Accounting Information
Systems
Chapter 7
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1
Objective 1
Describe an effective accounting
information system
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2
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
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3
Basic Features
• Flexibility- Can your company respond to
change effectively?
• Cost/benefit relationship – The cost of an
accounting system should not outweigh
the benefits
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4
Objective 2
Understand both computerized and
manual accounting systems
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5
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)
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6
Three Stages of
Data Processing
Come from source
documents like
invoices
Input
Financial statements
and other reports
Journalizing,
posting
Processing
Output
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Computerized
Accounting System
ACCOUNTING RECORDS
Journals,
Ledgers,
Other records
HARDWARE
INPUT
DATA
SOFTWARE
PROCESSING
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OUTPUT
REPORTS
8
Designing a System –
Chart of Accounts
Assets
Current
(11)
Plant
(12)
Cash in Bank
(111)
Accounts
Receivable
(115)
Inventory
(120)
Customer A
(115001)
Customer B
(115002)
Customer C
(115003)
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Other
(13)
9
E7-13
Number
101
102
103
104
105
106
201
221
301
321
401
501
521
Account
Cash
Accounts receivable
Inventory
Supplies
Computer equipment
Accumulated depreciation
Accounts payable
Note payable, long-term
Jerry Mobile, capital
Jerry Mobile, withdrawals
Sales revenue
Cost of goods sold
Depreciation expense
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10
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
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11
Processing Transactions –
Computerized System
• Menu Driven
• Menu organized by function or task
• Posting is automatic
– On-line processing
– Batch processing
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12
Menu-Driven Accounting
System
Ledger Receivables Payables Inventory Payroll Reports Utilities
Transactions
Posting
Account Maintenance
COMPUTERIZED
ACCOUNTING
SYSTEM
Closing
Use arrow keys to make choice
Press <return> to access choice
MAIN
Press F7 <escape> to leave menu
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13
ERP Systems
• “Enterprise Resource Planning Systems”
• Integrates all departments and functions
across a company into a single unified
system
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14
Objective 3
Understand how spreadsheets
are used in accounting
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15
Integrated Accounting Software:
Spreadsheet
• Computer program designed to perform
computational tasks
• Organized by cells, defined by a row and a
column
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16
Integrated Accounting Software:
Spreadsheet
A
1
2
3
4
5
6
7
8
9
10
11
12
13
14
B
Account Title
Cash
Supplies
Accounts payable
Salaries payable
Suzanne Byrd, capital
Service revenue
Rent expense
Supplies expense
Depreciation expense
Interest expense
Totals
C
Trial Balance
Dr.
Cr.
9,400
700
200
Labels
Cell B4
Numbers
6,000
8,000
4,000
100
14,200
14,200
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Formulas
17
E7-15
A
1
2
3
4
5
6
7
8 Years of Life
9 Equipment
10
B
C
20
60,000
Annual Depreciation = Cost / Years of Life
Annual Depreciation = B9/C8
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18
Objective 4
Use the sales journal, the cash receipts
journal, and the accounts receivable ledger
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19
Special Journals
• Accounting journals used to record one
specific type of transaction
• Save time
• Save money
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20
Special Journals
Transaction
Special Journal
Sales on account
Sales journal
Cash receipts
Cash receipts journal
Purchases on account Purchases journal
Cash payments
All others
Cash payments
journal
General journal
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Posting
Abbreviation
S
CR
P
CP
J
21
Sales Journal
Sales Journal
DATE
INVOICE
NO.
ACCOUNT DEBITED
POST
REF
ACCOUNTS
RECEIVABLE DR.
SALES REVENUE CR.
COST OF GOODS
SOLD DR.
INVENTORY CR.
Debit Accounts Receivable and
credit Sales Revenue. Debit Cost of
Goods Sold and credit Inventory
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22
Cash Receipts Journal
Cash Receipts Journal
DEBITS
CREDITS
OTHER ACCOUNTS
DATE
CASH
SALES
DISC
ACCTS
REC
SALES
REV
ACCOUNT
TITLE
PR
AMT
COST OF GOODS
SOLD DR.
INVENTORY CR.
Debit Cash and credit some other
account
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23
Subsidiary Ledger
• Provides details on individual balances
– Customers (accounts receivable)
– Suppliers (accounts payable)
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24
Control Account
• The general ledger account
• Equals the sum of the individual account
balances in a subsidiary ledger
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25
ACCOUNT
ACCOUNTS RECEIVABLE
BALANCE
JRNL
REF
DEBIT
Jan
S7
1,500
Jan
Cr3
DATE
ITEM
ACCOUNT
CREDIT
DEBIT
CREDIT
1,500
500
Controlling
Account
1,000
ST. JOHN’S CAFE
BALANCE
DATE
ITEM
JREF
Jan 1
DEBIT
S7
ACCOUNT
CREDIT
DEBIT
500
CREDIT
500
MARKET STREET GRILL
BALANCE
DATE
ITEM
JREF
Jan 8
DEBIT
S7
ACCOUNT
CREDIT
300
DEBIT
CREDIT
Subsidiary
Accounts
300
WELLWOOD INN
BALANCE
DATE
ITEM
JREF
DEBIT
Jan 5
S7
700
Jan 10
CR3
CREDIT
DEBIT
CREDIT
700
500
200
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26
Objective 5
Use the purchase journal, the cash
disbursements journal, and the accounts
payable ledger
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27
Purchases Journal
Purchases Journal
CREDITS
DEBITS
OTHER ACCOUNTS
DATE
ACCOUNT
CREDITED
TERMS
PR
ACCOUNTS
PAYABLE
INVENTORY
SUPPLIES
ACCOUNT
TITLE
PR
AMOUNT
Debit Inventory or some other
account and credit Accounts
Payable
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28
Cash Payments Journal
Cash Payments Journal
DEBITS
DATE
CK
NO
ACCOUNT
DEBITED
PR
OTHER
ACCOUNTS
ACCOUNTS
PAYABLE
CREDITS
INVENTORY
CASH
Credit Cash….debit other accounts
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29
ACCOUNT
ACCOUNTS PAYABLE
BALANCE
DATE
JRNL
REF
ITEM
Jan
P7
Jan
CP3
ACCOUNT
DEBIT
CREDIT
DEBIT
CREDIT
800
800
100
Controlling
Account
700
FAVER EQUIPMENT COMPANY
BALANCE
DATE
ITEM
JREF
Jan 1
DEBIT
CREDIT
P7
ACCOUNT
DEBIT
CREDIT
500
500
REAL TECHNOLOGIES
BALANCE
DATE
ITEM
JREF
Jan 8
DEBIT
CREDIT
P7
ACCOUNT
DEBIT
CREDIT
100
Subsidiary
Accounts
100
NOTTINGHAM SALES
BALANCE
DATE
ITEM
JREF
Jan 5
P7
Jan
10
CP3
DEBIT
CREDIT
DEBIT
CREDIT
200
100
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200
100
30
General Journal
• Used for transactions that do not fit into
any of the special journals including
adjusting and closing entries
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31
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
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32
S7-6
Transactions:
CR
a. Cash sale of inventory
CP
b. Payment of rent
J
c. Depreciation of computer equipment
P
d. Purchases of inventory on account
e. Collection of accounts receivable
CR
f. Expiration of prepaid insurance
J
g. Sale on account
S
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33
S7-6
Transactions:
CP h. Payment on account
CP i. Cash purchase of inventory
CR j. Collection of dividend revenue earned
on an investment
CP k. Prepayment of insurance
CR l. Borrowing money on a long-term note
payable
P m. Purchase of equipment on account
S n. Cost of goods sold along with a credit
sale
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34
P7-34B (March 2)
Sales Journal
DATE
INVOICE
NO.
Mar 2
ACCOUNT DEBITED
POST
REF
191 L E Wooten
Page 1
ACCOUNTS
RECEIVABLE DR.
SALES REVENUE CR.
COST OF GOODS
SOLD DR.
INVENTORY CR.
2,350
1,390
L E Wooten
Mar 2
S1
2,350
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2,350
35
P7-34B (March 3)
Purchases Journal
CREDITS
Page 1
DEBITS
OTHER ACCOUNTS
DATE
ACCOUNT
CREDITED
TERMS
3/10,
Mar 3 Delwood n/60
PR
ACCOUNTS
PAYABLE
5,900
INVENTORY
SUPPLIES
ACCOUNT
TITLE
PR
AMOUNT
5,900
Delwood Plaza
Mar 3
P1
5,900
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5,900
36
P7-34B (March 4)
Cash Receipts Journal
DEBITS
CREDITS
OTHER ACCOUNTS
DATE
CASH
Mar 4
3,410
SALES
DISC
ACCTS
REC
SALES
REV
ACCOUNT
TITLE
PR
3,410
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AMT
COST OF GOODS
SOLD DR.
INVENTORY CR.
1,820
37
P7-34B (March 5)
Cash Payments Journal
DEBITS
DATE
CK
NO
ACCOUNT
DEBITED
Mar 5 473 Furniture
PR
OTHER
ACCOUNTS
ACCOUNTS
PAYABLE
1,080
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CREDITS
INVENTORY
CASH
1,080
38
P7-34B (March 8)
Cash Receipts Journal
DEBITS
CREDITS
OTHER ACCOUNTS
DATE
CASH
Mar 4
3,410
8
120
SALES
DISC
ACCTS
REC
SALES
REV
ACCOUNT
TITLE
PR
AMT
COST OF GOODS
SOLD DR.
INVENTORY CR.
1,820
3,410
Interest
Revenue
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120
39
P7-34B (March 9)
Sales Journal
INVOICE
NO.
DATE
Mar 2
9
ACCOUNT DEBITED
POST
REF
Page 1
ACCOUNTS
RECEIVABLE DR.
SALES REVENUE CR.
COST OF GOODS
SOLD DR.
INVENTORY CR.
191 L E Wooten
2,350
1,390
192 Cortez Co
6,250
3,300
Cortez Co
Mar 9
S1
6,250
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6.250
40
P7-34B (March 10)
Cash Payments Journal
DEBITS
DATE
CK
NO
ACCOUNT
DEBITED
PR
OTHER
ACCOUNTS
ACCOUNTS
PAYABLE
CREDITS
INVENTORY
CASH
Mar 5 473 Furniture
1,080
1,080
10 474 Inventory
770
770
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41
P7-34B (March 12)
Cash Receipts Journal
DEBITS
CREDITS
OTHER ACCOUNTS
DATE
CASH
Mar 4
3,410
8
120
12
2,303
SALES
DISC
ACCTS
REC
SALES
REV
ACCOUNT
TITLE
PR
AMT
COST OF GOODS
SOLD DR.
INVENTORY CR.
1,820
3,410
Interest
Revenue
47 2,350
120
Wooten
L E Wooten
Mar 2
Mar 12
S1
CR1
2,350
2,350
2,350
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-042
End of Chapter 7
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43