ACC 401 (AIS) Exam 1

Authorization

An important part of control procedures that limits what activities can be done by certain parties, requiring signatures, initialization or codes to access or submit data for payments, sales, or requests.

Special Authorization

Special approval an employee needs to handle a transaction

• EX: When a sale is over a predetermined limit

General Authorization

The authorization given to employees to handle general work day tasks.

3 Functions of Segregation of Duties

Authorization

Recording

Custody

Recording

Preparing source documents, entering data into computers, maintaining journals, ledgers, files, and databases

Custody

handling cash, tools, inventory, or fixed assets; receiving incoming customer checks; writing checks.

Collusion

Cooperation between two or more people in an effort to thwart internal controls for personal gain

Transaction

Agreement between two entities to exchange goods and services for cash

Transaction Processing

Process of capturing transaction data, processing it, storing it for later use, and producing information output such as a managerial report or a financial statement

Give-Get exchange

Transactions that happen in the average business day where one item is exchanged for another

• Giving cash to get inventory, giving employees paychecks in exchange for labor, etc…

Revenue Cycle

Business activities and data processing in relation to selling goods and services in exchange for cash or future payment

Expenditure Cycle

Recurrings set of activities and data processing related to purchasing inventory or raw mats. in exchange for cash or future cash payments

Production Cycle

Activities related to using labor, raw materials, and equipment to produce finished goods

Human Resources/ Payroll Cycle

Where employees are hired, trained, compensated, evaluated, promoted, and terminated.

Financing Cycle

Activities to raise capital through debt or equity financing. Includes paying dividends and interest

Data processing Cycle

Data input, storage, processing, and output performed on data to generate meaningful information

Source Documents

Docs used to capture transaction data at its source when it takes place.

Sales orders, purchase orders, employee time cards

Turnaround Documents

Records sent to an external party and then returned to the system as an input.

Utility bill…

Coding

Assignment of numbers or letters to items to classify and organize them. Writing program instructions that direct a computer to perform an activity

Sequence Codes

Items are numbered consecutively to account for all items.

• Pre numbered checks, invoices, purchase orders

Block Code

Blocks of numbers are reserved for specific categories of data

• 1000 ~ 1999 —> Electric range

• 2000 ~ 2999 —-> Refrigerator

Group Codes

Two are more subgroups of digits used to code items based on position of the number

• Position 1-2 = product line, size, style

• Position 3 = color

• Position 4-5 = Year of manufacture

Mnemonic Coding

Letters and numbers interspersed to identify an item.

• Dry300W = Dry, model number 300, that is white

General Journal

Journal used to record infrequent or nonroutine transactions such as loan payments and end-of-period adjusting and closing entriesSp

Specialized Journal

Journal used to record large number of repetitive transactions such as credit sales, cash receipts, purchases, and cash dispursements

Business process Diagram

visual way to describe different steps or activities in a business process, providing the reader with an easily understood pictorial view of what takes place in a business process.

Flowchart

Pictorial analytical tool used to clearly describe parts of an information system

Document: Electronic or paper document

Multiple copies of one document

Electronic output: Info displayed by an electronic output device such as a screen, monitor, or terminal

Electronic data entry: device such as a computer, terminal, tablet, or phone to in put data

Electronic input and output device: Data entry and output symbols are put together because they are used on the same device

Computer processing: Computer performed function that usually results in a change of data or information

Manual operation: Function performed manually

Electronic Database storage

Magnetic tape storage

Paper Doc file: N = Numerically, A = Alphabetically, D = by date

Journal or Ledger

Document/Process flow

Communication Link: transmission of data from one geographic location to another

On page connector

Off page connector

Terminal: beginning or ending of a process/flow

Decision making step

annotation detailing additional information

What are the 4 basic revenue cycle activities?

Sales order entry

Shipping

Billing

Cash Collections

Which dept handles sales order entry processes

The sales department

Sales Order

Document created that details a request from customer and what they want including terms of sale

Who approves credit of customers?

With well established customers they dont need to be approved if they haven’t surpassed their credit limit.

The credit manager approves new or over credit limit balances

Credit Limit

maximum allowable credit account balance for each customer, based on credit history and ability to pay

Why could it be harmful for a sales rep to have ability to approve credit?

They have incentive to make sales to boost their personal revenue so they might approve bad credit customers

A/R aging report

Reporting list of accounts due by customers detailing the time they ahve been due and the balance

Back Order

document authorizing the purchase or production of more inventory to meet customer orders

Picking ticket

prepared list of items and quantities for customer order. Authorizes inventory control function to release merchandise to shipping

Packing Slip

Document listing quantity and description of each item included in shipment

Bill of Lading

Legal contract that defines responsibility for goods while they are intransig. Tells who the carrier is, source, destination, shipping instructions and how the customer or vendor must pay the carrier

What documents are included in a shipment of goods?

Bill of Lading and Packing Slip

Sales Invoice

document notifying customers how much they owe the company

Open-Invoice Method

Method for maintaining A/R where customers pay according to each invoice.

Convenient for uniform cash flows through the month

Usually used for companies whos customers are other companies

Remittance advice

Copy of invoice returned to vendor with payment that tells what items are being paid.

Balance-Forward Method

Customers pay based on the amount shown in a monthly statement rather than individual invoices. Used on companies with large numbers of customers.

Cycle Billing

Monthly statements are made for customers at different times in subsets of customers. Maybe last names A-G pay the first week and then H-N pay the second week of the month. This allows for steadier cash flows. through the month

Credit Memo

When a customer returns goods for any reason you need to account for the inventory and then create a credit memo which authorized the credit of a customers account reducing A/R. Can also be used to authorize write offs of bad debt

Remittance List

document listing names and amounts of all customer payments received in the mail

Lockbox

postal address where customers can send their remittances and payments. The bank is in charge of picking up payment and depositing it.

Factoring

Selling A/R at a discount to a firm that specializes in collections of past-due accounts.

Primary HRM/Payroll tasks

Recruiting and hiring new employees

Training

Job Assignment

Compensation

Performance Evaluation

Discharging employees due to voluntary or involuntary termination