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Accounting Principles
Accounting information systems

Learning objectives

Identify the four essential elements of an effective accounting

information system

Describe the key elements of computerised and manual

accounting systems and how they work

Describe how spreadsheets are used in accounting

Illustrate how to use the sales journal, the cash receipts journal
and the accounts receivable ledger

Illustrate how to use the purchases journal, the cash payments

journal and the accounts payable ledger

Explain the role of the general journal and describe the

transactions recorded in it

Effective accounting information systems

Control

Compatibility

Flexibility

Costbenefit
relationship

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Effective accounting information systems

Internal controls are the methods and procedures used to

authorise transactions and safeguard assets

A compatible system is one that works smoothly with the

business operations, personnel and organisational structure

A well-designed system is flexible if it accommodates changes

without a complete overhaul

A favourable cost-benefit relationship indicates that the cost of

controls do not exceed their value to the organisation

Effective accounting information systems

Hardware and software make up the heart of a computerised

accounting system

Hardware is the electronic equipment that includes computers,

monitors, printers and the network that connects them

Software is the set of programs that drive the computer to

perform the work desired

How computerised and manual accounting

systems work

Inputs represent data from source documents, such as sales

receipts, bank deposit slips and fax orders and other
telecommunications. Inputs are usually grouped by type

In a manual system, processing includes journalising

transactions, posting to the accounts and preparing the financial
statements. A computerised system automates this processing

Outputs are the reports used for decision making, including the
financial statements

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How computerised and manual accounting

systems work

How computerised and manual accounting

systems work

An accounting system begins with the chart of accounts

The chart of accounts lists all accounts and their account

number in the ledger

Computer systems are organised by function or task

Computer systems usually have a choice of processing options

on a menu

How computerised and manual accounting

systems work

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Integrated accounting software: Spreadsheets

Computerised accounting systems are organised by modules

These modules are separate but integrated units

Changes affecting one module will affect others

Spreadsheets are computer programs that can be used to

process accounting data in very small organisations but are
generally used to support analysis of accounting data

They link data by means of formulas and functions

Spreadsheets are organised as a rectangular grid composed of

cells, each defined by a row number and a column number

Integrated accounting software: Spreadsheets

Special journals

A special journal is an accounting journal designed to record one

specific type of transaction

In modern automated computer systems the special journals

are represented by modules

An example is the manual recording of credit sales in a

specialised sales journal

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Special journals

Using the sales journal

Credit sales are entered in the sales journal

Each entry in the Accounts receivable/Sales revenue column of

the sales journal is a debit to Accounts receivable with credits to
Sales revenue and GST clearing

For each transaction, the accountant enters the date, invoice

number, customer account and transaction amount

Posting from the sales journal to the general ledger is usually

done only once each month

A subsidiary ledger is a record of accounts that provides

supporting details on individual balances, the total of which
appears in a general ledger account

Amounts in the sales journal are posted to the subsidiary ledger

daily to keep a current record of the amount receivable from
each customer

Using the cash receipts journal

To record repetitive cash receipt transactions, accountants have

traditionally used the cash receipts journal

Every transaction recorded in this journal is a cash receipt, so

the second column (after the date) is for debits to the Cash
account

The next two columns are for debits to Sales discounts and to
GST clearing on collections from customers

The cash receipts journal has credit columns for Accounts

receivable, Sales revenue (net of GST) and GST

The journal also has a credit column for Other accounts, which
lists sources of cash other than cash sales and collections on
account

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The purchases journal

This is designed to account for all purchases of inventory,

supplies, services and other assets on credit

Cash purchases are recorded in the cash payments journal

The purchases journal has special columns for credits to

Accounts payable and debits to Inventory, Supplies, GST
clearing and Other accounts

The accounts payable subsidiary ledger lists the creditors in

alphabetical order, along with the amounts owed to them

Using the cash payments journal

All payments are recorded by the cash payments module or

journal

The cash payments journal has two main debit columns, namely
Other accounts and Accounts payable. The Other accounts
column is subdivided into GST and net amount of these
payments

It has three credit columns, namely two for Inventory (GST and
Net discount) and one for Cash

It also has columns for the date and for the reference number of
each cash payment

The role of the 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

Entries such as depreciation, expiration of prepaid insurance,

accrual of salaries payable, and adjusting and closing entries
are recorded in the general journal

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The role of the 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 customers Accounts Receivable

A debit note or debit memo is the business document that

states that the buyer no longer owes the seller for the amount
of the returned purchases

Summary:

Effective accounting information systems are characterised by

control, compatibility, flexibility and a favourable cost-benefit
relationship

The chart of accounts lists all accounts and their account

number in the ledger

Computerised accounting systems are organised by modules

A special journal is an accounting journal designed to record one

specific type of transaction

Special journals save much time in recording repetitive

transactions and posting to the ledger