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ACCOUNTING INFORMATION SYSTEMS
Core Concepts of ACCOUNTING INFORMATION SYSTEMS Moscove, Simkin & Bagranoff Developed by: Marianne Bradford, Ph.D. Bryant College John Wiley & Sons, Inc.
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Chapter 5 Transaction Processing: Additional Cycles, Special Industries, and Accounting Software
Introduction Additional Transaction Processing Cycles Transaction Processing in Special Industries Accounting and Enterprise Software Business Process Reengineering
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Introduction Many organizations have specialized information needs, apart from the typical AIS requirements. The focus of AISs is moving from transaction processing to capturing data around business processes. Two important transaction processing cycles common to many organizational entities are the production and financing cycles.
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The Production Cycle The production cycle begins with a request for raw material and ends with the transfer of finished goods to warehouses. This cycle concerns the capture of data and the reporting of information associated with producing goods in manufacturing organizations.
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Objectives of the Production Cycle
Track purchases and sales of inventories Monitor and control manufacturing costs Control inventory Control and coordinate the production process Provide input for budgets
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Cost Accounting Subsystem
Provides important control information for the budget process. Can be characterized as job costing or process costing systems. A job costing information system keeps track of costs for each product or group of products, called a job. Process costing systems make use of averages to calculate the costs associated with goods in process and finished goods produced.
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Just-in-Time (JIT) Inventory Systems
Inventory control ensures that the production cycle processes inventory transactions appropriately so that the financial statements correctly state the value of the inventory and cost of goods sold accounts. The objective of JIT is to minimize inventories at all levels. The production AIS may be integrated with a computer integrated manufacturing (CIM) system.
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Inputs to the Production Cycle
Material Requisition Form - directs stores to issue materials or parts to designated work centers or authorized persons Bill of Materials - shows the types and quantities of parts needed to make a single unit of product Master Production Schedule - shows the quantities of goods needed to meet sales demands
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Inputs to the Product Conversion Cycle
Production order - incorporates data from sales orders or forecasts, operations lists and bills of materials in order to authorize the production of an order or batch Job Time Card - shows the distribution of labor costs to specific jobs or production orders
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MRP Material requirements planning (MRP I) system monitors the acquisition and use of parts and subassemblies. Manufacturing resource planning (MRP II) is a more complex version of MRP II which uses the information from the bill of materials and production schedule to coordinate the purchase and use of raw material inventories.
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Outputs of the Product Conversion Cycle
Financial Statement Information Materials Price Lists - shows prices charged for raw materials Periodic Usage Reports - provides managerial information about how various production departments are using raw materials Inventory Reconciliation Reports - reconciles physical inventory with perpetual records
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Outputs of the Product Conversion Cycle
Inventory Status Reports - allows purchasing and production managers to monitor inventory levels Production Cost Reports - details the actual costs for each production operation, each cost element, and/or each separate job Manufacturing Status Reports - provide managers with information about the status of various jobs
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The Financing Cycle The financing process is where a company gets and uses financial resources, such as cash, other liquid assets and investments. The financing cycle includes the activities of borrowing cash or selling ownership shares.
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Objectives of the Financing Cycle
Effective cash management – organizations can make use of lockbox systems and electronic funds transfer (EFT). Minimizing cost of capital, or the cost of obtaining financial resources. Earn maximum return on investments by using financial planning models. Project cash flows
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Inputs to the Financing Cycle
Remittance Advices - accompanies a customer’s payment Deposit Slips - banks provide to document account deposits Checks - companies receive and issue checks Bank Statements - used to reconcile the cash balance in the company’s ledger against the cash balance in the bank account Stock Market Data Interest Data Financial Institution Profiles
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Outputs of the Financing Cycle
Financial Statement Information Cash Budget Investment Reports Debt and Interest Reports Financial Ratios Financial Planning Model Reports
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Transaction Processing in Special Industries
Vertical market refers to markets or industries that are distinct in terms of the services they provide or the goods they produce. These organizations may require more information than is typically output from a traditional AIS. Examples of specialized information needs include time and billing systems, activity based costing systems, and point-of-sale systems.
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Industries with Specialized AISs
Professional service Not-for-profit Health care Retail Construction Government Banking and Financial services Hospitality
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Accounting and Enterprise Software
Most companies purchase accounting and enterprise software. Another option is to “e-source” the software by buying the services of an application service provider (ASP). Integrated accounting software programs process all types of accounting transactions. Packages today include Internet connectivity and enable small businesses to create Web sites and engage in electronic commerce. Middle to high-end accounting software packages are typically sold by a value-added reseller (VAR).
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Enterprise-wide Accounting Software Solutions
Enterprise resource planning (ERP) systems are integrated programs do much more than process financial data. The capabilities of accounting software programs to process enterprise-wide data expand with the price and complexity of software. A valued feature of ERPs is the ability to interface with customers and suppliers. This is termed supply chain management.
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Specialized Accounting Software
Accounting software has become more sophisticated and customized for specific industry information needs. Specialized accounting software may include: Customer relationship management to keep track of sales calls, seminars, and phone calls with prospective clients Source code that may be customized to fit a particular firm’s needs.
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Business Process Reengineering
Today, AISs are less concerned with accounting transactions and more concerned with business events. Business events include important activities that affect the business but are not captured by the financial accounting system. Business process reengineering (BPR) concerns redesigning business processes from scratch.
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Copyright Copyright 2001 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make backup copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.
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Chapter 5
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