Accounting
Information
Systems
Chapter
6
HORNGREN ♦ HARRISON ♦ BAMBER ♦ BEST ♦ FRASER ♦ WILLETT
Objectives
1. Describe the features of an effective accounting
information system.
2. Understand how computerised and manual
accounting systems work.
3. Understand how spreadsheets are used in
accounting
4. Use the sales journal, the cash receipts journal
and the accounts receivable subsidiary ledger
5. Use the purchases journal, the cash payments
journal and the accounts payable subsidiary
ledger
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Objective 1
Describe the
features of
an effective
accounting
information system.
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Basic Features
Control
Control
Comparability
Comparability
Flexibility
Flexibility
Cost/benefit
Cost/benefit relationship
relationship
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Basic Features
Internal controls are the methods and
procedures used to authorise
transactions and safeguard assets.
Comparability means that the system
works smoothly with operations,
personnel, and the organisational
structure.
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Basic Features
Flexibility relates to the system’s ability
to accommodate changes in the
organisation.
A cost/benefit relationship indicates that
the cost of controls do not exceed their
value to the organisation.
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Computerised Accounting
System
Hardware
Hardware
Software
Software
Company
Company
Personnel
Personnel
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Computerised Accounting
System
Hardware is the electronic equipment
that makes up a computer system.
Software is a system of instructions that
drive the computer to perform various
functions.
Properly trained personnel are critical to
the successful operations of the system.
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Objective 2
Understand how both
computerised and manual
accounting systems work.
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Three Stages of
Data Processing
(Source documents) Input
Input
Processing
Processing
Output (Financial
Output statements)
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Computerised
Accounting System
ACCOUNTING RECORDS
PERSONNEL Journals,
input transactions, request Ledgers,
reports, protect records Other records
posted accessed for
reports
HARDWARE
printed to
INPUT entered, paper, OUTPUT
edited SOFTWARE screen
DATA PROCESSING REPORTS
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Designing an Accounting
System
Design of the accounting system begins
with the chart of accounts.
The chart of accounts lists all accounts
and their account number in the ledger.
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Menu-Driven Accounting
System
Computer systems are organised by
function or task.
Computer systems usually have a
choice of processing options on a
“menu.”
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Menu-Driven Accounting
System
General Receivables Payables Inventory Payroll Reports
Posting COMPUTERISED
Account Maintenance 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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Preparing Accounting Reports
Trial Financial Accounts Accounts Daily Cash
Balance Statements Receivable Detail Payable Detail Report
Statement of Financial Performance Statement of Owners’ Equity
Statement of Financial Position Statement of Cash Flows
Use arrow keys to make choice.
Press <return> to access choice. REPORTS
Press F7 <escape> to leave menu.
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Objective 3
Understand how
spreadsheets
are used in accounting.
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Integrated Accounting Systems
Computerised accounting systems are
organised by modules.
These modules are separate but
integrated units.
A sales transaction entry will update two
modules:
1 Accounts Receivable / Sales
2 Inventory / Cost of Goods Sold
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Ana’s Boutique Example
Ana wants to budget for expected cash
collections in the month of May.
Past experience indicates that 50% of
credit sales are collected in the month
of sales and 50% the following month.
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Ana’s Boutique Example
May sales were $250,000.
$50,000 were cash sales.
April credit sales amounted to
$120,000.
What are the expected cash collections
during the month of May?
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Ana’s Boutique Example
May cash sales $ 50,000
Collection of April’s credit sales 60,000
Collection of May’s credit sales 100,000
Total $210,000
Spreadsheets make calculations like these
easier.
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Spreadsheet Example
Formula for B4: =B2–B3
Column: A B C
Row: 1 Statement of Financial Performance:
2 Revenues 150,000
3 Expenses 90,000
4 Net Profit 60,000
5
Cursor is on cell B4.
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Objective 4
Use the sales journal,
the cash receipts
journal,
and the accounts
receivable
subsidiary ledger.
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Special Journals
What are special journals?
They are accounting journals used to
record one specific type of transaction.
What are some examples?
Sales Cash Receipts Payroll
Purchases Cash Payments
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Using the Sales Journal
Sales Journal Page 5
Invoice Account Account Post
Date Number Debited Number Ref. Amount
Jan. 2 201 Joe Co. 120-122 600.00
Jan. 2 202 May Co. 120-033 700.00
Jan. 2 203 XYZ Co. 120-111 900.00
TOTAL 2,200.00
120 / 410
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Using the Sales Journal
Sales Journal Page 5
Invoice Account Account Post
Date Number Debited Number Ref. Amount
Jan. 2 203 XYZ Co. 120 -111 900.00
TOTAL 2,200.00
120 / 410
General Ledger
Account: Accounts Receivable Account Number: 120
Date Description Post Ref Debit Credit Balance
Jan. 2 Sales SJ5 2,200 2,200
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Using the Sales Journal
Sales Journal Page 5
Invoice Account Account Post
Date Number Debited Number Ref. Amount
Jan. 2 203 XYZ Co. 120-111 900.00
TOTAL 2,200.00
120/410
General Ledger Account: Credit Sales
Account Number: 410 Date Description Post Ref Debit
Credit Balance Jan. 2 Sales SJ5 2,200 2,200
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Subsidiary Ledger
A subsidiary ledger is often used to
provide details on individual balances
of...
– customers (accounts receivable) and...
– suppliers (accounts payable).
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A Control Account
What is a control account?
It is the general ledger account.
It equals the sum of the individual
account balances in a subsidiary ledger.
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Cash Receipts Journal — Page
6
Debits Credits
Sales Accounts Sales
Date Cash Discounts Receivable Revenue
Jan. 2 200 200
11 882 18 900
30 800 800
311,882 18 900 1,000
(101)
(420) (112) (410)
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Accounts Receivable
XYZ Company Subsidiary Ledger
Jrnl.
Date Ref. Debit Credit Balance
Jan. 2 S.5 900 900
11 CR.6 900 -0-
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General Ledger
Cash No. 101
Jrnl. Debit
Date Ref. Debit Credit Balance
Jan. 31 CR.6 1,882
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Cash Receipts Journal
Additional columns are provided to enter
other account descriptions and amounts.
Cash receipts amounts affecting subsidiary
ledger accounts are posted daily to keep
customer balances up to date.
At month end, foot and crossfoot the journal
and post to the general ledger.
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Objective 5
Use the purchase journal, the
cash payments journal,
and the accounts payable
subsidiary ledger.
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Purchases Journal
This is designed to account for all
purchases of inventory, supplies,
services, and other assets on account.
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Purchases Journal
Cash purchases are recorded in the
cash payments journal.
At month end the journal is footed
(totaled) and crossfooted.
Posting to the general ledger is similar
to posting from sales and cash receipts
journals.
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Cash Payments Journal
Most payments are by check and are
recorded in the cash payments journal.
The cash payments journal is also
called:
– cheque register
– cash disbursements journal
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Cash Payments Journal
This has columns for:
– Date
– Cheque number (or transfer number)
– Account Debited
– Debits;
– Other Accounts, Accounts payable
– Credits
– Discounts Received, Cash at Bank
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General Journal
Special journals save much time in
recording repetitive transactions and
posting to the ledger.
However, some transactions do not fit
into any of the special journals.
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General Journal
Every accounting system needs a
general journal.
What entries are recorded in the
general journal?
– depreciation
– expiration of prepaid insurance
– accrual of salaries payable
– adjusting and closing entries
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General Journal
Many companies record sales returns
and allowances and purchase returns in
the general journal.
A credit note (or credit memo) is the
document issued by the seller for a
credit to a customer’s Accounts
Receivable.
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Purchase Returns and
Allowances
A debit note or debit memorandum is
the business document that states that
the buyer no longer owes the seller for
the amount of the returned purchases.
The buyer debits the Accounts Payable
to the seller and credits Inventory.
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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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End of Chapter 6
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