Chapter

7-1

ACCOUNTING INFORMATION SYSTEMS AND BUSINESS PROCESS – PART 1 Core Concepts of Accounting Information Systems

GERALD V. JADER

Chapter

7-2

BUSINESS PROCESS FUNDAMENTALS

• Overview of the Financial Accounting Cycle

• Journals

• Ledgers

• Trial Balances

• Financial Statements

GERALD V. JADER

Chapter

7-3

JOURNALS

• Chronological record of business events by account

• General Journal • Records any type of accounting transaction

• Special Journals • Captures specific types of transactions

GERALD V. JADER

Chapter

7-4

TYPES OF SPECIAL JOURNALS

• 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

GERALD V. JADER

Chapter

7-5

LEDGERS

• General Ledger • Contains detailed monetary information • Includes the assets, liabilities, owners’ equity, revenues, and

expenses of the company

• Chart of Accounts • Listing of all accounts used by the company • Provides organizational structure for the general ledger • Utilizes block coding structure

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Chapter

7-6

TRIAL BALANCES

• Listing of all accounts with the debit and credit balances

• Timing of Preparation • After all journal entries are posted

• Following the posting of adjusting entries

• Following the posting of closing entries

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Chapter

7-7

FINANCIAL STATEMENTS

• Primary output of financial accounting system

• Main Financial Statements • Income Statement

• Balance Sheet

• Statement of Owners’ Equity

• Statement of Cash Flows

GERALD V. JADER

Chapter

7-8

STEPS IN THE ACCOUNTING CYCLE

GERALD V. JADER

Chapter

7-9

CODING SYSTEMS

• Importance of Coding for AISs • Record, store, classify, and retrieve information • Utilize numeric and alphanumeric codes

• Design Considerations • Must serve a useful purpose

• Must be consistent

• Plan for future expansion

GERALD V. JADER

Chapter

7-10

TYPES OF CODES

• Mnemonic Codes • Helps user remember what they represent

• Sequence Codes • Sequential set of numbers

• Block Codes • Sequential codes • Blocks of numbers reserved for specific

• Group Codes • Combine two or more subcodes

GERALD V. JADER

Chapter

7-11

BLOCK CODE EXAMPLE

GERALD V. JADER

Chapter

7-12

COLLECTING AND REPORTING ACCOUNTING INFORMATION

• Design Considerations • Should be effective

• Expectations of outputs

• Outputs of an AIS • Reports to management

• Reports to investors and creditors • Files retaining transaction data

• Files retaining current data about accounts

GERALD V. JADER

Chapter

7-13

DESIGNING REPORTS

• Characteristics of Good Reports • Useful and convenient format

• Easy to identify and consistent

• Identification and Consistency • Include headings, page numbers, and dates

• Emphasize consistency

• Over time

• Across departmental or divisional levels

• With general accounting practice

GERALD V. JADER

Chapter

7-14

SOURCE DOCUMENTS

• Manage flow of accounting data • Dictate type of data collected

• Encourage completeness of data

• Distributors of information

• Establish authenticity of data

• Usage today • Extensively used in AISs

• Movement from paper to electronic format

GERALD V. JADER

Chapter

7-15

SAMPLE PURCHASE ORDER

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Chapter

7-16

SAMPLE SALES INVOICE

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Chapter

7-17

BUSINESS PROCESS

• Definition

• Collection of activities

• Creates value for organization

• AIS collects and reports data related to processes

• Economic event • Impacts financial statements

• Business event • Does not impact financial statements

GERALD V. JADER

Chapter

7-18

THE SALES PROCESS

• Process

• Begins with customer order

• Ends with collection of cash

• Primary Objectives of Sales Process • Process sales in a timely and efficient manner

• Collect cash in a timely and efficient manner

GERALD V. JADER

Chapter

7-19

OBJECTIVES OF THE SALES PROCESS

• Tracking sales of goods and/or services to customers

• Filling customer orders

• Maintaining customer records

• Billing customers for goods and services

• Collecting payment for goods and services

• Forecasting sales and cash receipts

GERALD V. JADER

Chapter

7-20

DATA FLOW DIAGRAM OF SALES PROCESS

GERALD V. JADER

Chapter

7-21

INPUTS TO THE SALES PROCESS

• Sales Order

• Created at time of sale

• Used to prepare the sales invoice

• Sales Invoice

• Reflects information of the sale

• Products purchased, price, terms of payment

• Remittance Advice

• May accompany payment

GERALD V. JADER

Chapter

7-22

INPUTS TO THE SALES PROCESS

• Shipping Notices

• Prepared when warehouse releases goods

• Copy possibly included with goods

• Additional copy sent to accounts receivable

• Debit/Credit Memoranda • Denotes return of damaged goods

• Identifies discrepancies about amount owed

GERALD V. JADER

Chapter

7-23

OUTPUTS OF THE SALES PROCESS

• Financial Statements

• Customer Billing Statement • Summarizes outstanding sales invoices

• Total amount currently owed

• Aging Report • Accounts receivable balances

• Categorized based on time outstanding

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Chapter

7-24

OUTPUTS OF THE SALES PROCESS

• Bad Debt Report

• Information on collection follow-up procedures

• Helps manage overdue accounts

• Cash Receipts Forecast

• Source documents used as inputs

• Prior payment experience and aging analysis aid in preparation

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Chapter

7-25

OUTPUTS OF THE SALES PROCESS

• Approved Customer Listing Report

• Identifies customers approved for sales

• Includes customer information such as billing address, credit limits, and billing terms

• Sales Analysis Reports • Detailed information captured by AIS

• Aid in decision-making process for production planning and marketing efforts

GERALD V. JADER

Chapter

7-26

SALES PROCESS SUMMARY

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Chapter

7-27

THE PURCHASING PROCESS

• Process

• Begins with request for goods/services

• Ends with payment of cash

• Primary Objectives of Purchasing Process • Purchase high-quality goods at best price

• Pay vendors at the optimal time

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Chapter

7-28

OBJECTIVES OF THE PURCHASING PROCESS

• 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

7-29

DATA FLOW DIAGRAM OF PURCHASING PROCESS

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Chapter

7-30

INPUTS TO THE PURCHASING PROCESS

• Purchase Requisition • Identifies item requested

• May indicate name of vendor

• Purchase Order • Based on Purchase Requisition

• Includes vendor information

• Vendor Invoice • Includes prices, shipping terms, and discounts

GERALD V. JADER

Chapter

7-31

INPUTS TO THE PURCHASING PROCESS

• Receiving Report • Count and condition of goods received

• Bill of Lading • Accompanies the good sent

• Carrier assumes responsibility for the goods

• Packing Slip • Specific goods and quantities included in

shipment

• Included in merchandise package

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Chapter

7-32

OUTPUTS OF THE PURCHASING PROCESS

• Financial Statement Information

• Vendor Checks • Supported by a voucher

• Signed by a person designated by management

• Check Register • List of all checks issued for a particular period

• Byproduct of batch processing

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Chapter

7-33

OUTPUTS OF THE PURCHASING PROCESS

• Discrepancy Reports • Notes differences in quantities or amounts • Based on reconciliation of purchase order,

receiving report, and the purchase invoice

• Cash Requirements Forecast • Predicts future payments and payment

dates • Utilizes multiple source documents

GERALD V. JADER

Chapter

7-34

PURCHASING PROCESS SUMMARY

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Chapter

7-35

IT IN SALES AND PURCHASING

• Electronic input • Wireless capabilities

• Automated data-entry technology

• Biometrics

• Inventory Management Systems

• RFID Tags

GERALD V. JADER

Chapter

7-36

CURRENT TRENDS IN BUSINESS PROCESSES

• Business Processes Outsourcing (BPO) • Business without boundaries • Offshoring

• Business Process Management Software (BPM)

• Collect corporate knowledge, data, and business rules • Accomplish business processes more efficiently

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Chapter

7-37

BPO EXAMPLES

GERALD V. JADER