1. Jan 2016 1
Computerized Accounting
Information Systems
OVERVIEW

2. Jan 2016 2
Transaction Processing System
Architectures
• A firm’s transaction processing systems
may either be manual or computerized

3. Computerized Transaction
Processing System
T1 T2 T3 T4 T5 T6 T7
D1 D2 D3 D4 D5 D6
D7
D8
D9
P1
A1
D1
D2 D3
P2
M1
T8 T9
Display
3
Jan 2016

4. Jan 2016 4
Components of the Transaction
Processing System
• What are some examples of inputs?
– customer orders
– sales slips
– invoices
– purchase orders
– employee time cards

5. Jan 2016 5
Components of the Transaction
Processing System
• Processing involves the use of journals
and registers to provide a permanent and
chronological record of inputs.
• Journals are used to record financial
accounting transactions.
• Registers are used to record other types
of data not directly related to accounting.

6. Jan 2016 6
Components of the Transaction
Processing System
• Special journals are used to record
similar and recurring transactions.
• What are examples of special journals?
– sales journal
– purchase journal
– cash receipts journal
– cash disbursements journal

7. Jan 2016 7
Components of the Transaction
Processing System
Source
Documents
Cash
Receipts
Journal
Cash
Disbursements
Journal
General
Journal
Purchases
Journal
Sales
Journal

8. Jan 2016 8
Components of the Transaction
Processing System
• Ledgers and files provide storage of data
in both manual and computerized systems.
• Ledgers provide summaries of a firm’s
financial accounting transactions.
• A file is an organized collection of data.
– transaction file
– master file
– reference or table file

9. Jan 2016 9
Components of the Transaction
Processing System
• What is an output?
• It is any document generated in the system.
• What are some examples of outputs?
– trial balance
– financial reports
– operational reports
– paychecks

10. Jan 2016 10
Designing Double-Entry Systems
• An accounting system must “fit” a
particular organization.
• What must be taken into account in
designing an accounting system?
– the nature and purpose of the organization
– its structural and functional characteristics
– its physical layout, products, and services
– the personnel who operate the system

11. Jan 2016 11
Designing Double-Entry Systems
Hierarchical Model of an Accounting System
Financial Statements
Chart of Accounts
Cycles Revenue Expenditure Production
Application
Systems
Sales
Accounts
Receivable
Purchasing
Payroll
Inventory
Property
Standard Journal
Entries
Identify accounts affected by
each application system

12. Jan 2016 12
Designing Double-Entry Systems
Hierarchical Model of an Accounting System
Financial Statements
Chart of Accounts
Cycles Finance Financial Reporting
Application
Systems
Cash General
Ledger
Standard Journal
Entries
Identify accounts affected by
each application system
Consolidation

13. Jan 2016 13
Designing Double-Entry Systems
• What are the four stages involved in the
design of an accounting system?
1 Design a rough classification of accounts,
or chart of accounts, and related financial
statements and reports.
2 Review this with management and
operating personnel.

14. Jan 2016 14
Designing Double-Entry Systems
3 Finalize statements, chart of accounts, and
other reports.
4 Prepare a plan of journalizing and design
the necessary business papers and
procedures to implement and operate the
system.

15. Jan 2016 15
Designing Double-Entry Systems
• The chart of accounts is a listing of all
asset, liability, revenue, expense, and
equity accounts used in an accounting
system.
• It is used to achieve an organization’s
objectives for financial reporting and
control.

16. Jan 2016 16
Designing Double-Entry Systems
• A plan for journalizing and posting
transactions involves several steps.
• Step 1: Analyze the natures of activities
within the four basic transaction cycles.
1 Revenue cycle
2 Expenditure cycle
3 Finance cycle
4 Production cycle

17. Jan 2016 17
Designing Double-Entry Systems
• It is common to identify a fifth major
transaction cycle to group accounts that
are not directly affected by transactional
activity.
• The financial reporting cycle does not
process transactions involving external
parties.

18. Jan 2016 18
Designing Double-Entry Systems
• Step 2: Group activities within each major
transaction cycle into application systems.
• An application system processes a logically
related set of transactions.
• Step 3: Develop a complete set of standard
or recurring journal entries.

19. Jan 2016 19
Designing Double-Entry Systems
• What are standard journal entries?
• They are pro forma or hypothetical entries
that are expected to occur in the normal
operation of the system.
• They should indicate three items.
1 The accounts affected by the entry
2 The source of the entry
3 The date or period of the entry

20. Jan 2016 20
Designing Double-Entry Systems
Journal and Journal-Entry Relationship
Sales Journal Page 1
Debits Credits
Accounts
Receivable Sales
Date Reference Customers Other Class 1 Class 2 Services Tax
Number 120 121 511 512 520 550
Standard Journal Entry
No. 15 Monthly
DR. 120 Accounts Receivable–Customers
DR. 121 Accounts Receivable–Others
CR. 511 Sales–Class 1
CR. 512 Sales–Class 2
CR. 520 Sales–Services
CR. 550 Sales–Tax

21. Jan 2016 21
Designing Double-Entry Systems
• The flow of processing in a manual
accounting system is from source
documents to journals, journals to ledgers,
and from ledgers to financial statements.
• Multiple transaction techniques become
essential as the volume of transactions
grows.

22. Jan 2016 22
Designing Double-Entry Systems
• What is a one-write system?
• It is a device that both posts a transaction
and journalizes it in the same operation.
• A writing board is designed to allow
simultaneous recording on several
documents arranged and held on a special
board.

23. Jan 2016 23
Designing Double-Entry Systems
• What is ledgerless bookkeeping?
• It is a form of processing in which source
documents are sorted and filed rather than
posted to ledgers.
• The file of source documents replaces a
separate ledger.

24. Jan 2016 24
Designing Double-Entry Systems
• Accounts receivable and accounts payable
systems are typically best suited for
ledgerless bookkeeping applications.
• Ledgerless bookkeeping systems have less
redundancy, and therefore less inherent
control.

25. Jan 2016 25
Designing Double-Entry Systems
• When computers are used to process
transactions, two different modes of
processing accounting transactions are
possible.
1 Batch processing
2 Direct processing

26. Jan 2016 26
Designing Double-Entry Systems
• Batch processing is a form of processing
in which batches of transactions are
accumulated and processed as a group.
• Direct processing is a form of processing in
which individual transactions are processed
separately.

27. Jan 2016 27
Designing Double-Entry Systems
• What is data validation?
• It is the process of reviewing transaction
details for accuracy and completeness
during input.

28. Jan 2016 28
Designing Double-Entry Systems
• The basic double-entry accounting model
contains just three accounts: assets,
liabilities, and equity.
• Block coding is a way to organize a chart
of accounts.
• It sets aside a “block” or group of sequential
account numbers for each major group of
accounts.

29. Jan 2016 29
Form Design and Records
Retention Considerations
• Accounting-related forms and papers serve
several functions.
• What are these functions?
• They serve as a physical medium to store
and transmit data.
• They transmit authority and responsibility.
• They assist employees by indicating what
data should be recorded.

30. Jan 2016 30
Form Design and Records
Retention Considerations
• The fundamental consideration in form
design is the user.
• Concerning paper forms, optional design
features such as multiple colors,
prenumbering, and rigid specifications for
size and quality of the paper stock are often
desirable.

31. Jan 2016 31
Form Design and Records
Retention Considerations
• Records retention requirements must be
considered in the design of an accounting
system.
• Various government and tax regulations set
specific guidelines and legal requirements
over records retention.

32. Jan 2016 32
Form Design and Records
Retention Considerations
• Records retention must also be considered
from the internal viewpoint of information
storage and usage.