Accounting Information Systems

CONSIDERATIONS IN REPORT DESIGN

• Reports

– should be useful for managerial decision-making,
– should not create information overload.

• Format of the reports should

– contain fundamental identification,
– be convenient, and
– be consistent.

• Reports that only list exceptional
conditions are exception reports.

Core Business Processes

■ An AIS

– collects and
– reports data related to business processes which are

collections of activities that create value.

■ An economic event

– is an economic activity
– impacts financial statements (accounting transactions).

■ A business event

– is important to the business,
– does not impact financial statements.

The Sales Process

The sales process

begins with a customer order for goods or services and
ends with the collection of cash from the customer.

The primary objective is to achieve

timely and efficient revenue collection.

An organization that generates revenues, but fails to collect
these revenues on a timely basis, may find itself in a position
where it cannot pay its bills.

OBJECTIVES OF THE SALES PROCESS

• Tracking sales of goods and/or services to
customers

• Filling customer orders
• Billing customers for goods and services
• Collecting payment for goods and

services
• Forecasting sales and cash receipts

THE SALES PROCESS - INPUTS

Sales Order
• Prenumbered, usually prepared in multiple

copies and used to prepare sales invoice
Sales Invoice
• prepared after shipment of goods or

providing of a service
Remittance Advice
• served as source document for credits to

accounts receivable

THE SALES PROCESS - INPUTS

Shipping Notice
• prepared after goods are released for shipment,

and may serve as a packing slip
Debit/Credit memo
• issued for sales returns and allowances; debit

memos increase amount customer owes

THE SALES PROCESS - OUTPUTS

• Financial Statement Information
• Customer Billing Statement includes

– sales,
– returns, and
– cash receipts

• Accounts Receivable Aging Report

– contains data concerning the status of open
balances of all active credit customers

– arranges the overdue amounts by time periods

THE SALES PROCESS - OUTPUTS

• Bad Debt Report
–contains info about collection follow-up
procedures for overdue customer
accounts

• Cash Receipts Forecast
–data from source documents in revenue
transactions are inputs

THE SALES PROCESS -
OUTPUTS

• Approved Customer Listing

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

• Sales Analysis Reports

– detailed data about each sale in order to monitor
sales activities and plan production and marketing
efforts

THE PURCHASING PROCESS

• The purchasing process
– begins with a request for goods or services and
– ends with the payment of cash to the vendor.

• Purchase may be for
– either goods
– or services

• Purchase can be
– by cash or
– on credit

PURCHASING PROCESS - OBJECTIVES

• Tracking purchases of goods and/or services from
vendors

• Tracking amounts owed
• Maintaining vendor records
• Controlling inventory
• Making timely and accurate vendor payments
• Forecasting purchases and cash outflows

PURCHASING PROCESS - INPUTS

Purchase Requisition
• shows items requested by stores, indicates names of

vendors
Purchase Order
• is based on purchase requisition including vendor

information
Vendor Invoice
• includes prices, shipping terms and discounts
Receiving Report
• reflects the count and condition of goods received

PURCHASING PROCESS - INPUTS

Bill of lading

• accompanies the goods sent and given by the freight
carrier to the supplier as a receipt.

Packing slip

• indicates the specific quantities and items in the
shipment and those items that are on back order. It
is sometimes included in the merchandise package.

Debit/Credit Memoranda

• debits or credits accounts payable.

PURCHASING PROCESS - OUTPUTS

• Financial Statement Information
• Vendor Checks

– supported by a voucher and
– signed by a person designated by management

• Check Register

– list of all checks issued for a particular period

PURCHASING PROCESS - OUTPUTS

• Discrepancy Reports

– used to identify any differences between quantities or amounts on the
purchase order, the receiving report, and the purchase invoice.

• Cash Requirements Forecast

– predicts future payments and payment dates

• Purchases analysis reports

Chapter 4

AIS and Business Processes: Part II

• Introduction
• The Resource Management Process
• The Production Process
• The Financing Process
• Business Processes In Special

Industries
• Monitoring Business Processes

Human Resource
Management

An organization’s human resource
management activity includes

• the personnel function
– hires employees,
– trains employees, and
– maintains personnel records
– maintains payroll records for
employees

Human Resource
Management

• the payroll function

– pays employees for their work
– maintains records of employees’

paychecks,
– complies with employee tax,
– reports on various deduction

categories, and
– interacting with the personnel function

Human Resource
Management Objectives

• Hiring, training, and employing workers
• Maintaining employee earnings records
• Complying with regulatory reporting

requirements
• Reporting on payroll deductions
• Making timely and accurate payments

to employees
• Providing an interface for

personnel and payroll activities

Human Resource

Management Inputs

• Personnel Action Forms

– document the hiring of new employees or
changes in employee status

• Time Sheets

– used to track hours worked

• Payroll Deduction Authorizations

– authorize the payroll system to deduct certain
amounts

• Tax Withholding Forms

– authorize payroll to reduce gross pay by the
appropriate withholding tax.

Human Resource
Management Outputs

• Financial Statement Information
• Employee Listings

– shows current employees and may contain address
and
other demographic information

• Paychecks

– the final documents in the process; subject to strict
internal controls

• Check Registers

– used to make journal entries for salary and payroll tax
expenses

Human Resource
Management Outputs

• Deduction Reports

– contain summaries of deductions for employees as
a group

• Tax (Regulatory) Reports

– reports the government requires for income tax,
social security tax, and unemployment
tax information

• Payroll Summaries

– used by management in
analyzing expenses

Fixed Asset Management

• Fixed assets

– assets with usable lives of more than one
year.

• A fixed-asset management system has
to manage the assets in terms of their

– purchase,
– maintenance,
– valuation, and
– disposal.

Fixed Asset Management Function.

Acc. Dept

Management

Fixed Asset Management
Inputs

• Purchase Requisition

– requiring approval by one or more
managers

• Receiving Report

– upon receipt of a fixed asset

• Supplier Invoice

– when it ships the asset

Fixed Asset Management
Inputs

• Construction Work Orders

– if the company builds the asset

• Repairs and Maintenance Reports

– update of expense accounts for repairs and
maintenance

• Fixed Asset Change Forms

– basis for transferring fixed assets from one
location to another, retiring, selling or
trading-in fixed assets

Fixed Asset Management
Outputs

• Financial Statement Information

– gives the details of the valuation of the fixed
assets

• Fixed Asset Register

– lists identification numbers and location for
each fixed asset

• Depreciation Register

– shows depreciation expense and
accumulated depreciation

Fixed Asset Management
Outputs

• Repair and Maintenance Reports

– show the repair and maintenance
expenses and history

• Retired Assets Report

– shows all assets disposed of
during the accounting period

The Production Process

• The production process

– begins with a request for raw material and
– ends with the transfer of finished goods to

warehouses

• This cycle, associated with producing goods

– concerns the capture of data and
– the reporting of information

The Production Process

Production Process - Inputs

• Material Requisition Form

– directs stores to issue materials or parts to
designated work centers or authorized persons

• Bill of Materials

– shows the types and quantities of parts needed
to
make a single unit of product

• Master Production Schedule

– shows the quantities of goods needed to meet
sales demands

Production Process - Inputs

• Production order

– shows prices charged for raw materials.

– incorporates data from sales orders or
forecasts,

– operates lists and bills of materials in order to
authorize the production of an order or batch

• Job Time Card

– shows the distribution of labor costs to
specific jobs or production orders

PRODUCTION PROCESSES—
TECHNOLOGICAL ASSISSTANCE

• ERP
• Barcode scanners
• Radio frequency technology (RFID)
• Advanced electronic tags

Production Process - Outputs

• Financial Statement Information

– gives details of the costs and pricing

• Materials Price List

– shows prices charged for raw materials

• Periodic Usage Report

– provides managerial information on use of raw
materials

• Inventory Reconciliation Report

– reconciles physical inventory with perpetual
records

Production Process - Outputs

• Inventory Status Report

– allows purchasing and production managers
to monitor inventory levels

• Production Cost Report

– details the actual costs for each production
operation, each cost element, and/or each
separate job

• Manufacturing Status Report

– provides managers with information about the
status

The Financing Process

• The financing process

– is where a company acquires and uses
financial resources

• cash
• other liquid assets
• investments

• The financing process

– includes the activities of;

• borrowing cash
• selling ownership shares.

The Financing Process

Financing Process - Inputs

• Remittance Advices

– accompanies a customer’s payment

• Deposit Slips

– banks provide to document account
deposits

• Checks

– companies receive and issue checks

Financing Process - Inputs

• Bank Statements

– used to reconcile the cash balance in the
company’s ledger against the cash balance
in the bank account

• Stock Market Data
• Interest Data
• Financial Institution Profiles

Financing Process - Outputs

• Financial Statement Information
• Cash Budget
• Investment Reports
• Debt and Interest Reports
• Financial Ratios
• Financial Planning Model Reports

 Introduction
 Integrated Accounting Software Programs

 Accounting Software for different sized businesses
 Specialized Accounting Information Systems

 Enterprise-Wide Accounting Software Solutions

 Functionality and Architecture
 Business Processes and the Risks and Benefits of

Enterprise Resource Systems

 Selecting Accounting And Enterprise Software

 The when and how of selection

 Integrated accounting software programs

 process all types of accounting transactions

 include transactions affecting accounts in the general
and special journals

 organize transaction processing in modules and provide
links among the modules

 general ledger module includes the chart of accounts

 other modules usually include accounts receivable,
accounts payable, inventory and payroll

 journal entries recorded in modules update the ledger
module

 Small business owners are usually most concerned with

 cash flows and
 figuring out if they have been profitable.

 Small Business Accounting Software available in
the market include

 Microsoft Small Business Accounting
 Quickbooks
 Peachtree products
 PEAK
 FLOW ACCOUNTING
 EXPRESS
 CD ORGANIZE ETC….

 Quickbooks by Intuit includes

 a low-end package and an enterprise-wide software
package

 a chart of accounts and process general ledger,
 accounts receivable, and
 accounts payable transactions.

 Peachtree products include a

 variety of features offered in packages
 Internet connectivity, to create web sites and engage

in electronic commerce.
 a special link to take orders and receive payments

over the Internet.

 Sage software’s include:

 MAS 90
 MAS200
 Everest
 Accpac
 EXPRESS ON CLOUD
 CD ORGANIZE ON CLOUD
 FLOW ACCOUNTING
 PEAK

Enterprise resource planning (ERP) systems

 are integrated programs with a central data base
 do much more than process financial data
 expand with the price and complexity of software
 have the ability to interface with customers and

suppliers

(supply chain management).

ERP systems include

 SAP
 PeopleSoft
 Oracle
 Microsoft Dynamics GP Enterprise

Enterprise System Functionality:

 ERP systems originated from manufacturing
systems
 MRP I Systems:

 Marketing sales projections,
 Production schedules

 MRP II Systems:

 MRP I plus forecasting
 planning for all manufacturing resources including labor and

overheads

 ERP Systems combined MRP II systems with
accounting and finance functions

Traditional functions are concerned
with back-office functions which
primarily deal with internal systems,
such as

 Order processing and fulfillment
 Manufacturing
 Purchasing
 Human resources

Intregrated functions

 Traditional capabilities plus
 E-business
 Customer management
 Supplier management
 Business partner management
 Strategic business relationship management