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Accounting Information Systems

Accounting Information Systems. Chapter 7. Objective 1. Describe an effective accounting information system. Basic Features. Control – Internal controls are established to ensure that your assets are safeguarded and not being wasted.

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Accounting Information Systems

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  1. Accounting Information Systems Chapter 7

  2. Objective 1 Describe an effective accounting information system

  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. 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. Objective 2 Understand both computerized and manual accounting systems

  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. Three Stages ofData Processing Come from source documents like invoices Input Financial statements and other reports Journalizing, posting Processing Output

  8. INPUT OUTPUT DATA REPORTS Computerized Accounting System ACCOUNTING RECORDS Journals, Ledgers, Other records HARDWARE SOFTWARE PROCESSING

  9. Designing a System – Chart of Accounts

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

  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. Processing Transactions – Computerized System • Menu Driven • Menu organized by function or task • Posting is automatic • On-line processing • Batch processing

  13. MAIN Menu-Driven Accounting System Ledger Receivables Payables Inventory Payroll Reports Utilities Transactions COMPUTERIZED ACCOUNTING SYSTEM Posting AccountMaintenance Closing Use arrow keys to make choice Press <return> to access choice Press F7 <escape> to leave menu

  14. ERP Systems • “Enterprise Resource Planning Systems” • Integrates all departments and functions across a company into a single unified system

  15. Objective 3 Understand how spreadsheets are used in accounting

  16. Integrated Accounting Software: Spreadsheet • Computer program designed to perform computational tasks • Organized by cells, defined by a row and a column

  17. Labels Cell B4 Numbers Formulas Integrated Accounting Software: Spreadsheet

  18. E7-15 Annual Depreciation = Cost / Years of Life Annual Depreciation = B9/C8

  19. Objective 4 Use the sales journal, the cash receipts journal, and the accounts receivable ledger

  20. Special Journals • Accounting journals used to record one specific type of transaction • Save time • Save money

  21. Special Journals

  22. Sales Journal Debit Accounts Receivable and credit Sales Revenue. Debit Cost of Goods Sold and credit Inventory

  23. Cash Receipts Journal Debit Cash and credit some other account

  24. Subsidiary Ledger • Provides details on individual balances • Customers (accounts receivable) • Suppliers (accounts payable)

  25. Control Account • The general ledger account • Equals the sum of the individual account balances in a subsidiary ledger

  26. Controlling Account Subsidiary Accounts

  27. Objective 5 Use the purchase journal, the cash disbursements journal, and the accounts payable ledger

  28. Purchases Journal Debit Inventory or some other account and credit Accounts Payable

  29. Cash Payments Journal Credit Cash….debit other accounts

  30. Controlling Account Subsidiary Accounts

  31. General Journal • Used for transactions that do not fit into any of the special journals including adjusting and closing entries

  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. S7-6 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 CR CP J P CR J S

  34. S7-6 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 CP CP CR CP CR P S

  35. L E Wooten P7-34B (March 2) Mar 2 191 L E Wooten 2,350 1,390 Mar 2 S1 2,350 2,350

  36. Delwood Plaza P7-34B (March 3) 3/10, n/60 5,900 5,900 Mar 3 Delwood Mar 3 P1 5,900 5,900

  37. P7-34B (March 4) 3,410 1,820 3,410 Mar 4

  38. P7-34B (March 5) Mar 5 473 Furniture 1,080 1,080

  39. P7-34B (March 8) 3,410 1,820 3,410 Mar 4 Interest Revenue 120 120 8

  40. Cortez Co P7-34B (March 9) Mar 2 191 L E Wooten 2,350 1,390 9 192 Cortez Co 6,250 3,300 Mar 9 S1 6,250 6.250

  41. P7-34B (March 10) Mar 5 473 Furniture 1,080 1,080 10 474 Inventory 770 770

  42. L E Wooten P7-34B (March 12) 3,410 1,820 3,410 Mar 4 Interest Revenue 120 120 8 2,303 47 2,350 12 Wooten Mar 2 S1 2,350 2,350 -0- Mar 12 CR1 2,350

  43. End of Chapter 7

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