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Accounting Information Systems Chapter 6 HORNGREN ♦ HARRISON ♦ BAMBER ♦ BEST ♦ FRASER ♦ WILLETT.

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Presentation on theme: "Accounting Information Systems Chapter 6 HORNGREN ♦ HARRISON ♦ BAMBER ♦ BEST ♦ FRASER ♦ WILLETT."— Presentation transcript:

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2 Accounting Information Systems Chapter 6 HORNGREN ♦ HARRISON ♦ BAMBER ♦ BEST ♦ FRASER ♦ WILLETT

3 6 - 2 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Objectives 1.Describe the features of an effective accounting information system. 2.Understand how computerised and manual accounting systems work. 3.Understand how spreadsheets are used in accounting 4.Use the sales journal, the cash receipts journal and the accounts receivable subsidiary ledger 5.Use the purchases journal, the cash payments journal and the accounts payable subsidiary ledger

4 6 - 3 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Describe the features of an effective accounting information system. Objective 1

5 6 - 4 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Control Comparability Flexibility Cost/benefit relationship Basic Features

6 6 - 5 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Basic Features l Internal controls are the methods and procedures used to authorise transactions and safeguard assets. l Comparability means that the system works smoothly with operations, personnel, and the organisational structure.

7 6 - 6 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Basic Features l Flexibility relates to the system’s ability to accommodate changes in the organisation. l A cost/benefit relationship indicates that the cost of controls do not exceed their value to the organisation.

8 6 - 7 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Company Personnel Company Personnel Hardware Software Computerised Accounting System

9 6 - 8 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Computerised Accounting System l Hardware is the electronic equipment that makes up a computer system. l Software is a system of instructions that drive the computer to perform various functions. l Properly trained personnel are critical to the successful operations of the system.

10 6 - 9 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Objective 2 Understand how both computerised and manual accounting systems work.

11 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Processing Input (Source documents) (Financial statements) Output Three Stages of Data Processing

12 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Computerised Accounting System entered, edited printed to paper, screen ACCOUNTING RECORDS Journals, Ledgers, Other records SOFTWARE PROCESSING PERSONNEL input transactions, request reports, protect records REPORTSDATA INPUT OUTPUT posted accessed for reports HARDWARE

13 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Designing an Accounting System l Design of the accounting system begins with the chart of accounts. l The chart of accounts lists all accounts and their account number in the ledger.

14 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Menu-Driven Accounting System l Computer systems are organised by function or task. l Computer systems usually have a choice of processing options on a “menu.”

15 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Menu-Driven Accounting System GeneralReceivablesPayables Payroll Reports Posting Account Maintenance COMPUTERISED ACCOUNTING SYSTEM Use arrow keys to make choice. Press to access choice. Press F7 to leave menu. MAIN Inventory Closing

16 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Preparing Accounting Reports Trial Balance Financial Statements Accounts Receivable Detail Accounts Payable Detail Daily Cash Report Statement of Financial Performance Statement of Financial Position Statement of Owners’ Equity Statement of Cash Flows Use arrow keys to make choice. Press to access choice. Press F7 to leave menu. REPORTS

17 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Objective 3 Understand how spreadsheets are used in accounting.

18 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Integrated Accounting Systems l Computerised accounting systems are organised by modules. l These modules are separate but integrated units. l A sales transaction entry will update two modules: 1 Accounts Receivable / Sales 2 Inventory / Cost of Goods Sold

19 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Ana’s Boutique Example l Ana wants to budget for expected cash collections in the month of May. l Past experience indicates that 50% of credit sales are collected in the month of sales and 50% the following month.

20 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Ana’s Boutique Example l May sales were $250,000. l $50,000 were cash sales. l April credit sales amounted to $120,000. l What are the expected cash collections during the month of May?

21 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Ana’s Boutique Example l May cash sales$ 50,000  Collection of April’s credit sales 60,000  Collection of May’s credit sales 100,000  Total$210,000 l Spreadsheets make calculations like these easier.

22 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Spreadsheet Example Statement of Financial Performance: Revenues150,000 Expenses 90,000 Net Profit Row: Column: A B C Formula for B4: =B2–B3 Cursor is on cell B4. 60,000

23 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Objective 4 Use the sales journal, the cash receipts journal, and the accounts receivable subsidiary ledger.

24 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Special Journals l What are special journals? l They are accounting journals used to record one specific type of transaction. l What are some examples? SalesCash Receipts Payroll Cash PaymentsPurchases

25 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Sales Journal Page 5 InvoiceAccount Account Post DateNumberDebitedNumberRef. Amount Jan Joe Co  Jan May Co  Jan XYZ Co  TOTAL 2, / 410 Using the Sales Journal

26 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Sales Journal Page 5 InvoiceAccount Account Post DateNumberDebitedNumberRef. Amount Jan XYZ Co  TOTAL 2, / 410 General Ledger Account: Accounts Receivable Account Number: 120 DateDescriptionPost Ref Debit Credit Balance Jan. 2SalesSJ52,200 2,200 Using the Sales Journal

27 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Using the Sales Journal Sales Journal Page 5 InvoiceAccount Account Post DateNumberDebitedNumberRef. Amount Jan XYZ Co  TOTAL 2, /410 General Ledger Account: Credit Sales Account Number: 410 DateDescriptionPost RefDebit Credit Balance Jan. 2SalesSJ5 2,200 2,200

28 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Subsidiary Ledger l A subsidiary ledger is often used to provide details on individual balances of... – customers (accounts receivable) and... – suppliers (accounts payable).

29 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia A Control Account l What is a control account? l It is the general ledger account. l It equals the sum of the individual account balances in a subsidiary ledger.

30 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Debits Credits Sales Accounts Sales Date Cash Discounts Receivable Revenue Jan , ,000 (101) (420) (112) (410) Cash Receipts Journal — Page 6

31 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Accounts Receivable XYZ CompanySubsidiary Ledger Jrnl. DateRef.DebitCreditBalance Jan. 2S CR

32 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia General Ledger Jrnl.Debit DateRef.DebitCreditBalance Jan. 31CR.61,882 CashNo. 101

33 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Cash Receipts Journal l Additional columns are provided to enter other account descriptions and amounts. l Cash receipts amounts affecting subsidiary ledger accounts are posted daily to keep customer balances up to date. l At month end, foot and crossfoot the journal and post to the general ledger.

34 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Objective 5 Use the purchase journal, the cash payments journal, and the accounts payable subsidiary ledger.

35 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Purchases Journal l This is designed to account for all purchases of inventory, supplies, services, and other assets on account.

36 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Purchases Journal l Cash purchases are recorded in the cash payments journal. l At month end the journal is footed (totaled) and crossfooted. l Posting to the general ledger is similar to posting from sales and cash receipts journals.

37 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Cash Payments Journal l Most payments are by check and are recorded in the cash payments journal. l The cash payments journal is also called: – cheque register – cash disbursements journal

38 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Cash Payments Journal l This has columns for: – Date – Cheque number (or transfer number) – Account Debited – Debits; – Other Accounts, Accounts payable – Credits – Discounts Received, Cash at Bank

39 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia General Journal l Special journals save much time in recording repetitive transactions and posting to the ledger. l However, some transactions do not fit into any of the special journals.

40 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia General Journal l Every accounting system needs a general journal. l What entries are recorded in the general journal? – depreciation – expiration of prepaid insurance – accrual of salaries payable – adjusting and closing entries

41 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia General Journal l Many companies record sales returns and allowances and purchase returns in the general journal. l A credit note (or credit memo) is the document issued by the seller for a credit to a customer’s Accounts Receivable.

42 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Purchase Returns and Allowances l A debit note or debit memorandum is the business document that states that the buyer no longer owes the seller for the amount of the returned purchases. l The buyer debits the Accounts Payable to the seller and credits Inventory.

43 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia Balancing the Ledgers l At the end of the accounting period: l Total debits and credits of account balances in the general ledger are equal. l Control account balances are equal to the sum of the appropriate subsidiary ledger accounts.

44 Horngren ♦ Harrison ♦ Bamber ♦ Best ♦ Fraser ♦ Willett, Accounting 4e Copyright © 2004 Pearson Education Australia End of Chapter 6


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