1. Copyright © 2007 Prentice-Hall. All rights reserved 1 Accounting Information Systems Chapter 7

2. Copyright © 2007 Prentice-Hall. All rights reserved 2 Objective 1 Describe an effective accounting information system

3. Copyright © 2007 Prentice-Hall. All rights reserved 3 Basic Features Control – –Internal controls are established to ensure that your assets are safeguarded and not being wasted. –They are also established to ensure that employees follow company procedures Compatibility - Use an accounting system that is appropriate for the size of the company and the complexity of transactions

4. Copyright © 2007 Prentice-Hall. All rights reserved 4 Basic Features Flexibility- Can your company respond to change effectively? Cost/benefit relationship – The cost of an accounting system should not outweigh the benefits

5. Copyright © 2007 Prentice-Hall. All rights reserved 5 Objective 2 Understand both computerized and manual accounting systems

6. Copyright © 2007 Prentice-Hall. All rights reserved 6 Computerized Accounting System Hardware – equipment (computers, printers, monitors, network that links computers) Software - programs that tells the computer what to do (store data, generate reports)

7. Copyright © 2007 Prentice-Hall. All rights reserved 7 Processing Input Output Three Stages of Data Processing Come from source documents like invoices Journalizing, posting Financial statements and other reports

8. Copyright © 2007 Prentice-Hall. All rights reserved 8 Computerized Accounting System ACCOUNTING RECORDS Journals, Ledgers, Other records SOFTWARE PROCESSING REPORTS OUTPUT HARDWARE INPUT DATA

9. Copyright © 2007 Prentice-Hall. All rights reserved 9 Assets Current (11) Cash in Bank (111) Accounts Receivable (115) Customer A (115001) Customer B (115002) Customer C (115003) Inventory (120) Plant (12) Other (13) Designing a System – Chart of Accounts

10. Copyright © 2007 Prentice-Hall. All rights reserved 10 E7-13E7-13 NumberAccount 101Cash 102Accounts receivable 103Inventory 104Supplies 105Computer equipment 106Accumulated depreciation 201Accounts payable 221Note payable, long-term 301Jerry Mobile, capital 321Jerry Mobile, withdrawals 401Sales revenue 501Cost of goods sold 521Depreciation expense

11. Copyright © 2007 Prentice-Hall. All rights reserved 11 Processing Transactions – Manual System Similar transactions are grouped together and recorded in special journals –Sales journal (all sales on account) –Purchases journal (all purchases on account) –Cash receipts journal –Cash disbursements journal –General journal

12. Copyright © 2007 Prentice-Hall. All rights reserved 12 Processing Transactions – Computerized System Menu Driven Menu organized by function or task Posting is automatic –On-line processing –Batch processing

13. Copyright © 2007 Prentice-Hall. All rights reserved 13 Menu-Driven Accounting System LedgerInventoryReceivablesPayablesPayrollReports Posting Account Maintenance COMPUTERIZED ACCOUNTING SYSTEM COMPUTERIZED ACCOUNTING SYSTEM Use arrow keys to make choice Press to access choice Press F7 to leave menu Utilities Closing Transactions MAIN

14. Copyright © 2007 Prentice-Hall. All rights reserved 14 ERP Systems “Enterprise Resource Planning Systems” Integrates all departments and functions across a company into a single unified system

15. Copyright © 2007 Prentice-Hall. All rights reserved 15 Objective 3 Understand how spreadsheets are used in accounting

16. Copyright © 2007 Prentice-Hall. All rights reserved 16 Integrated Accounting Software: Spreadsheet Computer program designed to perform computational tasks Organized by cells, defined by a row and a column

17. Copyright © 2007 Prentice-Hall. All rights reserved 17 Integrated Accounting Software: Spreadsheet Cell B4 Labels Numbers Formulas

18. Copyright © 2007 Prentice-Hall. All rights reserved 18 E7-15E7-15 Annual Depreciation = Cost / Years of Life Annual Depreciation = B9/C8

19. Copyright © 2007 Prentice-Hall. All rights reserved 19 Objective 4 Use the sales journal, the cash receipts journal, and the accounts receivable ledger

20. Copyright © 2007 Prentice-Hall. All rights reserved 20 Special Journals Accounting journals used to record one specific type of transaction Save time Save money

21. Copyright © 2007 Prentice-Hall. All rights reserved 21 Special Journals TransactionSpecial JournalPosting Abbreviation Sales on accountSales journalS Cash receiptsCash receipts journalCR Purchases on accountPurchases journalP Cash paymentsCash payments journal CP All othersGeneral journalJ

22. Copyright © 2007 Prentice-Hall. All rights reserved 22 Sales Journal DATE INVOICE NO.ACCOUNT DEBITED POST REF ACCOUNTS RECEIVABLE DR. SALES REVENUE CR. COST OF GOODS SOLD DR. INVENTORY CR. Debit Accounts Receivable and credit Sales Revenue. Debit Cost of Goods Sold and credit Inventory

23. Copyright © 2007 Prentice-Hall. All rights reserved 23 Cash Receipts Journal DATE DEBITSCREDITS COST OF GOODS SOLD DR. INVENTORY CR. CASH SALES DISC ACCTS REC SALES REV OTHER ACCOUNTS ACCOUNT TITLEPRAMT Debit Cash and credit some other account

24. Copyright © 2007 Prentice-Hall. All rights reserved 24 Subsidiary Ledger Provides details on individual balances –Customers (accounts receivable) –Suppliers (accounts payable)

25. Copyright © 2007 Prentice-Hall. All rights reserved 25 Control Account The general ledger account Equals the sum of the individual account balances in a subsidiary ledger

26. Copyright © 2007 Prentice-Hall. All rights reserved 26 ACCOUNT ST. JOHN’S CAFE BALANCE DATEITEMJREFDEBITCREDITDEBITCREDIT Jan 1S7500 ACCOUNT ACCOUNTS RECEIVABLE BALANCE DATEITEM JRNL REFDEBITCREDITDEBITCREDIT JanS71,500 JanCr3 5001,000 ACCOUNT MARKET STREET GRILL BALANCE DATEITEMJREFDEBITCREDITDEBITCREDIT Jan 8S7300 ACCOUNT WELLWOOD INN BALANCE DATEITEMJREFDEBITCREDITDEBITCREDIT Jan 5S7700 Jan 10 CR3 500200 Controlling Account Subsidiary Accounts

27. Copyright © 2007 Prentice-Hall. All rights reserved 27 Objective 5 Use the purchase journal, the cash disbursements journal, and the accounts payable ledger

28. Copyright © 2007 Prentice-Hall. All rights reserved 28 Purchases Journal DATE ACCOUNT CREDITEDTERMSPR CREDITSDEBITS ACCOUNTS PAYABLEINVENTORYSUPPLIES OTHER ACCOUNTS ACCOUNT TITLEPRAMOUNT Debit Inventory or some other account and credit Accounts Payable

29. Copyright © 2007 Prentice-Hall. All rights reserved 29 Cash Payments Journal DATE CK NO ACCOUNT DEBITEDPR DEBITSCREDITS OTHER ACCOUNTS PAYABLEINVENTORYCASH Credit Cash….debit other accounts

30. Copyright © 2007 Prentice-Hall. All rights reserved 30 ACCOUNT FAVER EQUIPMENT COMPANY BALANCE DATEITEMJREFDEBITCREDITDEBITCREDIT Jan 1P7500 ACCOUNT ACCOUNTS PAYABLE BALANCE DATEITEM JRNL REFDEBITCREDITDEBITCREDIT JanP7800 JanCP3100700 ACCOUNT REAL TECHNOLOGIES BALANCE DATEITEMJREFDEBITCREDITDEBITCREDIT Jan 8P7100 ACCOUNT NOTTINGHAM SALES BALANCE DATEITEMJREFDEBITCREDITDEBITCREDIT Jan 5P7200 Jan 10 CP3100 Controlling Account Subsidiary Accounts

31. Copyright © 2007 Prentice-Hall. All rights reserved 31 General Journal Used for transactions that do not fit into any of the special journals including adjusting and closing entries

32. Copyright © 2007 Prentice-Hall. All rights reserved 32 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

33. Copyright © 2007 Prentice-Hall. All rights reserved 33 S7-6S7-6 Transactions: a.Cash sale of inventory b.Payment of rent c.Depreciation of computer equipment d.Purchases of inventory on account e.Collection of accounts receivable f.Expiration of prepaid insurance g.Sale on account J S CR P CP CR J

34. Copyright © 2007 Prentice-Hall. All rights reserved 34 S7-6S7-6 Transactions: h.Payment on account i.Cash purchase of inventory j.Collection of dividend revenue earned on an investment k.Prepayment of insurance l.Borrowing money on a long-term note payable m.Purchase of equipment on account n.Cost of goods sold along with a credit sale S CR P CP CR CP CP

35. Copyright © 2007 Prentice-Hall. All rights reserved 35 P7-34B (March 2) Sales Journal Page 1 DATE INVOICE NO.ACCOUNT DEBITED POST REF ACCOUNTS RECEIVABLE DR. SALES REVENUE CR. COST OF GOODS SOLD DR. INVENTORY CR. Mar 2L E Wooten2,3501,390191 L E Wooten Mar 2S12,350

36. Copyright © 2007 Prentice-Hall. All rights reserved 36 P7-34B (March 3) Purchases Journal Page 1 DATE ACCOUNT CREDITEDTERMSPR CREDITSDEBITS ACCOUNTS PAYABLEINVENTORYSUPPLIES OTHER ACCOUNTS ACCOUNT TITLEPRAMOUNT Mar 3Delwood 3/10, n/60 5,900 Delwood Plaza Mar 3P15,900

37. Copyright © 2007 Prentice-Hall. All rights reserved 37 P7-34B (March 4) Cash Receipts Journal DATE DEBITSCREDITS COST OF GOODS SOLD DR. INVENTORY CR. CASH SALES DISC ACCTS REC SALES REV OTHER ACCOUNTS ACCOUNT TITLEPRAMT Mar 4 3,4101,820 3,410

38. Copyright © 2007 Prentice-Hall. All rights reserved 38 P7-34B (March 5) Cash Payments Journal DATE CK NO ACCOUNT DEBITEDPR DEBITSCREDITS OTHER ACCOUNTS PAYABLEINVENTORYCASH Mar 5473Furniture1,080

39. Copyright © 2007 Prentice-Hall. All rights reserved 39 P7-34B (March 8) Cash Receipts Journal DATE DEBITSCREDITS COST OF GOODS SOLD DR. INVENTORY CR. CASH SALES DISC ACCTS REC SALES REV OTHER ACCOUNTS ACCOUNT TITLEPRAMT Mar 4 3,4101,820 3,410 8 120 Interest Revenue

40. Copyright © 2007 Prentice-Hall. All rights reserved 40 P7-34B (March 9) Sales Journal Page 1 DATE INVOICE NO.ACCOUNT DEBITED POST REF ACCOUNTS RECEIVABLE DR. SALES REVENUE CR. COST OF GOODS SOLD DR. INVENTORY CR. Mar 2L E Wooten2,3501,390191 Cortez Co Mar 9S16,250 6.250 9Cortez Co6,2503,300192

41. Copyright © 2007 Prentice-Hall. All rights reserved 41 P7-34B (March 10) Cash Payments Journal DATE CK NO ACCOUNT DEBITEDPR DEBITSCREDITS OTHER ACCOUNTS PAYABLEINVENTORYCASH Mar 5473Furniture1,080 10474770 Inventory

42. Copyright © 2007 Prentice-Hall. All rights reserved 42 P7-34B (March 12) Cash Receipts Journal DATE DEBITSCREDITS COST OF GOODS SOLD DR. INVENTORY CR. CASH SALES DISC ACCTS REC SALES REV OTHER ACCOUNTS ACCOUNT TITLEPRAMT Mar 4 3,4101,820 3,410 8 120 Interest Revenue 12 2,303 Wooten 2,35047 L E Wooten Mar 2S12,350 Mar 12CR12,350 -0-

43. Copyright © 2007 Prentice-Hall. All rights reserved 43 End of Chapter 7