ACCT 307 - Midterm #1: Business Processes

Source document

records a business activity such as the purchase or sale of goods

Journal

chronological record of transactions

General Journal

allows any type of accounting transactions, entries made only for non-routine transactions such as adjusting entries and summaries of routine transactions

Special journal

captures specific types of transactions, usually routine such as sales, purchases, cash receipts, and cash disbursements

General Ledger

keeps track of the beg bal, incr, decr, and end bal in the asset, liability, revenue, and expense accounts

Subsidiary leger

detailed records about specific general ledger accounts

general ledger accounts are often called ____ accounts

control

The ___ of the ___ account balances should equal the balance in the ___ account.

sum, subsidiary, control

(1/3) Pre-adjusted Trial balance

after all entries have been posted

(2/3) Adjusted trial balance

after adjustments have been recorded and posted

(3/3) Post-closing trial balance

after closing entries have been recorded and posted

Sequence codes

numbered consecutively to ensure all items are accounted for, no duplicates.

An example of sequences coded items

checks, invoices, and purchase orders

Block codes

ranges of numbers within a numerical sequence are reserved for each category of item

An example of Block coded items

product codes

Group codes

each digit or group of digits signifies a different aspect of the item

Example of group coded items

General ledger or chart of account numbers

Chart of accounts

a list of all general ledger accounts used by an organization

Mnemonic codes

give visible clues concerning the objects they represent, acronyms

Example of mnemonic coded items

College classes or area codes

Two common core business processes

sales process/revenue cycle and purchasing process/expenditure cycle

Sales process overview and primary objective

Customer order, shipment of goods, collection of cash. The objective is to achieve timely and efficient cash collection

Electronic Data Interchange (EDI)

automatic data transfer with little to none human involvement

To authorize and order the system must

check the customer’s credit limit and check inventory

(1/2) ways to maintain A/R - open invoice method

customers pay according to each invoice

(2/2) ways to maintain A/R - Balance forward method

customers pay monthly balance

cycle billing

preparing monthly statements for customers at different times, used with the balance forward method of A/R

Sales order - SP

Input, prenumbered used to prep sales invoices

Shipping notice - SP

Input, prepared after goods are released for shipment

Bill of Lading - SP/PP

Input, legal contract that defines responsibility for the goods in transit

Sales invoice - SP

Input, prepared after shipment of goods

Remittance advice - SP

Input, sent to seller with the invoice from the buyer with proof of pmt

Debit memo - SP

Input, issued when a customer is found to be undercharged, incr A/R

Credit Memo - SP

Input, sales returns, allowances, and write-offs, decr A/R

Financial statements are a ___ in the sales process

Output

A/R aging report - SP

Output, contains data concerning the status of open balances of all active credit users arranged by overdue amounts

Bad Debt Report - SP

Output, contains info about collection follow-up procedures for overdue accounts

Cash Receipts Forecast - SP

Output, sales amounts, terms of sale, prior pmt experience, aging analysis are all inputs for this

Approved customer listing - SP

Output, list of customer codes, contacts, shipping and billing addresses, credit limits, and billing terms

Sales analysis reports - SP

Output, detailed data about each sale

Objectives of the Sales process

Filling cust orders, billing, tracking, collecting pmt, forecasting

Purchasing process overview and primary objective

purchase request, receipt of goods, payment of cash. Primary objective is to minimize cost of inventory and pay vendors on time

Three-way match - PP

matching purchase order, vendor invoice, and receiving report

Purchase requisition - PP

Input, shows items requested by a dept

Purchase order - PP

Input, based of purchase requisition and formally requests a supplier to sell and deliver certain products and a certain price

Packing slip

indicates the specific quantities and items in the shipment

Vendor Invoice - PP

bill for goods and services

Recieving report - PP

details about each delivery and quality of items recieved

Debit memos - PP

Returns or allowances for damaged goods. Decr A/P

Credit memo - PP

Undercharged for goods, incr A/P

Vendor Checks and Check Register - PP

Output, a list of all checks for a particular period

Discrepancy report - PP

Output, Records and differences in quantity on the purchase order, no pmt is authorized until the discrepancy is cleared

Cash requirements Forecast - PP

Output, predicts future pmts and pmt dates

Purchasing Process - Objectives

Maintain vendor records, controlling inventory, tracking purchases, tracking amounts owed, paying vendors on time, forecasting purchases and outflows