Process - Outputs
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Chapter 4-28
Approved Customer Listing list of customer codes, contacts, shipping and
billing addresses, credit limits, and billing terms
Sales Analysis Reports detailed data about each sale in order to monitor
sales activities and plan production and marketing efforts
The Sales Process - Outputs
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Chapter 4-29
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 either goods or services
Purchase can be by cash or on credit
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Chapter 4-30
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
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Chapter 4-31
Purchasing Process - Inputs
Purchase Requisitionshows 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
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Chapter 4-32
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 debits or credits accounts payable.
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Chapter 4-33
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
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Chapter 4-34
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.
Cash Requirements Forecast predicts future payments and payment dates
Purchases analysis reports
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Chapter 4-35
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.
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Chapter 4-36
IT in Sales and Purchase
Successful organizations needto use accounting and enterprise softwaresolutions at all levelsto have inputs and outputs in sales and purchase in electronic formto save money with automated data-entry technology
IT has also made it possible for themto work anywhere in the worldat any time of the day
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Chapter 4-37
Businesses-Without-Boundaries
In Businesses-Without-Boundariesemployees may be located anywhere India, China, Canada, Mexico, or Malaysia.
employees may work on various business processes HR, accounting, production, and so on
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Chapter 4-38
Businesses-Without-Boundaries
The important point for accountants is costs and benefits of keeping a businessprocess in-house
what software solution the company should use to automate
how to integrate data and applications into business systems.
or outsourcing the function what will be the many costs and what will be the benefits/concerns associated with the
decision.
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Chapter 4-39
Business Process Outsourcing
Business processes outsourcingfor 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
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Chapter 4-40
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 purchasermay 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.
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Chapter 4-41
Chapter 4