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2 - Chapter 2 Overview of Business Processes Learning...

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Unformatted text preview: Chapter 2 Overview of Business Processes Learning Objectives Learning Understand the basic business transaction cycles Become familiar with basic accounting documents & Become procedures procedures Understand the basic functions of an AIS Become familiar with the basic internal control Become objectives and procedures objectives Overview of Business Processes Overview The AIS and Its Subsystems FINANCING CYCLE Get Get cash cash Give Give cash cash REVENUE CYCLE REVENUE Give Give goods goods Get Get cash cash EXPENDITURE CYCLE Give Give cash cash Get Get goods goods HUMAN RESOURCES CYCLE give give cash cash get get labor labor PRODUCTION CYCLE Give Give F/G F/G Get Get MLO MLO Basic Expenditure/Revenue Cycle Expenditure 1 2 4 3 5 5 4 3 1 2 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 Turnaround documents Data entry screens 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 Data Storage Elements Data Entity: Attribute: Field: Data value: Record: File: Database: Data Storage Elements A sse t Num b e r 3479 1453 8526 6278 Asse t De sc rip tion C o m p ute r Truc k Photo c o p ier Airc ra ft Purc ha se Da te 01/ 02/ Y1 07/ 14/ X5 11/ 29/ X9 03/ 19/ Y1 Orig ina l C o st 3,000 55,000 5,000 8,000,000 Ac c um ula te d De p re c ia tio n 1,200 38,500 3,000 1,000,000 Accounting Terminology Accounting Files used to store cumulative information are _______ The set of summary accounts is the _____________ The set of accounts containing detailed data for a general ledger account The that has many subaccounts is a _______________ 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 ...
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