Chapter

7-1

Chapter 7:
Accounting Information Systems
and Business Processes - Part I

Introduction
Business Process Fundamentals
Collecting and Reporting Accounting
Information
The Sales Process
The Purchasing Process
Current Trends in Business Processes
Chapter
7-2

Business Process
Fundamentals
Overview of the Financial Accounting Cycle

Journals

Ledgers

Trial Balances

Financial Statements
Chapter
7-3

Journals
Chronological record of business events by
account
General Journal

Records any type of accounting transaction

Special Journals

Captures specific types of transactions

Chapter
7-4

Types of Special Journals

Sales Journal

Record of credit sales transactions

Purchases Journal

Record of credit purchase transactions

Cash Receipts Journal

Record of transactions involving receipts of cash

Cash Disbursements Journal

Record of transactions involving disbursements of

cash

Chapter
7-5

Ledgers
General Ledger
Contains detailed monetary information
Includes the assets, liabilities, owners equity,
revenues, and expenses of the company

Chart of Accounts
Listing of all accounts used by the company
Provides organizational structure for the general
ledger
Utilizes block coding structure
Chapter

7-6

Trial Balances
Listing of all accounts with the debit and
credit balances
Timing of Preparation
After all journal entries are posted
Following the posting of adjusting entries
Following the posting of closing entries

Chapter
7-7

Financial Statements
Primary output of financial accounting
system
Main Financial Statements
Income Statement
Balance Sheet
Statement of Owners Equity
Statement of Cash Flows

Chapter
7-8

Steps in the Accounting

Cycle

Chapter
7-9

Coding Systems
Importance of Coding for AISs
Record, store, classify, and retrieve information
Utilize numeric and alphanumeric codes

Design Considerations
Must serve a useful purpose
Must be consistent
Plan for future expansion

Chapter
7-10

Block Code Example

Chapter
7-11

Study Break #1
Which of the following provides the organizational structure
for the general ledger?
A. Special Journals
B. A source document
C. General journals
D. The chart of accounts

Chapter
7-12

Collecting and Reporting

Accounting Information
Design Considerations
Should be effective
Expectations of outputs

Outputs of an AIS
Reports to management
Reports to investors and creditors
Files retaining transaction data
Files retaining current data about accounts

Chapter
7-13

Example of a Report

Chapter
7-14

Source Documents
Manage flow of accounting data

Dictate type of data collected

Encourage completeness of data
Distributors of information
Establish authenticity of data

Usage today

Extensively used in AISs

Movement from paper to electronic format
Chapter
7-15

Sample Purchase Order

Chapter
7-16

Sample Sales Invoice

Chapter
7-17

Business Process
Definition

Collection of activities
Creates value for organization
AIS collects and reports data related to processes

Economic event

Impacts financial statements

Business event

Does not impact financial statements

Chapter
7-18

The Sales Process

Process

Begins with customer order

Ends with collection of cash

Primary Objectives of Sales Process

Process sales in a timely and efficient manner

Collect cash in a timely and efficient manner

Chapter
7-19

Objectives of the Sales

Process
Tracking sales of goods and/or services to
customers
Filling customer orders
Maintaining customer records
Billing customers for goods and services
Collecting payment for goods and services
Forecasting sales and cash receipts
Chapter
7-20

Data Flow Diagram of

Sales Process

Chapter
7-21

Inputs to the Sales

Process
Sales Order

Created at time of sale

Used to prepare the sales invoice

Sales Invoice

Reflects information of the sale

Products purchased, price, terms of payment

Remittance Advice

May accompany payment

Chapter
7-22

Inputs to the Sales

Process
Shipping Notices

Prepared when warehouse releases goods

Copy possibly included with goods

Additional copy sent to accounts receivable

Debit/Credit Memoranda

Denotes return of damaged goods

Identifies discrepancies about amount owed

Chapter
7-23

Outputs of the Sales

Process
Financial Statements
Customer Billing Statement

Summarizes outstanding sales invoices

Total amount currently owed

Aging Report

Accounts receivable balances

Categorized based on time outstanding

Chapter
7-24

Outputs of the Sales

Process
Bad Debt Report

Information on collection follow-up procedures

Helps manage overdue accounts

Cash Receipts Forecast

Source documents used as inputs

Prior payment experience and aging analysis aid in

preparation
Chapter
7-25

Accounts Receivable
Aging Report

Chapter
7-26

Outputs of the Sales

Process
Approved Customer Listing Report

Identifies customers approved for sales

Includes customer information such as billing address,

credit limits, and billing terms

Sales Analysis Reports

Detailed information captured by AIS

Aid in decision-making process for production

planning and marketing efforts
Chapter
7-27

Sales Process Summary

Chapter
7-28

Study Break #3

________ is (are) a collection of activities or flow of work

in an organization that creates value.
A. An economic event
B. Accounting transactions
C. A business process
D. A chart of accounts

Chapter
7-29

The Purchasing Process

Process

Begins with request for goods/services

Ends with payment of cash

Primary Objectives of Purchasing Process

Purchase high-quality goods at best price

Pay vendors at the optimal time

Chapter
7-30

Objectives of the Purchasing

Process
Tracking purchases of goods and/or services
from vendors
Tracking amounts owed
Maintaining vendor records
Controlling inventory
Making timely and accurate vendor payments
Forecasting purchases and cash outflows
Chapter
7-31

Data Flow Diagram of

Purchasing Process

Chapter
7-32

Inputs to the Purchasing

Process
Purchase Requisition
Identifies item requested
May indicate name of vendor

Purchase Order
Based on Purchase Requisition
Includes vendor information

Vendor Invoice

Includes prices, shipping terms, and discounts

Chapter
7-33

Inputs to the Purchasing

Process
Receiving Report

Count and condition of goods received

Bill of Lading
Accompanies the good sent
Carrier assumes responsibility for the goods

Packing Slip
Specific goods and quantities included in shipment
Included in merchandise package

Chapter
7-34

Sample Packing Slip

Chapter
7-35

Outputs of the Purchasing

Process
Financial Statement Information
Vendor Checks
Supported by a voucher
Signed by a person designated by management

Check Register
List of all checks issued for a particular period
By-product of batch processing

Chapter
7-36

Outputs of the Purchasing

Process
Discrepancy Reports
Notes differences in quantities or amounts
Based on reconciliation of purchase order,
receiving report, and the purchase invoice

Cash Requirements Forecast

Predicts future payments and payment dates
Utilizes multiple source documents

Chapter
7-37

Purchasing Process
Summary

Chapter
7-38

IT in Sales and Purchasing

Electronic input

Wireless capabilities

Automated data-entry technology

Biometrics

Inventory Management Systems

RFID Tags
Chapter
7-39

Current Trends in
Business Processes
Business Processes Outsourcing (BPO)
Business without boundaries
Offshoring

Business Process Management Software

(BPM)
Collect corporate knowledge, data, and business
rules
Accomplish business processes more efficiently

Chapter
7-40