Accounting Information Systems PowerPoint Slides to accompany Fundamental Accounting Principles, 14ce Prepared by Joe Pidutti, Durham College CHAPTER 7

1. Explain the relationship of the accounting information system (AIS) to the management information system (MIS) and identify the components of an AIS. (LO 1 ) 2. Explain the goals and uses of special journals. (LO 2 ) 3. Describe the use of controlling accounts and subledgers. (LO 3 ) © 2013 McGraw-Hill Ryerson Limited. Learning Objectives 2

4. Journalize and post transactions using special journals. (LO 4 ) 5. Journalize and post transactions using special journals in a periodic inventory system. (Appendix 7A) ( LO 5 ) © 2013 McGraw-Hill Ryerson Limited. Learning Objectives 3

A system designed to collect and process data within an organization for the purpose of providing users with information. © 2013 McGraw-Hill Ryerson Limited. Management Information Systems LO 1 4

Management Information System © 2013 McGraw-Hill Ryerson Limited. Sales and Marketing System Finance System Accounting Information System Human Resources System Production System InternalExternal  Community  Competitors  Customers  Government  Industry  Suppliers LO 1 5

A group of components that collect and process raw financial data into timely, accurate, relevant, and cost-effective information to meet the purposes of internal and external users. © 2013 McGraw-Hill Ryerson Limited. Accounting Information Systems (AIS) LO 1 6

Components of an AIS © 2013 McGraw-Hill Ryerson Limited. Inputs Source Documents Outputs Reports/ Information to Internal/ External Users Feedback Loop LO 1 Accounts Payable Accounts Receivable PP & E Payroll Accounting Information System 7

Most organizations use Special Journals to enhance efficiency of transaction processing. Types Sales Journal Cash Receipts Journal Purchases Journal Cash Disbursements Journal © 2013 McGraw-Hill Ryerson Limited. Special Journals LO 2 8

A listing of individual accounts with a common characteristic. Common Subledgers Accounts Receivable Accounts Payable Merchandise Inventory © 2013 McGraw-Hill Ryerson Limited. Subledgers LO 3 9

Accounts Receivable Subledger © 2013 McGraw-Hill Ryerson Limited. A separate subledger account is used to show how much each individual customer owes. LO 3 10

After all items are posted, the balance in the Accounts Receivable controlling account must equal the sum of the balances in the subledger. Accounts Receivable Subledger LO 3 © 2013 McGraw-Hill Ryerson Limited. 11

© 2013 McGraw-Hill Ryerson Limited. The sales journal is used to record sales of merchandise on credit. Sales Journal LO 4 12

On February 2, Jason Henry purchased $450 of merchandise on account from Outdoors Unlimited. The goods originally cost Outdoors $315. Record the entry in the Sales Journal. (Assume the use of a perpetual merchandise inventory system.) Sales Journal - Example © 2013 McGraw-Hill Ryerson Limited. LO 4 13

Sales Journal © 2013 McGraw-Hill Ryerson Limited. Since each transaction yields a debit to Accounts Receivable and a credit to Sales, we need only one column for these two accounts. This column total is posted monthly. LO 4 14

Sales Journal © 2013 McGraw-Hill Ryerson Limited. LO 4 Similarly, each transaction yields a debit to Cost of Goods Sold and a credit to Merchandise Inventory. Therefore, these accounts can also be included together in one column. This column total would also be posted monthly. 15

Sales Journal-Posting © 2013 McGraw-Hill Ryerson Limited. Daily, each transaction is posted to the appropriate Accounts Receivable subledger account. LO 4 16

Sales Journal-Posting © 2013 McGraw-Hill Ryerson Limited. A in the PR column indicates the transaction has been posted to the subledger account. LO 4 17

Here is the Sales Journal after recording some additional sales. Sales Journal © 2013 McGraw-Hill Ryerson Limited. LO 4 18

Sales Journal © 2013 McGraw-Hill Ryerson Limited. On Feb. 28 th, post the column total to Accounts Receivable and Sales. Feb. 28 S3 2,150 2, LO 4 19

Sales Journal © 2013 McGraw-Hill Ryerson Limited. Now post to the COGS and Merchandise Inventory accounts … Feb. 28 S3 1,500 15,600 Feb. 28 S3 1,500 14, LO 4

Sales Journal © 2013 McGraw-Hill Ryerson Limited. … and include the posting references. Feb. 28 S3 1,500 15,600 Feb. 28 S3 1,500 14, LO 4

The Accounts Receivable controlling account and the subledger are in balance. Testing the Ledger © 2013 McGraw-Hill Ryerson Limited. LO 4 22

If a company has few sales returns, they may record them in the General Journal. But, if a company has lots of sales returns, they may use a Sales Returns and Allowances Journal. Sales Returns and Allowances © 2013 McGraw-Hill Ryerson Limited. LO 4 23

© 2013 McGraw-Hill Ryerson Limited. The cash receipts journal is used to record all receipts of cash. Cash Receipts Journal LO 4 24

Categories of Cash Receipts Cash from cash sales Cash from credit customers Cash from other sources Cash Receipts Journal - Example © 2013 McGraw-Hill Ryerson Limited. LO 4 25

Cash Receipts Journal © 2013 McGraw-Hill Ryerson Limited. LO 4 26

The Purchases Journal is used to record all purchases on credit. Purchases Journal © 2013 McGraw-Hill Ryerson Limited. LO 4 27

Purchases Journal © 2013 McGraw-Hill Ryerson Limited. LO 4 28

The Cash Disbursements Journal is used to record all payments of cash. Outdoors Unlimited Cash Disbursements Journal © 2013 McGraw-Hill Ryerson Limited. LO 4 29

Cash Disbursements Journal © 2013 McGraw-Hill Ryerson Limited. LO 4 30

Used for all transactions not recorded in a special journal. Closing entries Adjusting entries Correcting entries Other entries © 2013 McGraw-Hill Ryerson Limited. General Journal LO 4 31

Mini-Quiz Purchased equipment on credit. Sold merchandise for cash. Paid for supplies that were purchased on account. Sold merchandise on account. © 2013 McGraw-Hill Ryerson Limited. Give the name of the journal in which the following transactions should be recorded. PJ CRJ CDJ SJ 32

What is the purpose of special journals? Special journals help reduce the costs related to the time and effort of posting accounts. © 2013 McGraw-Hill Ryerson Limited. Review 33

Review Why should sales to and receipts of cash from credit customers be recorded and posted daily? Daily recording and posting of credit sales and cash receipts from customers provides up-to-date information used in decisions about granting credit to customers. Also, up-to-date account balances are needed if customers inquire about the amount of their balances. © 2013 McGraw-Hill Ryerson Limited. 34

End of Chapter © 2013 McGraw-Hill Ryerson Limited. 35