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Accounting

Information Systems
and Business
Part I
Processes

CHAPTER 7

Business Process
Fundamentals

Overview of Financial Accounting
Cycle
• Journals
• Ledgers
• Trial Balances and Financial
Statements

Factors to consider when designing an accounting code:  Must serve some useful purpose  Must be consistent .Coding Systems • Numeric Codes (numbers only) • Alphanumeric Codes (numbers and letters) – Types of Codes: • • • • Mnemonic Codes Sequence Codes Block Codes Group Codes S M L XL .

g. inventory records) Hard copy reports Soft copy reports E.Outputs of an AIS • • • • Reports to management Reports to investors and creditors Files that retain transaction data Files that retain current data (e.copy reports Audio outputs .

Designing Reports .

Characteristics of Good Reports • Useful • Convenient format • Easy to identify – Heading – Page number – Date • Consistent – Over time – Across departmental or divisional levels – With general accounting practice .

Source Documents: • They dictate the kind of data to be collected and help ensure consistency and accuracy in recording data • They encourage the completeness of accounting data • They serve as distributors of information for individuals or departments • They help establish the authenticity of accounting data .

SALES PROCES S .

Inputs to sales process • • • • • Outputs to sales process • Financial statement Sales order information Sales invoice • Customer billing Remittance advice statement • Aging report Shipping notice • Bad debt report Debit/ credit • Cash receipts memoranda forecast • Customer listing • Sales analysis report .

PUCHASIN G PROCESS .

Inputs to purchasing process • Purchase requisition • Purchase order • Vendor listing • Receiving report • Bill of lading • Packing slip • Debit/ credit memoranda Outputs to purchasing process • Financial statement information • Vendor checks • Check register • Discrepancy reports • Cash requirements forecast • Sales analysis report .

Current trends in business processes • Business process outsourcing – Business without boundaries – Offshoring • Business process management software .

Accounting Information Systems and Business • Part II Processes CHAPTER 8 .

Human resource management process .

Inputs to HR management process • Personnel action forms • Time sheets • Payroll deduction authorization • Tax withholding forms Outputs to HR management process • Financial statement information • Employee listings • Paychecks • Check register • Deduction reports • Tax (regulatory) reports • Payroll summaries .

Fixed asset management processing .

Inputs to fixed Outputs to fixed asset asset management management process process • Purchase requisition • Financial statement • Receiving reports • • Supplier invoices • • Construction work • orders • Repair and maintenance records • • Fixed asset change forms information Fixed asset register Depreciation register Repair and maintenance report Retired asset report .

The production process .

• Job costing information system • Process costing information system • Activity based costing • Just in time inventory systems • Lean production/ manufacturing • Lean accounting .

Inputs to production process • Materials requisition form • Bill of materials • Master production schedule • Production order • Job time cards Outputs to production process • Financial statement information • Material price list • Periodic usage reports • Inventory status reports • Production cost reports • Manufacturing status reports .

The financing process .

• • • • • • • Inputs to financing process Remittance advice Deposit slips Checks Bank statements Stock market data Interest data Financial institution profiles Outputs to financing process • Financial statement information • Cash budget • Investment reports • Debt and interest reports • Financial ratios • Financial planning model reports .

Professional service organizations • No merchandise inventory • Emphasis on professional employees • Difficulty in measuring the quantity and quality of output • Small size TIME AND BILLING INFORMATION SYSTEM .

Not-for-profit organizations • Staffed by volunteers as well as professional employees • Do not emphasize maximizing net income • Not as affected by market forces as are for-profit organizations • Sometimes have political emphasis FUND ACCOUNTING SYSTEM .

Health care organizations • Do not provide tangible goods to customers • Staffed by professional employees • Public • Operate on a not-for-profit basis • Output is difficult to measure THIRD PARTY BILLING .

Business process reengineering • Continuous process that involves the analysis of identifying areas for improvement of an existing process .

CHAPTER 9 Introduction to Internal Control Systems .

Sarbanes-Oxley Act of 2002 • Section 404 – Management is responsible for establishing and maintaining an adequate internal control structure .

Internal Control System • Four objectives – Safeguard assets – Check the accuracy and reliability of accounting data – Promote operational efficiency – Enforce prescribed managerial policies .

integrity and ethical principles that guide an organization – Attention and direction of the board of directors – Top management’s philosophy and operating style • Policies and procedures that management develops – To assign authority and responsibility across the organization – To develop its employees .Control Environment • Management’s oversight.

Risk Assessment • Purpose – Identify organizational risk – Analyze their potential in terms of costs and likelihood of occurrence – Implement only those controls whose projected benefits outweigh their costs .

Control Activities • Policies and procedures that the management develops to protect its assets Information and Communication • Inform employees about their roles and responsibilities pertaining to internal control Monitoring • Evaluation of design and operation of controls and then initiative corrective action when specific controls are not functioning properly .

Updates on Risk Assessment • 2004 Enterprise Risk Management Framework – objective setting – Event identification – Risk response .

Examples of control activities • Good audit trail • Sound personnel policies and procedures • Separation of duties • Physical protection of assets – Inventory controls – Document controls – Cash controls • Review of operating performance .

Types of controls • Preventive controls • Detective controls • Corrective controls Evaluating controls • Cost-benefit analysis • A risk matrix .