AC330 - Chapter Four

Learning Objectives

• Explain the flow of transaction and other event data through an accounting system

• Identify and explain the major activities of an accounting system: input, process, store, and output data

• Divide the accounting system into four business processes and identify typical accounting subsystems, or modules, in each process

• Understand how integration of the subsystems is achieved through the sharing of data files and the movement of data from one subsystem to another

Explain the flow of transaction and other event data through an accounting system

• A transaction must first be recognized through observation, notification, agreement, or judgement

• The data that reflect the transaction must be captured and input into the accounting system

• Transaction data are coded to relate them to accounts that serve as a classification scheme for subsequent processing and reporting

• Flow of information in a service organization

  • Sales Processing

  • Customer Invoicing

  • Cash Receipts

  • General Ledger

• In addition to the revenue and general ledger subsystems just illustrated accounting systems would include at minimum

  • Purchase order processing

  • Payroll

  • Vendor invoicing

  • Cash disbursements subsystems

    • would include their own transaction files, master files, and open files

Identify and explain the major activities of an accounting system: input, process, store, and output data

• Input (Capture) Data

  • An information processing activity that captures and feeds transaction and other data into accounting system for processing

• Process Data

  • An information processing activity that transforms data according to a prescribed set of instructions

  • Basic types of processing:

    • Classification

    • Calculation, or computation

    • Comparison

    • Sorting

    • Updating or posting

    • Summarization, or aggregation

    • Merging

    • File maintenance

• Store Data

  • Information processing activity that provides for storage of data to accommodate the timing differences between input, process, and output of data

• Output (Communicate) Data:

  • Information processing activity that retrieves formats and distributed data to users

  • Status reports (focus on balances master and open files)

  • Activity reports (listing of transaction file)

Divide the accounting system into four business processes and identify typical accounting subsystems, or modules, in each process

• Revenue Process

  • Activities related to the distribution of goods and services to customers and the receipt of money in exchange for these goods and services

  • Subsystems:

    • Sales

    • Sales order processing

    • Shipping

    • Accounts receivable

    • Sales analysis

• Procurement Process

  • Activities related to the acquisition of goods and services and the disbursement of money in exchange for these goods and services

  • Subsystems:

    • Purchase order processing

    • Receiving

    • Accounts payable

    • Payroll

• Inventory Process

  • Scope and subsystems depend on nature of organization

  • Subsystems:

    • Production Control

    • Inventory management

    • Cost accounting

• Financial Process

  • Referred to as the general ledger

  • Three types of entries

    • Data captured in and transferred from other processes to the financial process

    • Transactions originally recorded in the financial process

    • End-of-period adjustments required in the financial process

Understand how integration of the subsystems is achieved through the sharing of data files and the movement of data from one subsystem to another

• Accounting systems are not uniform

• Accounting subsystems are integrated with one another sharing data files and transferring data from one subsystem to another

• Interrelationships exist among subsystems within a business process and among subsystems in different processes