Chapter 7: Accounting Information Systems and Business Processes - Part I

2. Chapter 7:Accounting Information Systemsand Business Processes - Part I • Introduction • Business Process Fundamentals • Collecting and Reporting Accounting Information • The Sales Process • The Purchasing Process • Current Trends in Business Processes

3. Business Process Fundamentals • Overview of the Financial Accounting Cycle • Journals • Ledgers • Trial Balances • Financial Statements

4. Journals • Chronological record of business events by account • General Journal • Records any type of accounting transaction • Special Journals • Captures specific types of transactions

5. Types of Special Journals • 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

6. Ledgers • General Ledger • Contains detailed monetary information • Includes the assets, liabilities, owners’ equity, revenues, and expenses of the company • Chart of Accounts • Listing of all accounts used by the company • Provides organizational structure for the general ledger • Utilizes block coding structure

7. Trial Balances • Listing of all accounts with the debit and credit balances • Timing of Preparation • After all journal entries are posted • Following the posting of adjusting entries • Following the posting of closing entries

8. Financial Statements • Primary output of financial accounting system • Main Financial Statements • Income Statement • Balance Sheet • Statement of Owners’ Equity • Statement of Cash Flows

9. Steps in the Accounting Cycle

10. Coding Systems • Importance of Coding for AISs • Record, store, classify, and retrieve information • Utilize numeric and alphanumeric codes • Design Considerations • Must serve a useful purpose • Must be consistent • Plan for future expansion

11. Block Code Example

12. Study Break #1 • Which of the following provides the organizational structure for the general ledger? • Special Journals • A source document • General journals • D. The chart of accounts

13. Collecting and Reporting Accounting Information • Design Considerations • Should be effective • Expectations of outputs • Outputs of an AIS • Reports to management • Reports to investors and creditors • Files retaining transaction data • Files retaining current data about accounts

14. Example of a Report

15. Source Documents • Manage flow of accounting data • Dictate type of data collected • Encourage completeness of data • Distributors of information • Establish authenticity of data • Usage today • Extensively used in AISs • Movement from paper to electronic format

16. Sample Purchase Order

17. Sample Sales Invoice

18. Business Process • Definition • Collection of activities • Creates value for organization • AIS collects and reports data related to processes • Economic event • Impacts financial statements • Business event • Does not impact financial statements

19. The Sales Process • Process • Begins with customer order • Ends with collection of cash • Primary Objectives of Sales Process • Process sales in a timely and efficient manner • Collect cash in a timely and efficient manner

20. Objectives of the Sales Process • Tracking sales of goods and/or services to customers • Filling customer orders • Maintaining customer records • Billing customers for goods and services • Collecting payment for goods and services • Forecasting sales and cash receipts

21. Data Flow Diagram of Sales Process

22. Inputs to the Sales Process • Sales Order • Created at time of sale • Used to prepare the sales invoice • Sales Invoice • Reflects information of the sale • Products purchased, price, terms of payment • Remittance Advice • May accompany payment

23. Inputs to the Sales Process • Shipping Notices • Prepared when warehouse releases goods • Copy possibly included with goods • Additional copy sent to accounts receivable • Debit/Credit Memoranda • Denotes return of damaged goods • Identifies discrepancies about amount owed

24. Outputs of the Sales Process • Financial Statements • Customer Billing Statement • Summarizes outstanding sales invoices • Total amount currently owed • Aging Report • Accounts receivable balances • Categorized based on time outstanding

25. Outputs of the Sales Process • Bad Debt Report • Information on collection follow-up procedures • Helps manage overdue accounts • Cash Receipts Forecast • Source documents used as inputs • Prior payment experience and aging analysis aid in preparation

26. Accounts Receivable Aging Report

27. Outputs of the Sales Process • Approved Customer Listing Report • Identifies customers approved for sales • Includes customer information such as billing address, credit limits, and billing terms • Sales Analysis Reports • Detailed information captured by AIS • Aid in decision-making process for production planning and marketing efforts

28. Sales Process Summary

29. Study Break #3 ________ is (are) a collection of activities or flow of work in an organization that creates value. • An economic event • Accounting transactions • A business process • A chart of accounts

30. The Purchasing Process • Process • Begins with request for goods/services • Ends with payment of cash • Primary Objectives of Purchasing Process • Purchase high-quality goods at best price • Pay vendors at the optimal time

31. Objectives of the Purchasing Process • 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

32. Data Flow Diagram of Purchasing Process

33. Inputs to the Purchasing Process • Purchase Requisition • Identifies item requested • May indicate name of vendor • Purchase Order • Based on Purchase Requisition • Includes vendor information • Vendor Invoice • Includes prices, shipping terms, and discounts

34. Inputs to the Purchasing Process • Receiving Report • Count and condition of goods received • Bill of Lading • Accompanies the good sent • Carrier assumes responsibility for the goods • Packing Slip • Specific goods and quantities included in shipment • Included in merchandise package

35. Sample Packing Slip

36. Outputs of the Purchasing Process • Financial Statement Information • Vendor Checks • Supported by a voucher • Signed by a person designated by management • Check Register • List of all checks issued for a particular period • By-product of batch processing

37. Outputs of the Purchasing Process • Discrepancy Reports • Notes differences in quantities or amounts • Based on reconciliation of purchase order, receiving report, and the purchase invoice • Cash Requirements Forecast • Predicts future payments and payment dates • Utilizes multiple source documents

38. Purchasing Process Summary

39. IT in Sales and Purchasing • Electronic input • Wireless capabilities • Automated data-entry technology • Biometrics • Inventory Management Systems • RFID Tags

40. Current Trends in Business Processes • Business Processes Outsourcing (BPO) • Business without boundaries • Offshoring • Business Process Management Software (BPM) • Collect corporate knowledge, data, and business rules • Accomplish business processes more efficiently