2. Business Process Fundamentals
Chapter 4 Accounting Information Systems and Business Processes: Part I
Introduction
Business Process Fundamentals
Collecting and Reporting Accounting Information
Two Core Business Processes
Business Processes and Businesses-Without-Boundaries 2

3. Introduction AISs Effective processing systems
depend on the flow of data through various organizational subsystems
Effective processing systems
ensure capture of appropriate data and accurate information
Transaction processing cycles
organize transactions related to an organization’s business processes.

4. Business Process Fundamentals
The accounting cycle
Analysis of a transaction from a source document.
A source document
records a business activity such as the purchase or sale of goods,
can be a piece of paper, or
can be in electronic form.

5. Journals
The journal
is a chronological record of business events by account. Account structure of an organization is its chart of accounts.
may be a general journal or a special journal
a general journal allows any type of accounting transaction to be recorded,
a special journal captures specific types of transactions.

6. Special Journals for AISs
Sales Journal
Record of credit sales transactions
Purchases Journal
Record of credit purchase transactions
Cash Receipts Journal
Record of transactions involving receipts of cash
Cash Disbursements Journal
Record of transactions involving disbursements of cash

7. Ledgers Ledger general ledger subsidiary ledger
contains detailed monetary information about an organization’s
assets,
liabilities,
revenues, and
expenses.
subsidiary ledger
contains detailed records pertaining to a particular account in the general ledger.

8. Trial Balances AIS Three end of period trial balances:
records journal entries
posts them to the general ledger,
the system creates a trial balance.
Three end of period trial balances:
A preadjusting trial balance after all entries have been posted;
An adjusted trial balance after adjustments have been recorded and posted;
A postclosing trial balance after closing entries have been recorded and posted.

9. Steps in the accounting cycle

10. Financial Statements Financial statements
are the primary output of a financial accounting system
include the following statements:
Income Statement
Statement of Owners’ Equity
Balance Sheet
Cash Flow Statement

11. BUSINESS PROCESS FUNDAMENTALS
Which of the following provides the organizational structure for the general ledger?
Special journals.
A source document.
General Journals.
The chart of accounts.

12. Coding Systems AISs depend on coding to
record,
store,
classify and
retrieve financial data.
Computer codes for processing accounting transactions are
numeric or
alphanumeric codes

13. Coding Systems Codes are necessary to
Uniquely identify transactions and accounts
Compress data
Aid in classification of accounts or transactions
Communicate special meaning

14. Types of Codes Mnemonic Codes Sequence Codes Block Codes Group Codes
give visible clues concerning the objects they represent.
Sequence Codes
assign numbers or letters in consecutive order.
Block Codes
are sequential codes in which specific blocks of numbers are reserved for particular uses.
Group Codes
combining of two or more subcodes.

15. Design Considerations in Coding
Codes
should serve some useful purpose.
should be consistent.
should plan for future expansion.

16. Collecting and Reporting Accounting Information
The design of an AIS should
be effective
consider outputs from the system.
Outputs of an AIS include:
reports to management
reports to investors and creditors
files that retain transaction data
files that retain current data about accounts

17. Considerations in Report Design
Reports
should be useful for managerial decision-making,
should not create information overload.
Format of the reports should
contain fundamental identification,
be convenient, and
be consistent.
Reports that only list exceptional conditions are exception reports.

18. Collecting the Data for Output Reports
Source Documents
help manage the flow of accounting data by
dictating the kinds of data to be collected and help ensure legibility, consistency, and accuracy in recording data
encourage the completeness of accounting data
serve as distributors of information for individuals or departments.

19. Collecting the Data for Output Reports
help to establish the authenticity of accounting data in
establishing an audit trail,
testing for authorization of cash disbursement checks
testing for inventory disbursements, and
establishing accountability for the collection or distribution of money.

20. Core Business Processes
An AIS
collects and
reports data related to business processes which are collections of activities that create value.
An economic event
is an economic activity
impacts financial statements (accounting transactions).
A business event
is important to the business,
does not impact financial statements.

21. Core Business Processes
What is (are) a collection of activities or flow of work in an organization that creates value?
An economic event.
An accounting transaction.
A business process.
A chart of accounts.

22. 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.

23. 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

24. The Sales Process - Inputs
Sales Order
Prenumbered, usually prepared in multiple copies, and used to prepare sales invoice
Sales Invoice
prepared after shipment of goods or providing of a service
Remittance Advice
served as source document for credits to accounts receivable

25. The Sales Process - Inputs
Shipping Notice
prepared after goods are released for shipment, and may serve as a packing slip
Debit/Credit memo
issued for sales returns and allowances; debit memos increase amount customer owes

26. The Sales Process - Outputs
Financial Statement Information
Customer Billing Statement includes
sales,
returns, and
cash receipts
Accounts Receivable Aging Report
contains data concerning the status of open balances of all active credit customers
arranges the overdue amounts by time periods

27. The Sales Process - Outputs
Bad Debt Report
contains info about collection follow-up procedures for overdue customer accounts
Cash Receipts Forecast
data from source documents in revenue transactions are inputs

28. The Sales Process - Outputs
Approved Customer Listing
list of customer codes, contacts, shipping and billing addresses, credit limits, and billing terms
Sales Analysis Reports
detailed data about each sale in order to monitor sales activities and plan production and marketing efforts

29. 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
Purchase can be
by cash or
on credit

30. Purchasing Process - Objectives
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

31. Purchasing Process - Inputs
Purchase Requisition
shows items requested by stores, indicates names of vendors
Purchase Order
is based on purchase requisition including vendor information
Vendor Invoice
includes prices, shipping terms and discounts
Receiving Report
reflects the count and condition of goods received

32. Purchasing Process - Inputs
Bill of lading
accompanies the goods sent and given by the freight carrier to the supplier as a receipt.
Packing slip
indicates the specific quantities and items in the shipment and those items that are on back order. It is sometimes included in the merchandise package.
Debit/Credit Memoranda
debits or credits accounts payable.

33. Purchasing Process - Outputs
Financial Statement Information
Vendor Checks
supported by a voucher and
signed by a person designated by management
Check Register
list of all checks issued for a particular period

34. Purchasing Process - Outputs
Discrepancy Reports
used to identify any differences between quantities or amounts on the purchase order, the receiving report, and the purchase invoice.
Cash Requirements Forecast
predicts future payments and payment dates
Purchases analysis reports

35. IT in the Sales and Purchase Process
Which of the following reports is common to both the sales and the purchasing processes?
Cash receipts forecast and cash requirements forecast.
Financial statement information.
Discrepancy and bad debts reports.
None of the above.

36. IT in Sales and Purchase
Successful organizations need
to use accounting and enterprise software solutions at all levels
to have inputs and outputs in sales and purchase in electronic form
to save money with automated data-entry technology
IT has also made it possible for them
to work anywhere in the world
at any time of the day

37. Businesses-Without-Boundaries
In Businesses-Without-Boundaries
employees may be located anywhere
India, China, Canada, Mexico, or Malaysia.
employees may work on various business processes
HR, accounting, production, and so on

38. Businesses-Without-Boundaries
The important point for accountants
is costs and benefits of keeping a business process
in-house
what software solution the company should use to automate
how to integrate data and applications into business systems.
or outsourcing the function
what will be the many costs and
what will be the benefits/concerns associated with the decision.

39. Business Process Outsourcing
Business processes outsourcing
for strategic advantages
Competitiveness,
Revenue generation, and
cost savings.
Business processes outsourced are
human resources,
finance and accounting,
customer services,
learning services and training, and
information technology

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41. Chapter 4 36