Section Title

Introduction
Economic Development.
Business Enviornment.
Mergers.
Focus.

Section Title

Information System

Section Title

Composed of people and computers

that
processes
or
interprets
information.

Financial Accounting IS

People
Procedures
Data
Software
Information technology infrastructure

Section Title

A system is a set of two or more interrelated

components that interact to achieve a goal.
Systems are almost always composed of
smaller subsystems, each performing a
specific function supportive of the larger
system.
It consists of:

Functions

Section Title

1 It collects and stores data about

activities and transactions.
2 It processes data into information
that is useful for making decisions.
3 It provides adequate controls to
safeguard the organizations assets.

2.
3.

4.
5.

reporting
Long-term strategic
planning
Managing the
accounting and
finance function
Internal Consulting
Short-term
budgeting

7. Process
improvement
8. Computer systems
and operations
9. Performance
evaluation
10. Customer and
product profitability
analyses

Section Title

Ten Most Important

Activities Performed By
1. Accounting
systems 6. Financial and
Accountants
and financial
economic analyses

 A transaction processing cycle combines one

or more types of transactions having related
features or similar objectives.
A transaction cycle consists of a set of
transactions leading to the recognition of a
major economic event on the financial
statements
It is through the study of transaction cycles
that we gain a clear view of a firms
processing framework.

Section Title

Transaction Cycles

Section Title

DL
DL
MOH
MOH

Use
d
Used
ed
i
l
p
Ap

WIP
WIP

Fini
she
d

Sales

Income
Statement

Unfinished

COGS
COGS

WIP
WIPInv.
Inv.
FG
FGInv.
Inv.

Sale
Sold

Gross Margin
S&A
S&A
Net Income

Period
Costs

Section Title

Produ ct Costs

Cost Flows in a
Manufacturing Costs
Balance Sheet
Manufacturing
Firm
Unused
DM
DM
DM
DM Inv.
Inv.

Materials
Plant

EXPENDITURE
CYCLE

CONVERSION
CYCLE

Subsystems
Purchasing & A/P
Cash Disbursements
Payroll

Subsystems
Production Planning
and Control
Cost Accounting

Cash

Fin.
Goods

REVENUE
CYCLE
Subsystems
Sales Order Processing
and Cash Receipts

Fin. Goods
Cash

Section Title

Cash

Customers

Labor

Merchandisin
g Shipments
Sale of
Merchandise

Cash Receipts

GL &
Fin Rpt
Cycle
Purchase of
Mdse, &
Labor, Etc.

PP&E,
Investments

Merchandise
Receipts

Section Title

Cash
Disbursements

The Revenue Cycle

Merchandising
Shipments
Cash Receipts

GL &
PP&E,
Fin Rpt Cycle Investments
The Revenue
Cycle
Spans activities from
Sale to Receipt of Cash
Purchase of
Cash
Key Transactions: Disbursement
Mdse, &
Sales
Labor, Etc.
s
Merchandise
Cash Receipts
Receipts

Section Title

Sale of
Merchandise

Section Title

Includes transactions surrounding the

recognition of revenue.
Sales
Accounts Receivable
Inventory (some)
General Ledger (some)

Section Title

Capturing and recording of customer

orders.
Shipment of the goods and the
recording of the cost of goods sold.
The billing process and the recording
of sales and accounts receivable.
The capturing and recording of cash
receipts.

The Expenditure Cycle

The Expenditure Cycle

Merchandisi
Spans activities from the need for
ng
resources/services to payment for that
Shipments
resource/service
Cash
Sale of
Receipts
Merchandise
Key Transactions:
GL &
Purchases
PP&E,
Fin Rpt
Cash Disbursements
Investments
Cycle
Cash
Disbursements
Merchandise
Receipts

Section Title

Purchase of
Mdse, & Labor,
Etc.

Section Title

Includes the transactions surrounding

the recognition of expenditures.
Purchases
Accounts Payable
Cash Disbursements
Inventory (some)
General Ledger (some)

Section Title

The preparation and recording of

purchase orders.
The receipt of goods and the
recording of the cost of inventory.
The receipt of vendor invoices and
the recording of accounts payable.

Section Title

The preparation and recording of

cash disbursements.
The cycle also includes the
preparation of employee paychecks
and the recording of payroll
activities.

Function #1

Section Title

Capture transaction data on source

documents.
Record transaction data in journals,
which present a chronological record
of what occurred.
Post data from journals to ledgers,
which sort data by account type.

Data Processing Cycle

The agents who participate in
that event.

The Event of
Interest

Section Title

The resources affected by that

event.

Data
Files

Output

Process

Control

Feedback
Loop

Sensor

Section Title

Input

Capture Transaction Data on

Source Documents
Purchase Order

Source
documents are
special forms
used to capture
transaction data.

Sales Invoice

Section Title

Sales Order

Section Title

Control over data collection is

improved by prenumbering each
source document.
Accuracy and efficiency in recording
transaction data can be further
improved if source documents are
properly designed.

System - Inputs
Input documents can be categorized
into three types . . .

Section Title

Source Documents
Product Documents
Turn-around Documents

Creation of a Source
Document Source 11
Order

Data
Collection

Document

2
3
Sales
Order

Sales
System

Section Title

Customer

A Product Document
Order

Data
Collectio
n

Source 1
Document 2

3
Sales

Bill
Remittance
Advice

Product
Document

Sales
System
Section Title

Customer

Order

A Turnaround Document
Order

Data
Collection

Source
1
Document

3
Sales

Customer

Order
Bill

Remittance
Advice

Sales
System

Check 1

1
Remittance Advice

Cash Receipts
System

Section Title

Product Document

Source
Document

Function

Sales Order

Record Customer Order

Delivery Ticket

Record Delivery to
Customer

Remittance
Advice

Receive Cash

Deposit Slip

Record Amounts
Deposited

Support Adjustments to
Credit Memo Revenue Cycle
Customer Accounts

Section Title

Common Source Documents &

Functions

Expenditure Cycle

Section Title

Common Source Documents &

Functions

Human Resource Cycle

Section Title

Common Source Documents &

Functions

General Ledger & Reporting System

Section Title

Common Source Documents &

Functions

Data
Files

Output

Process

Control

Feedback
Loop

Sensor

Section Title

Input

Data Processing

Section Title

Updating previously stored

information about the resources
affected by the event and agents
who participated in the activity.

Section Title

Periodic updating of the data stored

is referred to as batch processing.
Immediate updating as each
transaction occurs is referred to as
on-line, real-time processing.

Audit Trail

Section Title

An audit trail provides a means to

check the accuracy and validity of
ledger postings.

Data
Files

Output

Process

Control

Feedback
Loop

Sensor
Section Title

Input

Storage . . .
Ledgers and files provide storage of
data in both manual and
computerized systems.

Section Title

The General Ledger

The Accounts Payable Ledger
The Accounts Receivable Ledger

Section Title

A ledger is a book of financial

accounts, which reflect the financial
effects of the firms transactions
after they are posted from
the various journals.

Flow of Information From the

Economic Event to the General
Ledger Journal
Order

Sales
Order

Entry

Sales
Journal

Customer
Post

General
Ledger
Periodically reconcile subsidiary
ledger to General Ledger

Section Title

AR Sub
Ledger

Post

 A file is an organized collection of data.

Files may be

A transaction file is a collection of

transaction
input data normally
temporary in nature.
A master file is a collection of data that are
of a more permanent or continuing interest

Section Title

Manual
Computer (magnetic)

Section Title

A reference (table) file contains

data that are necessary to support
data processing

 After transaction data have been captured on

source documents, the next step is to record the
data in a journal.
A journal entry is made for each transaction
showing the accounts and amounts to be debited
and credited.
The general journal records infrequent or
nonroutine transactions.
Specialized journals simplify the process of
recording large numbers of repetitive transactions.
What are the four most common types of
transactions?

Section Title

Record Transaction Data

in Journals

Record Transaction Data

in Journals

Section Title

1 Credit sales
2 Cash receipts
3 Purchases on account
4 Cash disbursements

Record Transaction Data in Journals

Sales Journal

Page 5

Dec. 1
800.00

201

Lee Co.

120-122

Dec. 1
700.00

202

May Co.

120-033

Dec. 1
900.00

203

DLK Co.

120-111

TOTAL:

2,400.00
120/502

Section Title

Invoice
Account Account
Post
Date
Number Debited
Number
Ref.
Amount

Post Transactions to Ledgers

Section Title

Ledgers are used to summarize the

financial status, including the current
balance, of individual accounts.
The general ledger contains
summary-level data for every asset,
liability, equity, revenue, and
expense account of an organization.

Post Transactions to Ledgers

A subsidiary ledger records all the detailed
data for any general ledger account that has
many individual subaccounts.
What are some commonly used subsidiary
ledgers?
accounts receivable
inventory
accounts payable

What is the general ledger account

corresponding to a subsidiary ledger called?
A control account contains the total amount for
all individual accounts in the subsidiary ledger.

Section Title

control account

Post Transactions to Ledgers

Page 5

Sales Journal
Date

Invoice
Number

Account
Debited

Account
Number

Post
Ref.

Amount

Dec 1

203

DLK Co.

120-111

900.00

Total

2,400.00
120/502

General Ledger
Account: Accounts Receivable Account Number: 120
Description

Dec 1

Sales

Post Ref.
SJ5

Debit
2,400

Credit

Balance
2,400

Section Title

Date

Chart of Accounts

Section Title

The chart of accounts is a list of all

general ledger accounts used by an
organization.
It is important that the chart of
accounts contains sufficient detail to
meet the information needs of the
organization.

Function #2
This information is provided in the form
of reports that fall into two main
categories:

Prepare a trial balance.

Make adjusting entries.
Prepare the adjusted trial balance.
Produce the income statement.
Make closing entries.
Produce the balance sheet.
Prepare the statement of cash flows.

Section Title

Financial statements

Function #2
Managerial statements
The AIS must also be able to provide managers with
detailed operational information about the organizations
performance.
Two important types of managerial reports are
budget
performance reports

A budget is the formal expression of goals in

financial terms.
A performance report lists the budgeted and actual
amounts of revenues and expenses and also shows
the variances, or differences, between these two
amounts.

Section Title

One of the most common types of budget is a cash budget.

Magic Co. Monthly Performance Report

Budget
Actual
Variance
Sales
$32,400 $31,500
($900)
Cost of Goods
12,000
14,000
(2,000)
Gross Margin
$20,400 $17,500 ($2,900)
Other Expenses
9,000
7,000
2,000
Operating Income $11,400 $10,500
($900)

Section Title

Function #2

Function #3

Section Title

Ensure that the information produced

by the system is reliable.
Safeguard organizational assets.
Ensure that business activities are
performed efficiently and in
accordance with managements
objectives.

Adequate Documentation

Section Title

Documentation allows management

to verify that assigned
responsibilities were completed
correctly.

Segregation of Duties

authorizing transactions
recording transactions
maintaining custody of assets

Section Title

Segregation of duties refers to

dividing responsibility for different
portions of a transaction among
several people.
What functions should be performed
by different people?

References

Section Title

Accounting Information Systems, 12/E

Marshall B. Romney, Brigham Young
University Paul J. Steinbart, Arizona State
University ISBN-10: 0136015182 Publisher:
Prentice Hall 2013