Overview
1
• Contracts in e-commerce
• Support for automated contract
management … Business Contracts
Architectures (BCA)
• BCA Web services model
• Web services issues
• Future work
Accounting Systems and
Internal Control
Slide 3.1
Chapter 3 Learning
Objectives
•
•
•
•
•
•
3
Define an accounting system and identify its principal elements.
Briefly describe how an accounting system is used to record
accounting data for a business each accounting period.
Identify the key components of internal control.
Identify the principal differences between manual and computerbased processing of accounting data and the related internal control
implications.
Discuss recent trends in computer processing and the related
implications for organizations’ accounting and control functions.
Identify internal control issues stemming from the growing trend
toward multinational business operations.
Slide 3.2
What is a “system?
• “A coordinated
network of plans and
procedures designed
to achieve a stated
goal in an orderly,
effective, and
efficient manner.”
4
Okay, what is an “accounting
system”?
• “A systematic approach to collecting, processing, and
communicating financial information to decision makers.”
5
Principal Elements of an
Accounting System
•
•
•
•
Accounts
Chart of accounts
Journals and ledgers
The accounting cycle
6
Slide 3.5
Accounts
The basic storage units for financial data in an
accounting system.
Cash
4,200
900
700
600
400
Cash” balance”?
$3,800
Slide 3.6
Chart of accounts: An address
book for a company’s accounts
101.
102.
103.
.
201.
.
300.
.
401.
402.
501.
502.
8
Cash
Accounts Receivable
Supplies
Accounts Payable
Common Stock
Rental Revenue
Interest Revenue
Salaries Expense
Utilities Expense
Slide 3.7
Journals and Ledgers: The
Accounting “Books”
General journal: the accounting record in
which the dollar amounts for transactions and
other financial events are initially recorded by
businesses that maintain only one journal.
General ledger: the accounting record that
contains each of the individual accounts for a
business’s assets, liabilities, owners’ or
stockholders’ equity, revenues, and expenses.
9
Slide 3.8
The accounting cycle: the set of
recurring accounting procedures that must be
performed for a business each accounting
period.
Task
Accounting Activity
Record financial data
Journalize transactions
Collate financial data
Post transations to the
general ledger
Organize account
Prepare trial balance
balances
Consolidate and
Prepare financial
classify account
statements
balances
10
Slide 3.9
Internal Control for Business
Organizations
An accounting system is one element
of a larger system that business
executives use to maintain effective
control over their organizations.
Slide 3.10
Internal control is a process-effected by an entity’s board of
directors, management, and other
personnel--designed to provide
reasonable assurance that key entity
objectives will be accomplished.
Slide 3.11
Key Components of
Internal Control
• Accounting system
• Control environment: the
degree of control consciousness
within an organization
• Control activities: the policies
and procedures established to help
ensure that an entity’s primary
organizational objectives are
accomplished
13
Slide 3.12
Examples of Control
Activities
™Segregation of key functional responsibilities
™Proper authorization of transactions
™Use of prenumbered accounting documents
™Periodic counts of inventory
™Clerical tests
™Periodic reconciliations
14
Slide 3.13
Key Duties that Should Be
Segregated in an Accounting
System
Authorization
Recordkeeping
Custodianship
15
Slide 3.14
Internal Control and Computer
Processing
Businesses, large and small, can benefit significantly by
integrating computer processing into their accounting
and control functions.
Slide 3.15
Computer Processing and Internal
Control Implications
Uniformity in the processing of transactions
Initiation and execution of transactions
Existence of transaction trails
Ability to segregate key functional
responsibilities
Potential for errors
Monitoring capability of management
17
Slide 3.16
Examples of Control Activities in
Computer-based Accounting Systems
† Maintain back-up copies of key computer programs
† Periodically process “test” transactions
† Data input controls
† Limit access to computers
† Establish procedures to identify parties accessing
and operating each computer
† Limit access to key data files and computer
programs
18
Slide 3.17
Two Key Trends in Information
Processing Technology . . . and
Their Implications for Accountants
• Outsourcing of information systems
• Electronic data interchange (EDI)
19
Slide 3.18
Internal Control: An International
(Multinational) Perspective
• Recent years have seen a dramatic increase in
multinational business operations
• This trend poses significant challenges for
accountants
• Among these challenges is designing an internal
control process for a business organization that
cuts across several cultures
20
Slide 3.19
The Foreign Corrupt Practices Act of
1977 has Important Implications for
U.S. Companies
Prohibits payments of bribes and related inducements to
establish/maintain business relationships in foreign
countries
Requires all public companies to establish internal
controls that have a high likelihood of preventing and
detecting bribes and similar payments
21
Slide 3.20