Collecting and Reporting Accounting Information Design of an effective AIS begins by considering outputs from the system. Outputs of an AIS include: 1.
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Presentation on theme: "Collecting and Reporting Accounting Information Design of an effective AIS begins by considering outputs from the system. Outputs of an AIS include: 1."— Presentation transcript:
Collecting and Reporting Accounting Information Design of an effective AIS begins by considering outputs from the system. Outputs of an AIS include: 1. reports to management 2. reports to investors and creditors 3. files that retain transaction data 4. files that retain current data about accounts
Considerations in Report Design Reports that only list exceptional conditions are exception reports. Reports should be useful to managerial decision- making without creating information overload. Format should be convenient, contain fundamental identification, and be consistent.
Source Documents Dictate kinds of data to be collected Encourage completeness of accounting data Serve as distributors of information Establish authenticity of accounting data
Core Business Processes An AIS collects and reports data related to an organization’s business processes. An economic event is an economic activity that involves an increase and/or decrease in dollar amounts in the financial statements. Since economic events impact financial statements, they are often called accounting transactions. A business event is one that does not impact financial statements, but is nevertheless important to the business.
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.
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.
Inputs to the Sales Process Sales Order - prenumbered and usually prepared in multiple copies; used to prepare sales invoice Sales Invoice - prepared after shipment of goods or providing of a service Remittance Advice - serve as source document for credits to accounts receivable Shipping Notice - warehouse prepares after goods are released for shipment Debit/Credit memo - issued for sales returns and allowances; debit memos increase amount customer owes
Outputs of the Sales Process Financial Statement Information Customer Billing Statement - includes customer account activity such as sales, returns, and cash receipts Accounts Receivable Aging Report - contains data concerning the status of open balances of all active credit customers arranging the overdue amounts by time periods
Outputs of the Sales Process Bad Debt Report - customer accounts written off. Cash Receipts Forecast - all data gathered from source documents in revenue transactions are inputs to this forecast. Customer Listing - shows customer codes, contacts, shipping and billing addresses, credit limits, and billing terms. Sales Analysis Reports - captures detailed data about each sale in order to monitor sales activities and plan production and marketing efforts.
Most Important Control of the Credit Sales Process Credit check must be performed by someone other than the salesperson. Credit check may even be automated. Check for credit approval, documentation, credit limit and current state of balances.
Most important Control in the Cash Sales Process Most important control in a Cash Sale is to ensure that the transaction (event) is originally recorded. May use scanners or other mechanical devices. Most important is customer audit. What are some examples of Customer Audit?
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 and for cash or on credit.
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
Inputs to the Purchasing Process Purchase Requisition - shows items requested by stores and may indicate the name of the vendor Purchase Order - based on purchase requisition but also includes vendor information and payment terms Vendor Invoice - includes items shipped by vendors, prices, shipping terms and discounts provided Receiving Report - reflects the count and condition of received goods Bill of lading – accompanies the goods sent Packing slip – included in the merchandise package Debit/Credit Memoranda - debits or credits accounts payable
Outputs of the Purchasing Process Financial Statement Information Vendor Checks - should be supported by a voucher and signed by a person designated by management Check Register - lists all checks issued for a particular period Discrepancy Reports - used to identify any differences among quantities on the purchase order, receiving report, and vendor invoice Cash Requirements Forecast - predicts future payments and payment dates by reference to outstanding purchase order, unbilled receiving reports and vendor invoices
Most Important Control in the Purchasing Process The most important control of the Purchasing process is to control the relationship between the purchasing agent and the vendor. This is done by using a Master Vendor List. Request for Bid (RFB) or Request for Proposal (RFP).