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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
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
7-11
Block Code Example
Chapter
7-12
Study Break #1
Which of the following provides the organizational structure
for the general ledger?
A.
B.
C.
D.
Special Journals
A source document
General journals
The chart of accounts
Chapter
7-13
Study Break #1 - Answer
Which of the following provides the organizational structure
for the general ledger?
A.
B.
C.
D.
Special Journals
A source document
General journals
The chart of accounts
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.
B.
C.
D.
Block codes
Mnemonic codes
Alphanumeric codes
Numeric codes
Chapter
7-15
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.
B.
C.
D.
Block codes
Mnemonic codes
Alphanumeric codes
Numeric codes
Chapter
7-16
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
7-17
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
7-18
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
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
7-30
Sales Process Summary
Chapter
7-31
Study Break #3
________ is (are) a collection of activities or flow of work
in an organization that creates value.
A.
B.
C.
D.
An economic event
Accounting transactions
A business process
A chart of accounts
Chapter
7-32
Study Break #3 - Answer
________ is (are) a collection of activities or flow of work
in an organization that creates value.
A.
B.
C.
D.
An economic event
Accounting transactions
A business process
A chart of accounts
Chapter
7-33
Study Break #4
Which of the following is NOT an objective of the sales
process?
A.
B.
C.
D.
Controlling inventory
Tracking sales of goods and/or services to customers
Billing for goods and services
Forecasting sales and cash receipts
Chapter
7-34
Study Break #4
Which of the following is NOT an objective of the sales
process?
A.
B.
C.
D.
Controlling inventory
Tracking sales of goods and/or services to customers
Billing for goods and services
Forecasting sales and cash receipts
Chapter
7-35
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
7-36
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
7-37
Data Flow Diagram of
Purchasing Process
Chapter
7-38
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
7-39
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
7-40
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
Byproduct of batch processing
Chapter
7-41
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
7-42
Purchasing Process Summary
Chapter
7-43
IT in Sales and Purchasing
Electronic input

Wireless capabilities
Automated data-entry technology

Biometrics
Inventory Management Systems

RFID Tags
Chapter
7-44
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
7-45
BPO Examples
Chapter
7-46
Copyright
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information contained herein.
Chapter
7-47
Chapter 7
Chapter
7-48