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Accounting Information Systems

Chapter 4. Accounting Information Systems. Electronic Presentation by Douglas Cloud Pepperdine University. Learning Goals. 1. Describe the nature of business information systems. 2. Describe the nature of accounting information systems.

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Accounting Information Systems

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  1. Chapter 4 Accounting Information Systems Electronic Presentationby Douglas Cloud Pepperdine University

  2. Learning Goals 1. Describe the nature of business information systems. 2. Describe the nature of accounting information systems. 3. Describe and illustrate the basic elements of transaction processing systems. 4. Describe and illustrate the basic elements of a financial reporting system. After studying this chapter, you should be able to: Continued

  3. Learning Goals 5.Describe and illustrate the computation and use of earnings before interest, taxes, depreciation, and amortization (EBITDA).

  4. Learning Goal 1 Describe the nature of business information systems.

  5. A business information system collects and processes data and distributes information to users.

  6. Business Information System Data Sources Data Collection Data Processing

  7. Business Information System Information Users

  8. Learning Goal 2 Describe the nature of accounting information systems.

  9. An accounting information system processes financial and operating data into reports useful to internal and external stakeholders.

  10. Accounting Information System ACCOUNTING INFORMATION SYSTEMS Management Reporting System Transaction Processing System Financial Reporting System Financial and Operational Data Stakeholders Stakeholders Stakeholders

  11. Accounting Information System The management reporting system provides internal information to assist managers in making decisions. The transaction processing system records and summarizes the effects of financial transactions on a business. The financial reporting system produces financial statements and other reports for external stakeholders.

  12. Learning Goal 3 Describe and illustrate the basic elements of transaction processing systems.

  13. Cash The Account The account has a title.

  14. Left side debit The Account Cash The left side of the account is the debit side.

  15. Right side credit The Account Cash Left side debit The right side of the account is the credit side.

  16. The Account Cash 3,750 4,300 2,900 850 1,400 700 2,900 1,000

  17. 10,950 The Account First, foot the debit side. Cash 3,750 4,300 2,900 850 1,400 700 2,900 1,000

  18. Next, foot the credit side. 10,950 6,850 The Account Cash 3,750 4,300 2,900 850 1,400 700 2,900 1,000

  19. 10,950 6,850 The Account Subtract total credits from total debits to obtain the account balance. Cash 3,750 4,300 2,900 850 1,400 700 2,900 1,000 4,100

  20. Rules of Debits and Credits Assets Scale or Balance T account Right Side Give CREDIT Left Side Receive DEBIT Luca Pacioli Developer of Double-Entry Accounting Give CREDIT Receive DEBIT

  21. Stockholders’ Equity Liabilities Capital Stock/Retained Earnings T account T account Right Side CREDIT Left Side DEBIT Right Side CREDIT Left Side DEBIT Rules of Debits and Credits

  22. Dividends Revenues T account T account Right Side CREDIT Left Side DEBIT Right Side CREDIT Left Side DEBIT Rules of Debits and Credits

  23. The normal balance is on the increase side of an account. Expenses T account Right Side CREDIT Left Side DEBIT Rules of Debits and Credits

  24. The Journal

  25. JOURNAL Page 1 Post. Ref. Date Description Debit Credit 2004 Nov. 1 On November 1, 2004, Shannon Hughes deposits $25,000 in a bank account in the name of Online Solutions. Cash 25 000 00 Capital Stock 25 000 00

  26. On November 5, Online Solutions bought land for $20,000, paying cash. 5 Land 20 000 00 Cash 20 000 00

  27. On November 10, Online Solutions purchased supplies on account for $1,350. 10 Supplies 1 350 00 Accounts Payable 1 350 00

  28. On November 18, Online Solutions received fees of $7,500 from customers for services provided. 18 Cash 7 500 00 Fees Earned 7 500 00

  29. Throughout the month, Online Solutions incurred the following expenses that were paid in cash: wages, $2,125; rent, $800; utilities, $450; and miscellaneous, $275. 30 Wages Expense 2 125 00 Rent Expense 800 00 Utilities Expense 450 00 Miscellaneous Expense 275 00 Cash 3 650 00

  30. On December 30, Online Solutions paid creditors on account, $950. 30 Accounts Payable 950 00 Cash 950 00

  31. Online Solutions paid stockholder (Shannon Hughes) a dividend of $2,000. 30 Dividends 2 000 00 Cash 2 000 00

  32. You should have noted that in every entry the sum of the debits always equaled the sum of the credits.

  33. JOURNAL Page 1 Post. Ref. Date Description Debit Credit 2004 Cash 25 000 00 Nov. 1 Capital Stock 25 000 00 Posting to a Ledger 11 31 CASH CAPITAL STOCK 31 11 Nov. 1 25,000 Nov. 1 25,000

  34. Cash Dividends Nov. 30 2,000 Nov. 1 25,000 Nov. 5 25,000 30 3,650 30 960 30 2,000 18 7,500 Fees Earned Nov. 18 7,500 30 Bal. 5,900 Wages Expense Supplies Nov. 30 2,125 Nov. 10 1,350 Land Rent Expense Nov. 5 20,000 Nov. 30 800 Accounts Payable Utilities Expense Nov. 30 950 Nov. 10 1,350 Nov. 30 450 30 Bal. 400 Miscellaneous Expense Capital Stock Nov. 30 275 Nov. 1 25,000 Ledger for Online Solutions—November

  35. Online Solutions Trial Balance November 30, 2004 Cash 5,900 Supplies 1,350 Land 20,000 Accounts Payable 400 Capital Stock 25,000 Dividends 2,000 Fees Earned 7,500 Wages Expense 2,125 Rent Expense 800 Utilities Expense 450 Miscellaneous Expense 275 32,900 32,900

  36. Learning Goal 4 Describe and illustrate the basic elements of a financial reporting system.

  37. On December 1, paid a premium of $2,400 for a comprehensive insurance policy covering liability, theft, and fire. The policy covers a two year period. Dec. 1 Prepaid Insurance 2,400 Cash 2,400

  38. On December 1, paid rent for December, $800. The company from which Online Solutions is renting its store space now requires the payment of rent on the first of each month rather than the end of the month. Dec. 1 Rent Expense 800 Cash 800

  39. This account is a liability! On December 1, received an offer from a local retailer to rent the land purchased on November 5. The retailer plans to use the land as a parking lot for its employees and customers. Online Solutions agreed to rent the land to the retailer for three months, with rent payable in advance. Online Solutions received $360 for three months’ rent beginning December 1. Dec. 1 Cash 360 Unearned Rent 360

  40. On December 4, purchased office equipment on account from Executive Supply Co. for $1,800. Dec. 4 Office Equipment 1,800 Accounts Payable 1,800

  41. On December 6, paid $180 for a newspaper advertisement. Dec. 6 Miscellaneous Expense 180 Cash 180

  42. On December 11, paid creditors, $400. Dec. 11 Accounts Payable 400 Cash 400 On December 13, paid a receptionist and a part-time assistant $950 for two week’s wages. Dec. 13 Wages Expense 950 Cash 950

  43. On December 16, received $3,100 from fees earned for the first half of December. Dec. 16 Cash 3,100 Fees Earned 3,100 On December 16, earned fees on account totaling $1,750 for the first half of December. Dec. 16 Accounts Receivable 1,750 Fees Earned 1,750

  44. On December 20, paid $1,800 to Executive Supply Co. on the debt owed from the December 4 transaction. Dec. 20 Accounts Payable 1,800 Cash 1,800 On December 21, received $650 from customers in payment of their accounts. Dec. 21 Cash 650 Accounts Receivable 650

  45. On December 23, purchased $1,450 of supplies by paying $550 cash and charging the remainder of account. Dec. 23 Supplies 1,450 Cash 550 Accounts Payable 900 On December 27, paid the receptionist and the part-time assistant $1,200 for two weeks’ wages Dec. 27 Wages Expense 1,200 Cash 1,200

  46. On December 31, paid $310 telephone bill for the month. Dec. 31 Utilities Expense 310 Cash 310 On December 31, paid $225 electric bill for the month. Dec. 31 Utilities Expense 225 Cash 225

  47. On December 31, received $2,870 from fees earned for the second half of December. Dec. 31 Cash 2,870 Fees Earned 2,870 On December 31, earned fees on account totaling $1,120 for the second half of December. Dec. 31 Accounts Receivable 1,120 Fees Earned 1,120

  48. On December 31, paid dividend of $2,000 to stockholder (Shannon Hughes). Dec. 31 Dividends 2,000 Cash 2,000

  49. Adjusting Entries

  50. Online Solutions Trial Balance December 31, 2004 Cash 2,065 Accounts Receivable 2,220 Supplies 2,800 Prepaid Insurance 2,400 Office Equipment 1,800 Land 20,000 Accounts Payable 900 Unearned Rent 360 Capital Stock 25,000 Dividends 4,000 Fees Earned 16,340 Wages Expense 4,275 Rent Expense 1,600 Utilities Expense 985 Miscellaneous Expense 455 42,600 42,600

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