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COMP - Chapter 1 Accounting Information Systems An Overview...

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Unformatted text preview: Chapter 1 Accounting Information Systems: An Overview Learning Objectives Define “system” Understand what an AIS is Describe the basic AIS functions Understand why studying AIS is important Examples of Systems UH system UH main Campus CBA Registrations NYSE Automobile production Accounting information system “System” Defined A set of two or more interrelated components The components interact to achieve a goal Smaller subsystems usually perform a specific supporting function Components of an AIS People Procedures Data Software IT infrastructure Internal controls and security measures Three Functions of an AIS 1. Collecting and storing data about a) Resources affected by the b) Events (activities) of the organization and the c) Agents who participate 2. Transforming data into information useful for decision making 3. Providing adequate controls to safeguard data and other assets Information Usefulness Decision Usefulness Understandable, Complete & Accessible Relevance Reliability Predictive Value Verifiability Feedback Value Neutrality Representational Faithfulness Timeliness Comparability Consistency Convergence of GAAP and IFRS Costs Fundamental Characteristics Enhancing Characteristics Comparability Relevance Verifiability Decision Usefulness Faithful Representation Timeliness Read Convergence of FASB and IASB on WebCT under Readings Materiality Understandability Why Study AIS ? Auditors must understand the system used to prepare financial statements Tax accountants must have confidence in tax planning and compliance information CPAs often help design, select, and implement AIS as management consultants Internal accountants must understand the system used to collect, store, and transform financial data into information AIS vs. MIS AIS courses focus on Accountability Control Specific accounting software MIS courses focus on specialized skills Database Expert systems Telecommunications AIS Design Factors ORGANIZATIONAL ORGANIZATIONAL CULTURE CULTURE STRATEGY AIS INFORMATION TECHNOLOGY TECHNOLOGY Strategic Role of AIS AIS is an important part of strategy Traditionally viewed as financial transaction processing systems Debit/credit based Other systems filled nonfinancial requirements Enterprise resource planning (ERP) systems integrate financial and nonfinancial information requirements AIS Adds Value Improved Quality & Reduced Costs Improved efficiency Improved decision making Shared knowledge Decision Structure Structured Repetitive & routine Delegated to lower-level employees Example: retail check out Incomplete rules Subjective assessments & judgment supplement formal analysis Example: capital investment analysis Nonrepetitive & nonroutine Incomplete formal framework for analysis Require experience, judgment & intuition Example: Advertising decisions Semistructured Unstructured Decision Scope Operational control Effective & efficient performance of specific tasks Example: Wal Mart check-out clerks & supervisors Management control Effective & efficient use of resources for accomplishing organization objectives Example: Wal Mart store manager Strategic planning Establishing organization objectives & policies Example: Wal Mart CEO Decision Synthesis Level Top management Middle management Semistructured Lower-level supervisors & employees Scope Strategic planning Management control Operational control Semistructured or structured Structure Unstructured The Cost of Information Collecting data Processing data into information Storing data & information Organizing information into a useful form Distributing information to decision makers END OF CHAPTER 1 Chapter 2 Overview of Business Processes Learning Objectives Learning Understand the basic business transaction cycles Become familiar with basic accounting documents & procedures Understand the basic functions of an AIS Become familiar with the basic internal control objectives and procedures Overview of Business Processes Overview The AIS and Its Subsystems Obtaining and repaying funds from investors and creditors FINANCING CYCLE Get cash Give cash Selling products and services and REVENUE CYCLE collecting cash Give goods Get cash Obtain and paying for inventory, EXPENDITURE CYCLE supplies and Give Get services cash goods General Ledger and reporting system Obtaining and HUMAN paying for laborRESOURCES CYCLE give cash get labor Produce the products and PRODUCTION CYCLE services for sales Give Get F/G MLO Basic Expenditure/Revenue Cycle Expenditure PO 1 2 Receiving Report 4 3 Payment Voucher 5 Payment 1 2 Sales Order 5 4 3 Invoice Shipping Document Components of the Accounting System Components Chart of accounts General journal Subsidiary ledgers Special journals Report generation Internal control Audit trail Data Input Data Paper source documents original data are recorded on paper Turnaround documents returned to sender to be used as input Data entry screens Original data are entered directly by keyboard Source data automation Turnaround Document Example Turnaround “Detach and Return Top Portion With Your Payment. Return Address on Reverse Side” Data Processing Data Updating recorded information Resources affected by the event Agents who participated Types Batch Online real time Data Storage Elements Data Entity: something about which information is stored Attribute: characteristic of interest which is stored Field: physical space where data values are stored Data value: the contents of a field Record: the set of data fields for an entity File: a group of related records Database: a set of interrelated coordinated files Data Storage Elements A sset Num b er 3479 1453 8526 6278 A sset Desc rip t ion Com p ut er Truc k Phot oc op ier A irc ra ft Purc ha se Da t e 01/ 02/ Y1 07/ 14/ X5 11/ 29/ X9 03/ 19/ Y1 Orig ina l Cost 3,000 55,000 5,000 8,000,000 A c c um ula t ed Dep rec ia t ion 1,200 38,500 3,000 1,000,000 Accounting Terminology Accounting Files used to store cumulative information are __ledger accounts__ The set of summary accounts is the _______general ledger The set of accounts containing detailed data for a general ledger account The that has many subaccounts is a __________subsidiary ledger that A general ledger account that has many subaccounts is a _____________ The Chart of Accounts The • Lists of all the accounts in use • Structure is very important – – It affects the detail of transaction classification and recording It affects the preparation of financial statements and reports • More detail usually better than less (rollup) • The code system should identify account categories and The subcategories subcategories • Each major category should be assigned a block of numbers • Should correspond to financial statement order • Gaps for room to grow • Differ from one organization to another depending on needs – Retail, manufacturing, service, etc. Chart of Accounts Chart See charts of accounts for Peachtree sample companies Internal Control Internal Objectives Information reliability Business efficiency Compliance with management objectives Compliance with regulations Control Issues Control Input control Processing control Output control Data access Physical access Internal Control Examples Internal System Documentation a) b) c) Helps with verification that assigned responsibilities were completed correctly Helps identify potential problems Helps avoid making commitments that cannot be kept Prevents concentration of transaction control with one person Especially important for cash & other assets easily converted to cash Challenging for small organizations Segregation of duties a) b) c) Transaction authorization a) b) Prevents concentration of transaction control with one person Helps assure that transactions are bona fide Counts and reconciliations a) b) Helps maintains agreement between records and physical reality Especially important for cash, inventory, and depreciable assets Planning systems and documentation (budgets, strategies, etc.) a) b) Establishes a benchmark for comparing what is with what should be Helps guide management decisions More Internal Control Examples More Sequentially prenumbered data sources (paper documents & Sequentially computer records) computer Simplifies completeness verification Simplifies verification that no documents have been lost Facilitates communication with interested parties Well designed forms and screens Grouping related data together Providing instructions and/or prompts Presenting options with check-off boxes, buttons, & pull-down menus Shading and bordering separate items Opportunity for application of psychology and graphic arts Review financial statements before distribution More later Transaction Processing General & Special Journals General & Subsidiary Ledgers Learning Objectives Learning Understand AIS data flow Describe & understand special journals Describe & understand subsidiary ledgers Journals & Ledgers Journals Special journals • Sales journal • Purchases journal • Cash receipts journal • Cash disbursements journal • Payroll journal General journal General ledger Subsidiary ledgers ACCOUNTING SYSTEM INFORMATION FLOWS OBJECTIVE VERIFIABLE EVIDENCE ANALYZE CATEGORIZE SUSPENSE FILE JOURNALIZE IN SPC JRN JOURNALIZE IN GEN JRN POST DETAILS TO SUBS POST TO GL & CONT- ROL RECONCILE SUBS & CONTROL PREPARE FINANCIAL STMNTS PREPARE TRIAL BALANCES PREPARE ADJ ENTRIES INCOME STATEMENT BALANCE SHEET STATEMENT OF CHANGES IN RET EARN STATEMENT OF CASH FLOWS SPECIAL JOURNALS & SUBSIDIARY LEDGERS (abbreviated example) Sales Journal Customer Wine Depot Liquor Locker Stein's Fine Wines Liquor Locker Dr A/R & Cr Sales 300.00 500.00 400.00 100.00 1,300.00 Date Invoice # 1/2/05 1001 1/15/05 1002 1/22/05 1003 1/28/05 1004 Acct. # 2404 2401 2403 2401 A Cash Receipts Journal Account Name Dr Cash Wine Depot 300.00 Liquor Locker 200.00 Wine Depot 150.00 Stein's Fine Wines 100.00 Dividend income 50.00 800.00 Accounts Receivable Subsidiary Ledger Accounts Acct. # 2404 Date Ref 1/1/05 1/2/05 SJ 1/7/05 CRJ Acct. # 2401 Date Ref 1/1/05 1/15/05 SJ 1/20/05 CRJ 1/28/05 SJ Wine Depot Credit Balance 0.00 300.00 300.00 0.00 Liquor Locker Credit Balance 300.00 800.00 200.00 600.00 700.00 Debit 300.00 Date Acct. No. 1/7/05 2404 1/20/05 2401 1/25/05 2404 1/30/05 2403 1/31/05 5608 Cr A/R 300.00 200.00 100.00 600.00 Cr Sales Cr Sundry 150.00 50.00 50.00 150.00 Debit 500.00 100.00 General Ledger Accounts Acct # 1000 Date 1/1/05 1/31/05 Acct # 1400 Date 1/1/05 1/31/05 1/31/05 Acct # 4000 Date 1/31/05 1/31/05 Acct # 8000 Date 1/31/05 Cash Balance 100.00 900.00 Ref Debit 800.00 Credit Acct. # 2403 Date Ref 1/1/05 1/28/05 SJ 1/30/05 CRJ Debit 400.00 Stein's Fine Wines Credit Balance 0.00 400.00 100.00 300.00 Ref SJ CRJ Accounts Receivable Control Debit Credit Balance 300.00 1,300.00 1,600.00 600.00 1,000.00 Sales Balance 1,300.00 1,450.00 A Ref SJ CRJ Debit Credit 1,300.00 150.00 A Ref CRJ Debit Dividend Income Credit Balance 50.00 50.00 END OF CHAPTER 2 END Chapter 3 Systems Development Systems and Documentation Techniques Learning Objectives Learning Prepare and use data flow diagrams Prepare Draw flowcharts In order to understand, evaluate, and design In information systems information Introduction Introduction A clear understanding of the system is a precondition for Operation Internal control evaluation Methods of describing systems Graphical methods Data Flow Diagrams (DFDs) Flow charts (document & system) Program flow charts (not covered in this course) Written descriptions Combination of a graphical methods and written Combination descriptions descriptions Documentation Skill Levels Read To understand how a system operates To understand job tasks and responsibilities Evaluate System of internal controls Identify strengths and weaknesses Design audit program Recommend improvements Proposed systems Prepare System of internal controls description System implementation proposals Documentation Tools Data flow diagram: graphical representation of data flow Document flow chart: graphical representation of a document flow System flow chart: graphical representation of system inputs, processing, System and output and Program flow chart: graphical representation of program operations Data Flow Diagrams Graphically describe data flows Within existing systems For planning and designing revision of new For systems systems Elements Data sources Data Data processes Data destinations Data storage Data Flow Diagram Symbols Data Symbol Name Data sources and destinations Explanation People & organizations that send data to and receive data from the systems Storage of data Data stores Transformation processes Transformation of data from inputs to outputs Flow of the data into or out of a source, destination, store or process Data flows Sales Order Processing DFD Sales Context Diagram Sales Order Processing DFD Sales DFD Guidelines Understand the system Observe Interview Ignore Control processes Control actions Determine system boundaries Include all relevant items Exclude irrelevant items If in doubt, include (review later) DFD Guidelines (cont.) Identify data flows entering or exiting a system’s Identify boundary boundary All data flows come from and go to either a Transformation processes Data store (file) Data source Data destination Data flows can be Unidirectional Bidirectional DFD Guidelines (cont.) Identify data transformation processes Processes transform data into information All processes should have one or more incoming and outgoing data All flows flows Group transformation processes that Are logically related Or occur at the same time and place Describe all data stores (files) Identify all data stores Identify all data flows that enter or exit a data store DFDs do not identify the storage medium Name all DFD elements Use verbs & verb phrases to name processes Use nouns & noun phrases to name everything else DFD Guidelines (cont.) Subdivide the DFD if more than 5-7 processes Give each process a sequential number Data should flow from lower to higher numbered processes Exception: bidirectional flows Repeat the process until refined Prepare a final copy Data flow lines should not cross Include on each page • • • DFD name Preparer’s name Date Subdividing the DFD DFDs are subdivided into successively lower levels with DFDs greater detail greater The highest level is refered to as a ___________. Summary level view Depicts • The system • Entities that are sources and destinations of inputs and Entities outputs outputs Document Flow Charts Describe manual systems Describe manual Graphically portray document flows Physical movement of documents and Physical information Departments and responsibility areas involved Departments Activities performed “Cradle to grave” Origination Distribution Distribution Processing System Flow Charts Portray systems that have both manual and computer Portray manual components components Input Processing Output Disk Tape Terminals etc. Also describe media used by the system Basic Flow Chart Symbols Basic Symbol Represents Start & end points Paper document Multi-part paper document Manual input Decision Computer display Computer process Symbol Represents Computer disk data storage Direct access storage T T Document file (Temporary, On-page connector Off-page connector Manual process Flow by Date, by NAme, by Number) See Microsoft Excel Autoshapes for more Flowchart Guidelines Understand the system Observe Interview Identify the entities Divide the flowchart into columns Flow proceeds generally from top to bottom, left to right Clear beginning and ending Manual processing should have an input and output No direct connection of two documents A document moving between columns should be shown in document both columns both Flowchart Guidelines (cont) Use connectors On-page connectors avoid excessive lines Off-page connectors move among pages Manual processes are not needed to show Manual no Forwarded documents Documents entering a file Data stored or retrieved from a computer file should pass Data through a processing operation (program) first through Use an iterative process Start with a rough sketch Redesign to avoid clutter and crossed lines Verify accuracy Identify each page with flowchart name, date, and preparer’s name Amusement Park Maintenance Flowchart Example Amusement (see separate Lecture Guide file on WebCT for a more readable version) RIDE OPERATIONS RIDE OPERATOR JRU GENERAL MANAGER SERVICE REQUEST 2 MAINTENANCE A SERVICE REQUEST 2 SERVICE REQUEST 2 ACCOUNTING B WORK ORDER 4 PREPARE SVC REQUEST APPROVE? SERVICE REQUEST 1 2 YES NO PREPARE W ORK ORDER COST & PREPARE SUM REPAIR TYPE? WORK ORDER 2 3 4 1 SERVICE REQUEST 2 WRK ORDER SUMMARY 2 1 3 WORK ORDER 4 MAINTENANCE YES APPROVE? A C RECORD MAT'LS & LABOR NO C SERVICE REQUEST 2 WORK ORDER 2 N WORK ORDER 3 4 C N N B Prepared by: J.B. Stinson Prepared on: 5/5/2005 Last revised on: none END OF CHAPTER 3 END Chapter 4 Relational Databases Relational Learning Objectives Learning Understand the difference between Understand relational database and file-based systems relational Describe a relational database Understand the difference between logical Understand and physical views of a database and Be able to construct well-structured tables Be to properly store data to Data Hierarchy Accounts Payable File Example Accounts Database Database Customer File Record1 Vendor1 Field 1 Vendor Number Field 3 Web Address Field 5 City Field 7 Zip Code Vendor File Record 2 Vendor 2 Inventory File Record N Vendor N Field 2 Vendor Name Field 4 Street Address Field 6 State Field 8 Country Types of Files Types Two Basic Files Two Master files Transactional Master File Stores information about Resources of the organization Agents with whom it interacts Permanent (__cumulative________) Exists across fiscal periods Individual records are frequently changed Occasionally records are added/deleted Conceptually similar to the _ledger_____ Transaction File Stores information about Specific business transactions (events) That occur during a __fiscal period________ Not permanent (__temporary_____) Usually maintained on-line For one fiscal period Closed to the ___master file______ Conceptually similar to the _journal____ Database Systems Address the problem of file proliferation Data integration Data sharing Components Database Database management system (DBMS) Application programs File-based Approach File-based Master File 1 Master File 1 Data: A B C D Master File 2 Data: A C D Master File 3 Data: A B D E Purchasing Program Receiving Program A/P Program Database Approach Database Database Database Data: A B C D E DBMS Purchasing Program Receiving Program A/P Program Logical & Physical Views of Data The __logical__ view is how the user or programmer The conceptually organizes and understands the data. conceptually The __physical__ view is how and where the data are The arranged or stored. arranged The benefit of separating the two views is: The programmers can focus on the logic of the application without focusing on how and where data are stored and accessed and Logical & Physical Views of Data Logical Logical view: Logical STUDENT ID 451087475 123635988 662345582 573447913 259187364 582597320 226371961 NAME (Last, First, MI) HOME ADDRESS STREET 6214 Bonner 4806 East 42nd 2021 Elm 1315 Dover 3165 Glove CITY Houston Spring Katy Alief Houston Houston STATE TX TX TX TX TX TX TX ZIP 77024 77081 77017 77530 77040 77022 77008 HOME PHONE 7137818301 7134652328 7132404588 2815589553 7137434276 7137830183 2815317548 CR HOURS SEM 15 12 15 18 12 15 12 TOT 45 120 95 37 84 118 75 Decker, William B 5193 Elton Elliott, James D Su, Alice S Able, Robert A Nguyen, Kim H Grimes, Gerald Shah, Mohan 9197 Havner Ln Houston Physical view: 11 10 11 00 10 00 01 The Database Management System (DBMS) (DBMS) Links the __physical data__ with the _logical view__ Links of users of Allows users to ac...
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