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

2. Objectives
Describe the features of an effective accounting information system.
Understand how computerised and manual accounting systems work.
Understand how spreadsheets are used in accounting
Use the sales journal, the cash receipts journal and the accounts receivable subsidiary ledger
Use the purchases journal, the cash payments journal and the accounts payable subsidiary ledger

3. Describe the features of an effective accounting
Objective 1
Describe the features of
an effective accounting
information system.

4. Cost/benefit relationship
Basic Features
Control
Comparability
Flexibility
Cost/benefit relationship

5. Basic Features
Internal controls are the methods and procedures used to authorise transactions and safeguard assets.
Comparability means that the system works smoothly with operations, personnel, and the organisational structure.

6. Basic Features
Flexibility relates to the system’s ability to accommodate changes in the organisation.
A cost/benefit relationship indicates that the cost of controls do not exceed their value to the organisation.

7. Computerised Accounting System
Hardware
Software
Company
Personnel

8. Computerised Accounting System
Hardware is the electronic equipment that makes up a computer system.
Software is a system of instructions that drive the computer to perform various functions.
Properly trained personnel are critical to the successful operations of the system.

9. computerised and manual accounting systems work.
Objective 2
Understand how both
computerised and manual
accounting systems work.

10. Three Stages of Data Processing
Input
(Source documents)
Processing
(Financial
statements)
Output

11. Computerised Accounting System
ACCOUNTING RECORDS
Journals,
Ledgers,
Other records
PERSONNEL
input transactions, request
reports, protect records
posted
accessed for
reports
HARDWARE
printed to
paper,
screen
INPUT
SOFTWARE
PROCESSING
entered,
edited
OUTPUT
DATA
REPORTS

12. Designing an Accounting System
Design of the accounting system begins with the chart of accounts.
The chart of accounts lists all accounts and their account number in the ledger.

13. Menu-Driven Accounting System
Computer systems are organised by function or task.
Computer systems usually have a choice of processing options on a “menu.”

14. Menu-Driven Accounting System
General
Receivables
Payables
Inventory
Payroll
Reports
Posting
COMPUTERISED
ACCOUNTING
SYSTEM
Account Maintenance
Closing
Use arrow keys to make choice.
MAIN
Press <return> to access choice.
Press F7 <escape> to leave menu.

15. Preparing Accounting Reports
Trial
Balance
Financial
Statements
Accounts
Receivable Detail
Accounts
Payable Detail
Daily Cash
Report
Statement of Financial Performance
Statement of Owners’ Equity
Statement of Financial Position
Statement of Cash Flows
Use arrow keys to make choice.
REPORTS
Press <return> to access choice.
Press F7 <escape> to leave menu.

16. Understand how spreadsheets
Objective 3
Understand how spreadsheets
are used in accounting.

17. Integrated Accounting Systems
Computerised accounting systems are organised by modules.
These modules are separate but integrated units.
A sales transaction entry will update two modules:
Accounts Receivable / Sales
Inventory / Cost of Goods Sold

18. Ana’s Boutique Example
Ana wants to budget for expected cash collections in the month of May.
Past experience indicates that 50% of credit sales are collected in the month of sales and 50% the following month.

19. Ana’s Boutique Example
May sales were $250,000.
$50,000 were cash sales.
April credit sales amounted to $120,000.
What are the expected cash collections during the month of May?

20. Ana’s Boutique Example
May cash sales $ 50,000
Collection of April’s credit sales ,000
Collection of May’s credit sales 100,000
Total $210,000
Spreadsheets make calculations like these easier.

21. Spreadsheet Example Formula for B4: =B2–B3 Column: A B C Row: 1 2 3 45
Statement of Financial Performance:
Revenues 150,000
Expenses ,000
Net Profit
60,000
Cursor is on cell B4.

22. the cash receipts journal, and the accounts receivable
Objective 4
Use the sales journal,
the cash receipts journal,
and the accounts receivable
subsidiary ledger.

23. Special Journals What are special journals?
They are accounting journals used to record one specific type of transaction.
What are some examples?
Sales
Cash Receipts
Payroll
Purchases
Cash Payments

24. Using the Sales Journal
Sales Journal Page 5
Invoice Account Account Post
Date Number Debited Number Ref. Amount
Jan Joe Co 
Jan May Co 
Jan XYZ Co 
TOTAL ,200.00
120 / 410

25. Using the Sales Journal
Sales Journal Page 5
Invoice Account Account Post
Date Number Debited Number Ref. Amount
Jan XYZ Co 
TOTAL ,200.00
120 / 410
General Ledger Account: Accounts Receivable Account Number: Date Description Post Ref Debit Credit Balance Jan. 2 Sales SJ5 2, ,200

26. Using the Sales Journal
Sales Journal Page 5
Invoice Account Account Post
Date Number Debited Number Ref. Amount
Jan XYZ Co 
TOTAL ,200.00
120/410
General Ledger Account: Credit Sales Account Number: Date Description Post Ref Debit Credit Balance Jan. 2 Sales SJ , ,200

27. Subsidiary Ledger
A subsidiary ledger is often used to provide details on individual balances of...
customers (accounts receivable) and...
suppliers (accounts payable).

28. A Control Account What is a control account?
It is the general ledger account.
It equals the sum of the individual account balances in a subsidiary ledger.

29. Cash Receipts Journal — Page 6
Debits Credits
Sales Accounts Sales
Date Cash Discounts Receivable Revenue Jan
31 1, , (101) (420) (112) (410)

30. Accounts Receivable XYZ Company Subsidiary Ledger Jrnl.
Date Ref. Debit Credit Balance
Jan. 2 S
11 CR

31. General Ledger Cash No. 101 Jrnl. Debit Date Ref. Debit Credit Balance
Jan. 31 CR.6 1,882

32. Cash Receipts Journal
Additional columns are provided to enter other account descriptions and amounts.
Cash receipts amounts affecting subsidiary ledger accounts are posted daily to keep customer balances up to date.
At month end, foot and crossfoot the journal and post to the general ledger.

33. Use the purchase journal, the and the accounts payable
Objective 5
Use the purchase journal, the
cash payments journal,
and the accounts payable
subsidiary ledger.

34. Purchases Journal
This is designed to account for all purchases of inventory, supplies, services, and other assets on account.

35. Purchases Journal
Cash purchases are recorded in the cash payments journal.
At month end the journal is footed (totaled) and crossfooted.
Posting to the general ledger is similar to posting from sales and cash receipts journals.

36. Cash Payments Journal
Most payments are by check and are recorded in the cash payments journal.
The cash payments journal is also called:
cheque register
cash disbursements journal

37. Cash Payments Journal This has columns for: Date
Cheque number (or transfer number)
Account Debited
Debits;
Other Accounts, Accounts payable
Credits
Discounts Received, Cash at Bank

38. General Journal
Special journals save much time in recording repetitive transactions and posting to the ledger.
However, some transactions do not fit into any of the special journals.

39. General Journal Every accounting system needs a general journal.
What entries are recorded in the general journal?
depreciation
expiration of prepaid insurance
accrual of salaries payable
adjusting and closing entries

40. General Journal
Many companies record sales returns and allowances and purchase returns in the general journal.
A credit note (or credit memo) is the document issued by the seller for a credit to a customer’s Accounts Receivable.

41. Purchase Returns and Allowances
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.
The buyer debits the Accounts Payable to the seller and credits Inventory.

42. Balancing the Ledgers At the end of the accounting period:
Total debits and credits of account balances in the general ledger are equal.
Control account balances are equal to the sum of the appropriate subsidiary ledger accounts.

43. End of Chapter 6