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
7-1
Business Process Fundamentals

Overview of the Financial Accounting Cycle

 Journals

 Ledgers

 Trial Balances

 Financial Statements
Chapter
7-2
 Journals

Chronological record of business events by

account
General Journal
 Records any type of accounting transaction

Special Journals
 Captures specific types of transactions

Chapter
7-3
 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
7-4
 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
7-5
 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
7-6
 Financial Statements

Primary output of financial accounting

system

Main Financial Statements

 Income Statement
 Balance Sheet
 Statement of Owners’ Equity
 Statement of Cash Flows

Chapter
7-7
Steps in the Accounting Cycle

Chapter
7-8
 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
7-9
 Types of Codes

Mnemonic Codes
 Helps user remember what they represent
Sequence Codes
 Sequential set of numbers
Block Codes
 Sequential codes
 Blocks of numbers reserved for specific
Group Codes
 Combine two or more subcodes
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
 Study Break #1 - Answer

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
7-13
 Study Break #2

AISs depend on codes to record, classify, store, and retrieve

financial data. Which of the following codes is a group of
numbers reserved for particular uses?

A. Block codes
B. Mnemonic codes
C. Alphanumeric codes
D. Numeric codes

Chapter
7-14
 Study Break #2

AISs depend on codes to record, classify, store, and retrieve

financial data. Which of the following codes is a group of
numbers reserved for particular uses?

A. Block codes
B. Mnemonic codes
C. Alphanumeric codes
D. Numeric codes

Chapter
7-15
 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
7-16
 Designing Reports

Characteristics of Good Reports

 Useful and convenient format
 Easy to identify and consistent

Identification and Consistency

 Include headings, page numbers, and dates
 Emphasize consistency
 Over time
 Across departmental or divisional levels
 With general accounting practice

Chapter
7-17
Example of a Report

Chapter
7-18
 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
7-19
Sample Purchase Order

Chapter
7-20
Sample Sales Invoice

Chapter
7-21
 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
7-22
 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
7-23
 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
7-24
Data Flow Diagram of Sales
Process

Chapter
7-25
 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
7-26
 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
7-27
 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
7-28
 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
7-29
Accounts Receivable Aging
Report

Chapter
7-30
 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
7-31
Sales Process Summary

Chapter
7-32
 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
7-33
 Study Break #3 - Answer

________ 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
7-34
 Study Break #4

Which of the following is NOT an objective of the sales

process?

A. Controlling inventory
B. Tracking sales of goods and/or services to customers
C. Billing for goods and services
D. Forecasting sales and cash receipts

Chapter
7-35
 Study Break #4

Which of the following is NOT an objective of the sales

process?

A. Controlling inventory
B. Tracking sales of goods and/or services to customers
C. Billing for goods and services
D. Forecasting sales and cash receipts

Chapter
7-36
 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
7-37
 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
7-38
Data Flow Diagram of
Purchasing Process

Chapter
7-39
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
7-40
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
7-41
Sample Packing Slip

Chapter
7-42
 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
7-43
 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
7-44
Purchasing Process Summary

Chapter
7-45
 IT in Sales and Purchasing

Electronic input
 Wireless capabilities

Automated data-entry technology

 Biometrics

Inventory Management Systems

 RFID Tags

Chapter
7-46
 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
7-47
 Copyright

Copyright 2012 John Wiley & Sons, Inc. All rights reserved.
Reproduction or translation of this work beyond that permitted in
Section 117 of the 1976 United States Copyright Act without the
express written permission of the copyright owner is unlawful.
Request for further information should be addressed to the
Permissions Department, John Wiley & Sons, Inc. The purchaser
may make backup copies for his/her own use only and not for
distribution or resale. The Publisher assumes no responsibility for errors,
omissions, or damages, caused by the use of these programs or from the
use of the information contained herein.

Chapter
7-48
Chapter 7

Chapter
7-49