Accounting information systems 14th pdf download

You even have the option to add your own material or third party content. In addition, you may choose an alternate version of the REA material presented in Chapters 17—19 that uses the Batini style notation instead of the crows feet notation featured in this book. To explore how to create a customized version of the book you can contact your Pearson representative. As with prior editions, our objective in preparing this fourteenth edition has been to simplify the teaching of AIS by enabling you to concentrate on classroom presentation and discussion, rather than on locating, assembling, and distributing teaching materials.

The fourteenth edition includes an entirely new set of PowerPoint slides that make extensive use of high-quality graphics to illustrate key concepts. The slides do not merely consist of bullet points taken verbatim from the text, but instead are designed to help students notice and understand important relationships among concepts. The large number of slides provides instructors a great deal of flexibility in choosing which topics they wish to emphasize in class.

In addition, you can access all these supplements from the protected instructor area of www. We recognize that you may also wish to use specific software packages when teaching the AIS course. Ingraham and J.

As did previous editions, the fourteenth edition of Accounting Information Systems is designed to prepare you for a successful accounting career whether you enter public practice, industry, or government. All of you will be users of accounting information systems. In addition to being users, some of you will become managers. Others will become internal and external auditors, and some of you will become consultants. Regardless of your role, you will need to understand how accounting information systems work in order to effectively measure how cost-effectively they perform, to assess their reliability and that of the information produced, or to lead the redesign and implementation of new and better systems.

Mastering the material presented in this text will give you the foundational knowledge you need in order to excel at all those tasks. This text discusses important new IT developments, such as virtualization and the move to cloud computing, because such developments affect business processes and often cause organizations to redesign their accounting systems to take advantage of new capabilities.

Indeed, new IT developments not only bring new capabilities, but also often create new threats and affect the overall level of risk. This text will help you understand these issues so that you can properly determine how to modify accounting systems controls to effectively address those new threats and accurately assess the adequacy of controls in those redesigned systems.

In addition to technology- and regulatory-driven changes, companies are responding to the increasingly competitive business environment by reexamining every internal activity in an effort to reap the most value at the least cost. As a result, accountants are being asked to do more than simply report the results of past activities.

There would be a general ledger account number at the bottom of each column in the journal. Accounting Information Systems b. The audit trail for the sale of inventory links the customer order, sales order, and shipping document to the sales invoice. These documents are linked to the journal entry recording the sale of that merchandise.

The invoice would also be linked to the cash received from the customer and to the journal entry to record that receipt. The audit trail for employee payroll links records of employee activity time cards, time sheets, etc.

In a manufacturing company, there would also be links to the job-time tickets used to allocate labor costs to specific products or processes. It also sells fertilizer and potting soil. Design a coding scheme for your nursery. The coding scheme should be either a group or block coding.

Some students will respond that all can and ought to be done with online-real time processing. While all can certainly be done that way, batch processing does have its advantages cheaper, more efficient, etc.

In making the decision between batch and online-real time processing, designers must consider the need for current and accurate data. Batch processing is often used for data that does not need frequent updating and naturally occurs or is processed at fixed times. For example, while employee check in and checkout times may be gathered in real time, payroll is usually only processed at a fixed interval such as weekly, biweekly, or monthly.

Student solutions will vary depending on the demonstrations they observe. However, the demonstrations should give the students a more concrete and visual understanding of what an ERP system is and does.

Student solutions should at least discuss how an ERP could integrate all of the various cycle activities of a business into one integrated system. Update customer address change — Master file b. Update unit pricing information — Master file c. Record daily sales — Transaction file d. Record payroll checks — Transaction file e. Change employee pay rates — Master file f. Record production run variances — Transaction file g. Record Sales Commissions — Transaction file h.

Change employee office location — Master file i. Update accounts payable balance — Master file j. Change customer credit limit — Master file k. Change vendor payment discount terms — Master file l. He asks you to complete the following tasks: a. Specify what data you think should be collected on each of the following four documents: sales invoice, purchase order, receiving report, employee time card b.

Design a report to manage inventory. Design a report to assist in managing credit sales and cash collections. Visit a local office supply store and identify what types of journals, ledgers, and blank forms for various documents sales invoices, purchase orders, etc.

No single answer exists with this case. Indeed, solutions will vary depending upon student ingenuity and creativity. Student answers can be compared to examples of these documents found in chapters 10 and A sample invoice is presented in the Revenue Cycle chapter. A sample purchase order is presented in the Expenditure Cycle chapter. A sample receiving report also appears in the Expenditure Cycle chapter. The answers to this will vary depending upon the types of documents carried in the office supplies stores visited by the students.

A fruitful topic for class discussion, or a possible additional case assignment, is to compare the design of paper documents to the data entry screen layouts used in various popular accounting packages. Which of the following statements is are true? Turnaround documents are company output sent to an external party and returned as an input document. Each type of entity possesses the same set of attributes or characteristics of interest that are stored, but the specific data values for those attributes will differ depending on the entity.

On-line data processing is almost always cheaper and more efficient than batch processing, e. Reaping the potential benefits of ERP systems and mitigating their disadvantages requires conscious effort and involvement by top management. The data capture or input process is usually triggered by a top management decision. With sequence codes, items are numbered consecutively to account for all items and missing items cause a gap in the numerical sequence.

Cumulative accounting information is stored in general and subsidiary journals. Computers store data in a field; the fields containing data about entity attributes constitute a record. Updating done periodically, such as daily or weekly, is referred to as batch processing. Source data automation devices capture transaction data in paper form at the time and place of their origin. General ledgers are often used for accounts receivable, inventory, fixed assets, and accounts payable.

Master files are permanent and exist across fiscal periods; individual master file records may change frequently. When choosing an ERP system, make sure it has a module for every critical company process and that you are not paying for modules that you do not need. Using source data automation or well-designed turnaround documents and data entry screens helps ensure captured data are accurate and complete b. If the sum of all subsidiary ledger account balances does not equal its general ledger control account balance, a recording error has occurred.

Online, real-time processing updates transactions as they occur, helping ensure stored information is current and useful in making decision.

It is usually best to let a user determine what data to input rather than have data input screens list the data the user needs to enter e. A group codes is derived from the description of the item and is usually easy to memorize. Online batch processing is where transaction data are entered, edited, and processed as they occur.

ERP implementation costs for large companies with multiple sites are usually about half the cost of the ERP user license. Well-designed documents and screens improve accuracy and completeness by providing instructions or prompts about what data to collect d.

Data in ledgers is organized logically using coding techniques that assign numbers or letters to items to classify and organize them. In an ERP system, data entry controls such as validating data item and checking them for accuracy at the time of initial entry are not needed. Input controls are improved by using pre-numbered source documents or by the system automatically assigning a sequential number to each transaction.

With mnemonic codes, blocks of numbers are reserved for specific categories of data. As ERP modules do not automatically trigger additional actions in other modules, it is less important to understand business processes and their interactions. In an integrated ERP system, undetected data entry errors can automatically propagate throughout the system e.

A purchase to pay ERP module facilitates, production scheduling, work-in- process, quality control, cost management, and manufacturing processes 7. A transaction file contains records of individual business transactions and is similar to a general ledger in a manual AIS.

An ERP system uses a centralized database to share information across business processes and coordinate activities. Accounting Information Systems d. Use of pre-numbered documents makes it harder to verify that all transactions have been recorded and that none has been misplaced.

A chart of accounts facilitates preparing financial statements because data stored in individual accounts can easily be summed for presentation. A database query can provide the information needed to deal with problems and questions that need rapid action or answers. Repetitive and frequently used database queries are usually developed by users; one-time queries are usually developed by information systems specialists.

Transaction files are permanent and must be maintained for several years for backup purposes. A journal entry shows the accounts and amounts to be debited and credited.

Transaction data are almost always recorded in a ledger before they are entered into a journal b. Documents are records of transaction or other company data that can be printed out or stored as electronic images in a computer c. ERP systems are not effective in integrating nonfinancial company operations with a traditional accounting system. Since batch processing data are current and accurate only immediately after processing it is used for applications that do not need frequent updating.

Well-designed screens improve accuracy and completeness by using checkoff boxes or pull-down menus to present the available options An audit trail is a transaction path through a data processing system from point of origin to final output, but not backward from final output to point of origin. The need for reports should be periodically assessed, because they are often prepared long after they are needed, wasting time, money, and resources c. An AIS has traditionally been referred to as a transaction processing system because its only concern was financial data and accounting transactions.

Accountants and systems developers do not need to understand how data are captured, organized, stored, processed, or accessed. A master file, like a ledger in a manual AIS, stores cumulative information about an organization. Describe the data processing cycle used to process transactions, including how data is input, stored, and processed and how information is output. Discuss how organizations use enterprise resource planning ERP systems to process transactions and provide information.

Questions to be addressed in this chapter include: 1. How should I organize the accounting records so that financial statements can be easily produced? How do I organize all the data that will be collected? How should I design the AIS so that the information provided is reliable and accurate?

How can I design procedures to ensure that they meet all government obligations, such as remitting sales, income, and payroll taxes? Learning Objective One Describe the data processing cycle used to process transactions, including how data is input, stored, and processed and how information is output. Data Input Data must be collected about three facets of each business activity: 1. Each activity of interest 2. The resource s affected by each activity 3. The people who participate in each activity For example, collect the following data about a sales transaction: 1.

Date and time of day the sale occurred 2. Employee who made the sale and the checkout clerk who processed the sale 3. Checkout register where the sale was processed 4. Item s sold 5. Quantity of each item sold 6. List price and actual price of each item sold 7. Total amount of the sale 8. For credit sales: delivery instructions, customer bill-to and ship-to addresses, customer name For the above example, the activity of interest is the sales activity.

A sales activity involves resources of inventory and cash the company gives inventory and in exchange receives cash. The people who participated in this activity are the salesperson and the customer. Source documents are used to capture data at the beginning of the transaction. Table p. Many times this data is automatically captured such as point- of-sale POS scanners or even automated invoice scanning that uses scanners that will automatically capture common items from a vendor invoice and processes it to accounts payable.

These types of examples are known as source data automation. Source documents are documents used to collect data about their business activities. Source documents are also used to support the validity of the business activities.

If paper documents are exchanged with customers or suppliers, data input accuracy and efficiency is improved by using turnaround documents, which are records of company data sent to an external party and then returned to the system as input e. Accountants need to know how to manage data for maximum corporate use. Ledgers General ledger contains summary-level data for every asset, liability, equity, revenue, and expense account of the organization.

Subsidiary ledger records all the detailed data for any general ledger account that has many individual subaccounts. These subsidiary ledgers would be used for accounts receivable and accounts payable.

Accounts receivable subsidiary ledger would record detailed data for customers whom buy products or services on credit. The accounts receivable subsidiary ledger would support the accounts receivable general ledger controlling account. Accounts payable subsidiary ledger would record detailed data for the individual vendor credit purchases of merchandise or supplies made by the company. The accounts payable subsidiary ledger would support the accounts payable general ledger controlling account.

Coding Techniques Coding is the systematic assignment of numbers or letters to items to classify and organize them.