1. 7-1 PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University © Copyright 2007 Thomson South-Western, a part of The Thomson Corporation. Thomson, the Star Logo, and South-Western are trademarks used herein under license. Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc. 7 Computerized Accounting Systems Financial Accounting Ingram and Albright 6 th edition Information for Decisions

2. 7-2ObjectivesObjectives Once you have completed this chapter, you should be able to—

3. 7-3 1.Identify the primary components of a computerized accounting system. ObjectivesObjectives ContinuedContinued 2.Describe the components of a computerized accounting system used to process data and produce useful information. 3.Describe how data are processed in various modules of an accounting system.

4. 7-4 4.Explain the use of relational databases to perform accounting functions. ObjectivesObjectives 5.Describe how a database system can be used to create a simple accounting system.

5. 7-51 ObjectiveObjective Identify the primary components of a computerized accounting system.

6. 7-6 Components of a Computerized Accounting System Systems that integrate most of the business information functions as a basis for management decisions are referred to as enterprise resource planning (ERP) systems.

7. 7-7 Exhibit 1 Components of an Accounting Information System

8. 7-8 The sales module receives order data from customers and maintains accounts receivable information. Components of a Computerized Accounting System

9. 7-9 Exhibit 1 Components of an Accounting Information System

10. 7-10 The purchasing and inventory management module provides purchase order data to vendors. Components of a Computerized Accounting System Vendors are those who supply specific products to a company.

11. 7-11 The purchasing and inventory management module maintains accounts payable and inventory information. Components of a Computerized Accounting System

12. 7-12 Exhibit 1 Components of an Accounting Information System

13. 7-13 The human resources module maintains data about employees, including hours worked and wage rates. It is used for preparing payroll and payroll tax information. Components of a Computerized Accounting System

14. 7-14 Exhibit 1 Components of an Accounting Information System

15. 7-15 The production module tracks the flow of costs through the manufacturing process. Components of a Computerized Accounting System

16. 7-16 Exhibit 1 Components of an Accounting Information System

17. 7-17 The asset management module identifies long-term asset costs, their expected useful lives, and where these assets are located in the company. Components of a Computerized Accounting System

18. 7-18 Exhibit 1 Components of an Accounting Information System

19. 7-19 The financial management module keeps track of debt, repayment schedules, interest rates, and shareholder information. Components of a Computerized Accounting System

20. 7-20 Exhibit 1 Components of an Accounting Information System

21. 7-21 The general ledger/financial reporting module provides information for use by external stakeholders, including shareholders and government regulators. Components of a Computerized Accounting System

22. 7-22 Subsidiary Accounts Subsidiary accounts include transactions for individual customers, suppliers, or products. Records for all subsidiary accounts of a particular type are maintained in a subsidiary ledger.

23. 7-23 Subsidiary Accounts A subsidiary accounts receivable ledger would consist of all the individual customers accounts, with data about purchases and payments for each customer.

24. 7-24 Control Accounts Control accounts are summary accounts that maintain totals for all subsidiary accounts of a particular type. Example: The balance for Accounts Receivable control account is the sum of the balances of all customer accounts.

25. 7-25 Control Accounts Records for each control account are maintained in a company’s general ledger.

26. 7-26 2 2 Describe the components of a computerized accounting system used to process data and produce useful information. ObjectiveObjective

27. 7-27 Exhibit 2 Data Processing in a Computerized Information System

28. 7-28 Using computer networks, such as the Internet, to make customer sales is referred to as E-business. Application software includes the computer program that permit data to be recorded and processed.

29. 7-29 A database is a set of computerized files in which company data are stored in the form that facilitates retrieval and updating of the data. A database management system controls database functions to ensure data are recorded properly and are accessed only by authorized users.

30. 7-30 Exhibit 4 A Computer Network

31. 7-31 A computer network is a set of hardware devices that are linked so they can exchange data among themselves using software.

32. 7-32 3 3 Describe how data are processed in various modules of an accounting system. ObjectiveObjective

33. 7-33CustomerCustomer Sales sales order Sales files Customer files invoice Accounting General Ledger files Shipping cash goods Inventory files A Sales Processing Module Exhibit 5

34. 7-34 Good internal controls requires that the personnel who account for the cash should not also have physical access to the cash. The Sales Module

35. 7-35 The Sales Module Accounts receivable and sales revenue transactions are recorded at the time goods are shipped to customers. Cash and accounts receivable transactions are recorded when cash is received.

36. 7-36 A Purchasing and Inventory Management Module Exhibit 6 purchase orderVendorVendor Purchasing Vendor files invoice Accounting General Ledger files Receiving cash goods Inventory files

37. 7-37 The Purchasing and Inventory Management Module The interaction of a company and its suppliers is known as supply-chain management.

38. 7-38 A Human Resources Module Exhibit 7 Time workedEmployeeEmployee Production Production files Accounting General Ledger files Personnel Cash Employee files GovernmentsGovernments Cash and payroll tax information

39. 7-39 The Human Resources Module The human resource function in a business is responsible for hiring and training employees. The data needed to account for employee activities involve employees’ hours and their wages or salaries.

40. 7-40 A Production Module Exhibit 8 Orders/ forecastSalesSales Manufacturing Inventory files Cost accounting General Ledger files Stores/ warehouse Plant Asset files Employee files

41. 7-41 The Production Module A special accounting function, known as cost accounting, keeps track of the costs of resources used in the manufacturing process.

42. 7-42 4 4 Explain the use of relational databases to perform accounting functions. ObjectiveObjective

43. 7-43 Relational Database A relational database is a set of related files that are linked so that files can be updated and information can be retrieved from the files efficiently.

44. 7-44 Relational Database A table is a file that contains data represented as rows and columns. Each column identifies a particular attribute of the entity or process described in the table. Each attribute in the table is referred to as a field.

45. 7-45 Relational Database Each table contains one or more primary keys that uniquely identifies the entities or processes recorded in the rows of the table. The primary key is used to connect the tables into relationships.

46. 7-46 Relational Database The primary key in one table connects to the primary key or a foreign key in another table. A foreign key is a field that is a primary key in a different table.

47. 7-47 5 5 Describe how a database system can be used to create a simple accounting system. ObjectiveObjective

48. 7-48 Copying and Opening the Database It is highly recommended that the database be copied to a hard drive before it is used.

49. 7-49 Copying and Opening the Database It is a good idea to make several copies of the database under different names. FavoriteCookies1.mdb, FavoriteCookies2.mdb, and so on

50. 7-50 Database Contents Tables contain the data stored in the system. Queries are short programs that permit a user to obtain data from one or more tables. Forms provide a means for entering or reading data stored in the database. Reports provide summary information intended primarily to be printed. ContinuedContinued

51. 7-51 Database Contents Macros are sequences of steps a user performs to complete a particular task. Pages provide a means of creating web documents for accessing a database. Modules are computer programs to provide higher level functions in the database.

52. 7-52 Exercise 7-2 Click the button to skip this exercise. Press “Enter” or left click the mouse for solution. Complete the following sentence with the appropriate term: If you experience trouble making the button work, type 62 and press “Enter.” ContinuedContinued 1.A _____________ is a set of computerized files in which company data are stored in a form that facilitates retrieval and updating of the data. database

53. 7-53 Exercise 7-3 2.A _________________ is a set of related files that are linked so the files can be updated and information can be retrieved from the files efficiently. relational database Press “Enter” or left click the mouse for solution. Complete the following sentence with the appropriate term:

54. 7-54 Exercise 7-3 3.An accounting record of each (control) account and the balance of each such is called the _______________________. general ledger ContinuedContinued Press “Enter” or left click the mouse for solution. Complete the following sentence with the appropriate term:

55. 7-55 Exercise 7-3 4.A _______________________________ controls database functions to ensure data are recorded properly and can be accessed only by those authorized to record, update, or retrieve the data. database management system ContinuedContinued Complete the following sentence with the appropriate term: Press “Enter” or left click the mouse for solution.

56. 7-56 Exercise 7-3 5.A computer program that permits data to be recorded and processed is one kind of ____________________. application software ContinuedContinued Press “Enter” or left click the mouse for solution. Complete the following sentence with the appropriate term:

57. 7-57 Exercise 7-3 6.Financial data about individual items of importance in a company are recorded in ________________________. subsidiary accounts ContinuedContinued Press “Enter” or left click the mouse for solution. Complete the following sentence with the appropriate term:

58. 7-58 Exercise 7-3 7.Summary accounts that maintain totals for all subsidiary accounts of a particular type are called ________________________. control accounts ContinuedContinued Press “Enter” or left click the mouse for solution. Complete the following sentence with the appropriate term:

59. 7-59 Exercise 7-3 ContinuedContinued Press “Enter” or left click the mouse for solution. Complete the following sentence with the appropriate term: 8.Systems that integrate most of the business information functions are referred to as ___________________________________. enterprise resource planning (ERP) system

60. 7-60 Exercise 7-3 9.The interaction of a company and its suppliers is known as ___________ ____________________. supply- chain management ContinuedContinued Press “Enter” or left click the mouse for solution. Complete the following sentence with the appropriate term:

61. 7-61 Exercise 7-3 10.The use of computer networks, such as the Internet, to provide for customer sales is referred to as____________. E-business ContinuedContinued Press “Enter” or left click the mouse for solution. Complete the following sentence with the appropriate term:

62. 7-62 T HE E ND C HAPTER 7

63. 7-63