Chapter 7 Accounting Information Systems

Control principle

A system has internal controls, which are procedures that help managers control a business.

Relevance principle

Accounting info is useful and timely

Compatibility principle

System conforms to company structure

Flexibility principle

System adapts to internal/external changes.

Cost-benefit principle

Benefits from an activity outweigh the costs.

Source documents

Information processed by the system.

Input devices

Transfer info from source documents to processing

Information processors

Summarize info for use in reporting

Information storage

Keep data accessible

Output devices

Make info available to users

General journal

All-purpose journal for adjusting, closing, and any other transactions for which there is no special journal. Transactions includes sales of noninventory assets on credit, purchases returns and allowances, purchases of plant assets by issuing a note payable, sales returns and allowances ,and receipt of a mote receivable.

Special journal

Used to record and post transactions of similar type

Subsidiary ledger

A list of individual accounts detailing a specific account in the general ledger.

Sales journal

Used to record sales of inventory on credit

Schedule of accounts receivable

List each customer and the balance owed. Used to prove that the Accounts Receivable controlling account and the total of individual accounts in its subsidiary ledger are equal.

Sales return and allowances

Record them in a general journal with the following entry

Cash receipts journal

Used to record all receipts of cash, including (1) cash from credit customers in payment of their accounts-as well as discounts, (2) cash from cash sales, and (3) cash from all other sources.

Footing and crossfooting

To be sure that total debits and credits in a journal are equal we crossfoot column totals. To foot a column of numbers is to add to it. To crossfoot is to check if debit and credit column totals are equal.

Purchases journal

Used to record all credit purchases, including those for inventory and supplies.

Schedule of accounts payable

List each creditor’s accounts payable and the balance owed. Used to prove that the Accounts Payable controlling account and the total of individual accounts in its subsidiary ledger are equal.

Cash payments journal

Used to record all cash payments, including cash payments for inventory, salaries, and accounts payable-minus discounts.