Core concepts of accounting information systems 13 by simkin norman chapter 10

Prepared by Paula Funkhouser
University of Nevada, Reno

Core Concepts of Accounting Information Systems, 13th Edition
Mark G. Simkin ● Jacob M. Rose ● Carolyn S. Norman

Accounting
Information Systems
and Business
Processes - Part I
Chapter 10

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Chapter 10:
Accounting Information Systems
and Business Processes - Part I
•

Introduction

•

Business Process Fundamentals

•

Collecting and Reporting Accounting Information

•

The Sales Process

•

The Purchasing Process

•

Current Trends in Business Processes

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Business Process Fundamentals
•

Overview of the Financial Accounting Cycle

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–
–
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Journals
Ledgers
Trial Balances
Financial Statements

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Journals
•
•

Chronological record of business events by account
General Journal

– Records any type of accounting transaction
•

Special Journals

– Captures specific types of transactions

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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

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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

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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

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Financial Statements
•

Primary output of financial accounting system

•

Main Financial Statements

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–
–

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Income Statement
Balance Sheet
Statement of Owners’ Equity
Statement of Cash Flows

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Steps in the Accounting Cycle

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Coding Systems
• Importance of Coding for AISs
– Record, classify, store, and retrieve information
– Utilize numeric and alphanumeric codes

• Design Considerations
– Must serve a useful purpose
– Must be consistent
– Plan for future expansion

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Types of Codes
• Mnemonic Codes
– Helps user remember what they represent

• Sequence Codes
– Sequential set of numbers

• Block Codes
– Sequential codes
– Blocks of numbers reserved for specific

• Group Codes
– Combine two or more subcodes

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Block Code Example

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Study Break #1
Which of the following provides the organizational structure
for the general ledger?
A. Special Journals
B. A source document

C. General journals
D. The chart of accounts

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Study Break #2
AISs depend on codes to record, classify, store, and retrieve
financial data. Which of the following codes is a group of
numbers reserved for particular uses?
A. Block codes
B. Mnemonic codes
C. Alphanumeric codes
D. Numeric codes

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Collecting and Reporting
Accounting Information
• Design Considerations
– Should be effective
– Expectations of outputs

• Outputs of an AIS
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–
–

–

Reports to management
Reports to investors and creditors
Files retaining transaction data
Files retaining current data about accounts
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Designing Reports
• Characteristics of Good Reports
– Useful and convenient format
– Easy to identify and consistent

• Identification and Consistency
– Include headings, page numbers, and dates
– Emphasize consistency
• Over time
• Across departmental or divisional levels
• With general accounting practice

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Example of a Report

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Source Documents
• Manage flow of accounting data
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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

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Sample Purchase Order

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Sample Sales Invoice

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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
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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

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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
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Data Flow Diagram of Sales
Process

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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
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