Chapter 7 Outline[1]

Chapter 7 Outline[1] - Chapter Outline I II Fundamental...

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Chapter Outline Notes I. Fundamental System Principles —Accounting information systems (AIS) collect and process data from transactions and events, organize them in useful reports and communicate results to decision makers. The five fundamental principles of accounting information systems are: A. Control Principle Prescribes that AIS have internal controls —methods and procedures allowing managers to control and monitor activities. B. Relevance Principle Prescribes that AIS report useful, understandable, timely and pertinent information for effective decision making. C. Compatibility Principle Prescribes that AIS conform with a company's activities, personnel and structure. It also must adapt to the company’s unique characteristics. D. Flexibility Principle Prescribes that AIS be able to adapt to changes in the company, business environment, and needs of decisions makers. E. Cost-Benefit Principle Requires that the benefits from an activity in AIS outweigh the costs of that activity. Decisions regarding the other system principles are affected by this principle. II. Components of Accounting Systems —AIS consist of people, records, methods and equipment. Five basic components of AIS are: A. Source Documents Documents (paper and electronic) that provide the basic information processed by an accounting system. B. Input Devices Capture information from source documents and enable its transfer to the information system's processing component. C. Information Processors Systems that interpret, transform, and summarize information for use in analysis and reporting. D. Information Storage System component that keeps data in a form accessible to information processors. E. Output Devices Means to take information out of an accounting system and make available to users.
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Chapter Outline Notes III. Special Journals in Accounting A. Basics of Special Journals A special journal is used to record and post transactions of similar type. Use reduces recording and posting labor by grouping similar transactions and periodically posting totals accumulated. Use allows an efficient division of labor—an effective control procedure. B. Subsidiary Ledgers
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Chapter 7 Outline[1] - Chapter Outline I II Fundamental...

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