CACC521 CH07 part 2

CACC521 CH07 part 2 - 1 LEARNING OBJECTIVE#3 OUTLINE THE...

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1 LEARNING OBJECTIVE #3 OUTLINE THE RELATIONSHIP AMONG: 1. BUSINESS PROCESSES 2. ACCOUNTING PROCESSES/CYCLES AND 3. MANAGEMENT’S GENERAL PURPOSE FS 2 IMPORTANT POINTS REGARDING A MANAGEMENT’S FINANCIAL STATEMENT: 1. Prepared by the management of the organization Contain management’s assertion about economic actions and events 2. The numbers in them are produced by the organization’s control system Control system includes accounting system that generates the trial balance TO SIMPLY AUDIT PLAN, auditors apply one of a fairly standard set of business process Business process = (set of accounts) + (accounting process related to it) 4 SIMPLIFIED ACCOUNTING PROCESSES: 1. Revenue process dealing with accounting for the sales activities of the firm Revenue Cycle Starts with a sale and the recording of an account receivable Collection in cash Estimation of allowance for doubtful accounts or written off DR A/R CR Sales Revenue ( To record sales made on an account) DR Cash CR A/R (To record collection of receivables) DR Bad Debt Expense CR Allowance for Bad Debts (To provide for A/R receivable likely to be uncollectible) DR Allowance for Band Debts CR A/R (To write off uncollectible A/R previously provided for) 2. Purchasing process dealing with accounting for purchasing 3. Production process dealing with accounting for manufacturing and inventory costing 4. Financing process dealing with the accounting for all the financing activities of the firm Accounting process = cycle and the accounts are inserted into an accounting information system because they 1. record transaction from the same business activity 2. run through the same accounting process over and over Auditors audit related accounts with a coordinated procedure instead of attacking each account as if it stood alone Ex: If sales but A/R , it may be a warning of financial difficulties Audit evidence available for one part of the accounting process often also contains information for other parts To illustrate the accounting process
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2 EXHIBIT 7–10/7–11 KINGSTON COMPANY TRIAL BALANCE, DECEMBER 32, 20X2 Some accounts are in more than one process Ex: cash account is represented in all process because cash receipts are involved in
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This note was uploaded on 03/27/2012 for the course ACC 521 taught by Professor G.caers during the Spring '11 term at Ryerson.

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CACC521 CH07 part 2 - 1 LEARNING OBJECTIVE#3 OUTLINE THE...

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