ACCT 307 CH 3

Comprehensive set of 100 vocabulary flashcards defining key accounting information systems terms, coding schemes, financial cycle steps, sales process elements, and purchasing process elements based directly on the lecture.

Source Document

A paper or electronic record that first captures transaction data during a business activity, such as a purchase or sale of goods.

Source Data Automation

The capture of transaction data in machine-readable form (such as bar codes or POS devices) at the time of business activity to improve accuracy and efficiency.

Journal

A chronological record of accounting transactions.

General Journal

A journal used to record any type of accounting transaction, including non-routine entries and summaries of routine transactions.

Special Journal

A journal designed to capture specific, high-volume types of routine transactions to simplify the recording process.

Common Special Journals

The four most frequent special journals: sales, purchases, cash receipts, and cash disbursements.

General Ledger

The primary ledger that keeps track of the beginning balance, increases, decreases, and ending balance in asset, liability, revenue, and expense accounts.

Subsidiary Ledger

A ledger containing detailed records pertaining to a specific account in the general ledger.

Control Account

A general ledger account whose total balance equals the sum of the balances of all individual accounts in its corresponding subsidiary ledger.

Pre-Adjusting Trial Balance

An end-of-period trial balance prepared after all general entries have been posted to the ledger.

Adjusted Trial Balance

An end-of-period trial balance prepared after adjusting journal entries have been recorded and posted.

Post-Closing Trial Balance

An end-of-period trial balance prepared after closing journal entries have been recorded and posted.

Financial Statements

The primary outputs of a financial accounting system, including the Income Statement, Statement of Owners' Equity, Balance Sheet, and Cash Flow Statement.

Steps in the Accounting Cycle

The sequence of accounting operations: record transaction in a journal, post to ledger, prepare unadjusted trial balance, record/post adjusting entries, prepare adjusted trial balance, prepare financial statements, record/post closing entries, and prepare post-closing trial balance.

Coding Systems

Methods used by AIS to systematically assign numbers or letters to data items to uniquely identify transactions and accounts.

Sequence Codes

A coding scheme where items (such as pre-numbered checks or invoices) are numbered consecutively to ensure no gaps or duplicate numbers.

Block Codes

A coding scheme where blocks or ranges of numbers within a numerical sequence are reserved for specific categories of items.

Group Codes

A coding scheme where each digit or position in the code signifies a specific attribute or aspect of the coded item.

Chart of Accounts

A list of all general ledger accounts used by an organization, providing the organizational structure for the general ledger using group coding.

Mnemonic Codes

Coding schemes using letters (often acronyms) that give visible memory clues concerning the items they represent.

Business Process

A collection of activities within an organization that create value.

Core Business Processes

The two primary functional cycles common to business organizations: the sales process (revenue cycle) and the purchasing process (expenditure cycle).

Sales Process (Revenue Cycle)

The business process beginning with a customer order, followed by the shipment of goods or services, and ending with cash collection.

Primary Objective of the Sales Process

To achieve timely and efficient cash collection to ensure the company can satisfy its own financial obligations.

Level 0 DFD of the Revenue Cycle

A high-level data flow diagram showing the main revenue cycle processes (1.0 Take Order, 2.0 Ship Goods, 3.0 Collect payment) alongside entities and data stores.

Electronic Data Interchange (EDI)

Automated system-to-system transmission of orders or business documents according to predetermined terms with little or no human involvement.

Vendor-Managed Inventory (VMI)

An arrangement where a supplier is granted access to a customer's inventory data and assumes responsibility for managing and monitoring stock levels.

Credit Approval Requirement

Specific authorization needed when approving orders for new customers, customers with past-due balances, or orders exceeding assigned credit limits.

Credit Limit

The maximum allowable balance established for a customer based on past credit history and ability to pay.

Back Order

A record created during order processing when sufficient inventory is not available to fulfill a requested sales order.

Pick and Pack

The process in which warehouse personnel remove ordered goods from inventory storage and transfer them to shipping.

Packing Slip

A document included with a shipment that lists specific items, quantities, and descriptions of goods delivered.

Bill of Lading

A legal contract defining carrier responsibility for goods in transit, identifying carrier, source, destination, payment details, and FOB terms.

Open-Invoice Method

A method of maintaining accounts receivable where customers pay according to each specific invoice.

Balance-Forward Method

A method of maintaining accounts receivable where customers pay the overall balance shown on monthly statements.

Cycle Billing

Preparing monthly billing statements for subsets of customers at different times during the month to ensure steady cash flow and reduce workload.

Remittance Advice

A document sent by a buyer to a seller confirming payment details, serving as the source document for crediting accounts receivable.

Lockbox System

A postal service arrangement where payments are sent directly to a bank-managed post office box to reduce remittance processing delay.

Electronic Fund Transfer (EFT)

Electronic computer-to-computer movement of money to reduce mail time and check-clearing delays.

Financial Electronic Data Interchange (FEDI)

An integrated system combining Electronic Fund Transfer (EFT) for payments with Electronic Data Interchange (EDI) for billing details.

Sales Order

A pre-numbered document prepared in multiple copies used to record customer purchase details and authorize order processing.

Sales Invoice

An official document sent by a seller requesting payment from a buyer for delivered goods or services.

Credit Memo (Sales Process)

A document issued for sales returns, allowances, or write-offs that decreases the amount owed by a customer.

Debit Memo (Sales Process)

A document issued when a customer is undercharged, increasing the amount owed by the customer.

Accounts Receivable Aging Report

A report summarizing open customer balances categorized by the length of time outstanding.

Bad Debt Report

A report tracking collection follow-up efforts and write-off details for delinquent customer accounts.

Cash Receipts Forecast

A projection of incoming cash receipts estimated using sales amounts, credit terms, past collection patterns, and aging data.

Approved Customer Listing

A master list containing customer codes, contact details, shipping/billing addresses, credit limits, and terms.

Sales Analysis Reports

Detailed reports evaluating sales transaction data to help monitor activities and direct marketing and production efforts.

Objectives of the Sales Process

Core targets including filling orders, billing customers, tracking sales, collecting payments, and forecasting sales and cash receipts.

Purchasing Process (Expenditure Cycle)

The business process beginning with a purchase request, progressing to receipt of goods, and concluding with cash payment.

Primary Objective of the Purchasing Process

To minimize acquisition and maintenance costs of inventory while paying suppliers at optimal times.

Level 0 DFD of the Purchase Cycle

A data flow diagram showing the key purchasing processes (1.0 Order Goods, 2.0 Receive goods, 3.0 Pay for Goods) and related entities.

Purchase Requisition

An internal document requesting purchasing personnel to buy stock when inventory drops below a preset threshold.

Purchase Order

A formal document or electronic request sent to a supplier offering to purchase goods at designated terms and prices.

Reverse Auctions

A procurement method where competing suppliers bid to offer the lowest price for requested inventory.

Receiving Report

A document created upon arrival of inventory recording quantity, condition, supplier details, PO number, and receipt date.

Debit Memo (Purchasing Process)

A document issued by a buyer requesting a reduction in Accounts Payable for damaged goods or returns.

Credit Memo (Purchasing Process)

A document issued by a vendor acknowledging a buyer's debit memo or correcting an undercharge, increasing Accounts Payable.

Three-Way Match

The verification procedure performed by Accounts Payable matching purchase order, vendor invoice, and receiving report prior to payment approval.

Check Register

A chronological listing of all checks issued by an organization during a specific time period.

Discrepancy Reports

Purchasing reports flagging mismatches in quantities or prices among purchase orders, receiving reports, and vendor invoices.

Cash Requirements Forecast

A management report predicting future cash obligations and upcoming vendor payment schedules.

Objectives of the Purchasing Process

Core targets including vendor record maintenance, inventory control, purchase tracking, tracking debts, timely payments, and forecasting outflows.

Order Goods vs. Take Order

Mirror image activities where the expenditure cycle's purchase order output serves as input to the revenue cycle's take order process.

Receive Goods vs. Ship Goods

Mirror image activities where the expenditure cycle receives physical items dispatched by the revenue cycle's shipping department.

Pay for Goods vs. Collect Payment

Mirror image activities where disbursements created in the expenditure cycle are processed by the revenue cycle's collection function.

Accounting Information Systems (AIS)

Systems designed to collect, record, store, and process financial data and business process information to create accounting outputs.

Routine Transactions

Standard, day-to-day business operations recorded originally in special journals to simplify bookkeeping.

Non-Routine Transactions

Infrequent business events or periodic adjustments recorded directly into the general journal.

Customer Account File

A revenue cycle data store maintaining individual customer account balances, credit limits, and credit history.

Inventory File

A central data store tracking stock quantities on hand, descriptions, and stock movements across revenue and purchase cycles.

Cash Receipts File

A revenue cycle data store logging details of cash payments and remittances received from customers.

Open Purchase Order File

An expenditure cycle data store recording issued purchase orders awaiting inventory receipt.

Cash Payments File

An expenditure cycle data store logging vendor disbursement details and check payments.

Picking Ticket

An internal shipping document generated during order taking instructing warehouse workers to pick specific quantities of stock.

Shipping Company Entity

An external data destination in the revenue cycle that receives packing lists, bills of lading, and goods for transport.

Supplier File

An expenditure cycle data store containing vendor background details, contact information, purchase history, and amounts owed.

Choiceboards

Interactive web tools allowing online customers to customize products while placing orders.

Targeted Marketing

Sales customization strategies facilitated by capturing detailed online customer ordering data.

Cashier Function

The treasury role responsible for making actual cash disbursements and signing checks, segregated from Accounts Payable.

Accounts Payable (A/P) Department

The department responsible for reviewing vendor invoices, matching purchasing documents, and approving payment entries.

Verification of Account Balances

Periodic reconciliation comparing individual balances in a subsidiary ledger against the balance of the general ledger control account.

Chronological Sequence

Arranging entries strictly in order of occurrence by date, which characterizes journal entries.

Block Code Example

Reserving numerical ranges like 100000-199999 for Electric ranges and 200000-299999 for Refrigerators.

Group Code Position Example

A product coding scheme where digit 1 represents product line, digits 2-3 represent year, and digit 5 represents color.

Chart of Accounts Structure

A three-part group code system where the first section identifies major categories (assets), second section sub-accounts (receivables), and third specific accounts (trade).

Mnemonic Code Example

Using suggestive acronyms such as ACCT 307 for an accounting course or CA 90012 for a state and postal address.

Duplicate Number Detection

Using sequence codes to prevent duplicate document numbers, which could signal errors or fraud.

FOB Terms

Freight terms on a bill of lading specifying whether buyer or seller pays carrier fees and owns goods during transit.

Inventory Availability Verification

Checking the inventory file during order entry to ensure sufficient stock exists before committing to ship an order.

Production Department Trigger

Notification sent to manufacturing when stock is unavailable to fill a customer's order in a manufacturing environment.

Retail Purchasing Trigger

Notification sent to purchasing agents when inventory is insufficient to fill a sales order in a retail environment.

Overdue Account Follow-Up Procedures

Action steps tracked within bad debt reports for managing delinquent customer collections and write-offs.

Vendor Selection Criteria

Key factors evaluated when selecting suppliers, including price, material quality, and delivery dependability.

Automated Inventory Reordering

System process where purchase requisitions are automatically generated when stock drops below predetermined reorder points.

Quality Remarks on Receiving Reports

Notes recorded on receiving reports regarding the condition, defects, or damages of incoming supplier shipments.

Revenue Cycle External Entities

External parties interacting with the sales process, including Customer, Shipping Company, and Bank.

Expenditure Cycle External Entities

External or internal parties initiating purchasing inputs, such as Various Departments and Suppliers.

Financial Accounting System Primary Output

The structured set of financial statements derived from ledger accounts at the conclusion of an accounting period.