Accounting Information Systems and Business Processes Vocabulary

Comprehensive vocabulary flashcards covering AIS overview, system documentation tools, accounting cycles, GL/subsidiary ledgers, coding systems, sales processes, and purchasing processes.

Accounting Information System (AIS)

A system that collects, records, stores, and processes data to produce useful information for decision makers.

Data vs. Information

Data refers to raw and unprocessed transaction data such as sales orders, whereas information is processed data that is useful for decision-making, such as management reports and financial statements.

Document Flowchart

A flowchart that traces the physical flow of documents through an organization, from creation and review to approval, storage, and distribution.

System Flowchart

A flowchart that depicts the electronic flow of data and processing steps in an AIS, demonstrating relationships among system inputs, processing, and outputs.

Sandwich Rule

A systems flowcharting guideline stating that a process symbol must always be placed between an input symbol and an output symbol.

Data Flow Diagram (DFD)

A graphical tool primarily used in the systems development process for analyzing an existing system or planning a new system.

Context Diagram

A top-level or high-level data flow diagram that provides an overall picture of an application or system.

Decomposition

The act of exploding data flow diagrams into successively lower levels (such as Level $0$ and Level $1$ DFDs) to provide increasing detail.

CASE Tools

Computer-assisted Software Engineering tools that provide advanced graphical documentation capabilities to support Rapid Application Development (RAD).

Source Document

A paper or electronic record used to capture initial transaction data resulting from a business activity.

Source Data Automation

The practice of capturing transaction data directly in machine-readable form at the time and place of origin, such as with bar codes or POS devices.

General Journal

A chronological record used to originally enter non-routine accounting transactions, such as adjusting entries, and summaries of routine transactions.

Special Journal

A journal designed to originally record specific types of high-volume, routine transactions, such as sales, purchases, cash receipts, and cash disbursements.

General Ledger

A ledger that maintains the beginning balance, increases, decreases, and ending balance for asset, liability, revenue, and expense accounts.

Subsidiary Ledger

A ledger that keeps detailed individual records pertaining to a specific general ledger control account, such as individual customer accounts in Accounts Receivable.

Control Account

A general ledger account whose total balance summarizes and must equal the sum of all individual account balances in a related subsidiary ledger.

Sequence Code

A coding scheme where items are numbered consecutively without gaps, ensuring all items are accounted for and preventing duplicates.

Block Code

A coding scheme in which reserved blocks or ranges of numbers within a numerical sequence are assigned to specific categories of items.

Group Code

A coding scheme in which individual digits or groups of digits within a code signify distinct aspects or attributes of an item.

Chart of Accounts

A structured list of all general ledger accounts used by an organization, typically organized using group coding.

Mnemonic Code

A coding scheme that uses letters or acronyms suggestive of the items being coded to provide visible recognition clues.

Business Process

A collection of structured activities within an organization that work together to create value.

Sales Process (Revenue Cycle)

A core business process that begins with a customer order, moves through shipping goods or services, and ends with cash collection.

Electronic Data Interchange (EDI)

An automated transmission system that allows customers to send orders directly to a seller's system for automatic processing without human involvement.

Vendor-Managed Inventory (VMI)

An arrangement where a supplier is granted access to a customer's inventory data to monitor and manage inventory replenishment automatically.

Packing Slip

A shipping document that lists the specific items, quantities, and descriptions of goods included in a shipment.

Bill of Lading

A legal shipping contract that defines responsibility for goods in transit, identifying the carrier, source, destination, payment obligations, and FOB terms.

Open-Invoice Method

An accounts receivable payment method where customers pay individually according to each specific invoice received.

Balance-Forward Method

An accounts receivable payment method where customers pay the total balance shown on a monthly billing statement.

Cycle Billing

A billing strategy where monthly statements are prepared and sent to different subsets of customers at different times during the month to maintain smooth cash flow.

Remittance Advice

A document accompanying a buyer's payment that confirms which invoice has been paid, serving as the source document for crediting accounts receivable.

Accounts Receivable Aging Report

An output report displaying open customer balances organized by time outstanding to assist in monitoring overdue accounts.

Purchasing Process (Expenditure Cycle)

A core business process that begins with a purchase request, continues with the receipt of goods or services, and ends with payment to the vendor.

Purchase Requisition

An internal request document generated when inventory levels drop below a pre-specified threshold to initiate a purchase order.

Purchase Order

A formal document or electronic request issued to a supplier specifying products, quantities, and agreed-upon prices.

Receiving Report

A document prepared upon arrival of goods to record the quantity, quality, date, shipper, and purchase order reference number.

Three-Way Match

A control verification process performed by Accounts Payable matching the purchase order, receiving report, and vendor invoice prior to authorizing payment.

Discrepancy Report

An exception report highlighting any differences between quantities or amounts on the purchase order, receiving report, and vendor invoice.