1. © 2016 Pearson Education, Inc. Appendix C Accounting Information Systems

2. Learning Objectives 1.Describe an effective accounting information system 2.Journalize and post sales and cash receipts in a manual accounting information system using special journals and subsidiary ledgers C-2 © 2016 Pearson Education, Inc.

3. Learning Objectives 3.Journalize and post purchases, cash payments, and other transactions in a manual accounting information system using special journals and subsidiary ledgers C-3 © 2016 Pearson Education, Inc.

4. Learning Objectives 4.Describe how transactions are recorded in a computerized accounting information system C-4 © 2016 Pearson Education, Inc.

5. Learning Objective 1 Describe an effective accounting information system C-5 © 2016 Pearson Education, Inc.

6. What Is an Accounting Information System? An accounting information system (AIS) provides information that is useful for decision makers. An AIS: – Collects – Records – Stores – Processes accounting data C-6 © 2016 Pearson Education, Inc.

7. What Is an Accounting Information System? C-7 © 2016 Pearson Education, Inc.

8. Effective Accounting Information Systems An effective accounting information system provides: – Control – Compatibility – Flexibility – Relevance – Positive cost/benefit relationship C-8 © 2016 Pearson Education, Inc.

9. Components of an Accounting Information System An accounting information system has three basic components: – Source documents and input devices Purchase invoices, bank checks, sales invoices – Processing and storage A server allows employees to access information from anywhere in the world. – Outputs Reports, such as the financial statements C-9 © 2016 Pearson Education, Inc.

10. Learning Objective 2 Journalize and post sales and cash receipts in a manual accounting information system using special journals and subsidiary ledgers C-10 © 2016 Pearson Education, Inc.

11. How Are Sales and Cash Receipts Recorded in a Manual Accounting Information System? Manual accounting information systems are covered in this course because: – The accounting is the same regardless of the system. – Few small businesses have computerized all of their accounting. – Learning a manual system helps you master accounting. C-11 © 2016 Pearson Education, Inc.

12. Special Journals A special journal is an accounting journal designed to record one specific type of transaction. The four special journals are: – Sales journal – Cash receipts journal – Purchases journal – Cash payments journal C-12 © 2016 Pearson Education, Inc.

13. Special Journals C-13 © 2016 Pearson Education, Inc.

14. Subsidiary Ledgers Accounting information systems use subsidiary ledgers. There are two common subsidiary ledgers: Accounts receivable subsidiary ledger Accounts payable subsidiary ledger The sum of the balances in a group of related accounts in a subsidiary ledger is called a control account. C-14 © 2016 Pearson Education, Inc.

15. Accounts Receivable Subsidiary Ledger The accounts receivable subsidiary ledger includes a receivable account for each customer. C-15 © 2016 Pearson Education, Inc.

16. Accounts Payable Subsidiary Ledger The accounts payable subsidiary ledger lists: – Vendors in alphabetical order – Amounts paid – Amounts owed The total of the individual balances in the subsidiary ledger equal the Accounts Payable (control account) balance in the general ledger. C-16 © 2016 Pearson Education, Inc.

17. The Sales Journal Most merchandisers sell inventory on account. The credit sales are entered in a sales journal. The sale of merchandise inventory for cash is not recorded in the sales journal. C-17 © 2016 Pearson Education, Inc.

18. The Sales Journal C-18 © 2016 Pearson Education, Inc.

19. C-19 © 2016 Pearson Education, Inc. The Sales Journal

20. Instead of the sale transaction being recorded in the general journal, it is recorded in the sales journal. Note all items appear on a single line. C-20 © 2016 Pearson Education, Inc.

21. The Cash Receipts Journal The cash receipts journal records the collection of cash receipts. Every transaction in the cash receipts journal is a cash receipt; no payments are recorded. C-21 © 2016 Pearson Education, Inc.

22. The Cash Receipts Journal C-22 © 2016 Pearson Education, Inc.

23. The Cash Receipts Journal C-23 © 2016 Pearson Education, Inc.

24. Learning Objective 3 Journalize and post purchases, cash payments, and other transactions in a manual accounting information system using special journals and subsidiary ledgers C-24 © 2016 Pearson Education, Inc.

25. How Are Purchases, Cash Payments, and Other Transactions Recorded in a Manual Accounting Information System? A merchandising business purchases merchandise inventory and other items on account. The purchases journal handles these transactions. Cash purchases are not recorded in the purchases journal; they are recorded in the cash payments journal. C-25 © 2016 Pearson Education, Inc.

26. The Purchases Journal C-26 © 2016 Pearson Education, Inc.

27. The Purchases Journal C-27 © 2016 Pearson Education, Inc.

28. The Cash Payments Journal Businesses make most payments by check. All cash and check payments are recorded in the cash payments journal. This special journal is also called the check register and the cash disbursements journal. C-28 © 2016 Pearson Education, Inc.

29. The Cash Payments Journal C-29 © 2016 Pearson Education, Inc.

30. The Cash Payments Journal C-30 © 2016 Pearson Education, Inc.

31. The General Journal Not all transactions can be recorded in a special journal. The general journal is used to record all other transactions, such as: – Adjusting entries for depreciation – Expiration of prepaid insurance – Accrual of salaries payable – Adjustments for sales returns and allowances and purchase returns and allowances C-31 © 2016 Pearson Education, Inc.

32. C-32 © 2016 Pearson Education, Inc. The General Journal

33. Learning Objective 4 Describe how transactions are recorded in a computerized accounting information system C-33 © 2016 Pearson Education, Inc.

34. How Are Transactions Recorded in a Computer Accounting Information Systems? A computerized accounting information system has two basic components: – Hardware is the electronic equipment, such as computers, monitors, printers, and the network that connects them. – Software is the set of programs that drives the computer. C-34 © 2016 Pearson Education, Inc.

35. Entry-Level Software Two popular computerized accounting information systems for small businesses are: – QuickBooks – Sage 50 Accounting These programs allow businesses to: C-35 Enter sales transaction s Record expenses Produce reports Organize finances © 2016 Pearson Education, Inc.

36. Enterprise Resource Planning (ERP) Systems Larger companies often use an enterprise resource planning (ERP) system to manage their data. ERP systems are compatible with cloud computing. C-36 Advantages Reduce operating costs. Help companies adjust to change. Integrate separate software systems. Disadvantages Major installations are expensive. Implementation requires large commitment of time and people. © 2016 Pearson Education, Inc.

37. QuickBooks On June 23, Smart Touch Learning performed $3,000 of services for Richard Michura on account. Smart Touch Learning needs to create an invoice for Richard. In a computerized accounting system, the business does not have to record the transaction in debit and credit format. The software automatically posts to the appropriate general ledger accounts. C-37 © 2016 Pearson Education, Inc.

38. QuickBooks C-38 © 2016 Pearson Education, Inc.

39. QuickBooks The Vendors tab of QuickBooks is used to record bills received. On June 25, Smart Touch Learning received a $580 bill for utilities. The company records the bill in QuickBooks, and all items will post automatically to the appropriate general ledger accounts. C-39 © 2016 Pearson Education, Inc.

40. QuickBooks C-40 © 2016 Pearson Education, Inc.

41. QuickBooks C-41 © 2016 Pearson Education, Inc.

42. C-42 © 2016 Pearson Education, Inc.