Accounting systems OPERATION OF AN ACCOUNTING SYSTEM. Converting data to information. Chapter 7. 3 basic phases. Input. Processing.

Transcription

1 Chapter 7 Accounting systems PowerPoint presentation by Anne Abraham University of Wollongong 2009 John Wiley & Sons Australia, Ltd OPERATION OF AN ACCOUNTING SYSTEM 3 basic phases Input Source documents entered into journals Processing Journals posted to general ledger Output Financial statements 2 Converting data to information Business Transactions Source documents Journals Ledgers Reports Interested Parties 3 1

2 DEVELOPMENT OF AN ACCOUNTING SYSTEM Systems analysis Understanding information requirements and sources of information Systems implementation and review Implementing systems, training staff, preparing accounting manual, test-runs, evaluation and review Systems design Determining personnel requirements, source documents, accounting records and procedures, reports and reports format 4 Important considerations in developing an accounting system Must give consideration to: Cost versus benefits Compatibility Flexibility and adaptability Internal control 5 INTERNAL CONTROL SYSTEMS Efficient use and protection of an entity s asset is a primary management function All procedures adopted by an entity to control its activities and protect its assets are described collectively as an internal control system 6 2

3 Principles of internal control systems Clearly established lines of responsibility Separation of record keeping and custodianship Division of responsibility for related transactions Mechanical and electronic devices Adequate insurance Internal auditing Programming controls Physical controls Other controls 7 Limitations of internal control systems Absolute assurance not possible Effectiveness influenced by size of entity s operations Good controls can break down due to tiredness, indifference or carelessness Heavy reliance on segregation of duties Difficulties in detecting computer fraud 8 MANUAL ACCOUNTING SYSTEMS SUBSIDIARY LEDGERS Control accounts and subsidiary ledgers Summary information Control account Detailed information Subsidiary ledger Accounts receivable Accounts payable Inventory 9 3

4 General Ledger Accounts Receivable Control Date Debit Credit Balance Nov Nov Nov Schedule of Accounts Receivable as at 30 November P. Able $1 800 R. Baker D. Cane 500 $4 700 Subsidiary Ledger P. Able Date Debit Credit Balance Nov Nov Nov Subsidiary Ledger R. Baker Date Debit Credit Balance Nov Nov Nov Subsidiary Ledger D. Cane Date Debit Credit Balance Nov Nov Nov MANUAL ACCOUNTING SYSTEMS SPECIAL JOURNALS General journal inefficient where there are many transactions Group like transactions and record in a special purpose journal credit sales sales journal credit purchases purchases journal cash receipts cash receipts journal cash payments cash payments journal 11 Sales journal Records only credit sales of inventory Total posted to general ledger monthly Detail (by debtor) posted to subsidiary ledger daily Advantages Each transaction recorded on a single line Entries do not require a narration Posting efficiency achieved 12 4

5 Sales journal continued Sales Journal Invoice Post GST A/C Date no. Account Ref. Sales Collections Receivable Jan R Abbot D Ball N Camp R Abbot A Evans J Ford A Evans N Camp Purchases journal Records only credit purchases Can be used for items other than inventory Total posted to general ledger monthly Detail (by debtor) posted to subsidiary ledger daily Advantages as for sales journal 14 Purchases journal continued Purchases Journal Date Date of Post GST A/Cs Record Invoice Account Terms Ref. Purchases Outlays Payable Jan 3 Jan 2 Kirby Ltd n/ Jan 4 Risk Ltd n/ Jan 8 Dunn Supply n/ Jan 12 Dunn Supply n/ Jan 18 CSR Ltd 2/10, n/ Jan 24 Cooper Ltd 2/10, n/ Jan 26 Risk Ltd 2/10, n/ Jan 29 CSR Ltd n/

6 Cash receipts journal Records all receipts of cash Records each receipt and total banked Totals posted to general ledger monthly Detail (debtors only) posted to subsidiary ledger daily Columns set up for common receipts 16 Cash payments journal Records all payments of cash Records each payment and cheque number Totals posted to general ledger monthly Detail (creditors only) posted to subsidiary ledger daily Columns set up for common payments 17 Use of the general journal Generally inefficient Used for Infrequent transactions Adjusting entries Closing entries Reversing entries Correcting entries 18 6

7 Other Issues Abnormal balances in subsidiary ledgers Credit balances in accounts receivable Debit balances in accounts payable Account set-offs Buying and selling from same customer/supplier Need legal right to set-off 19 Accounting Software Electronic spreadsheets Excel, Lotus 123 General ledger programs ACCPAC, Attache, MYOB, QuickBooks, Sybiz Data input obtained from source documents Output produced by the program 20 When advising a client on adopting a computerised accounting system, what criteria should be considered? 21 7

8 22 An Introduction to MYOB 23 An Introduction to QuickBooks 24 8

9 COMPUTERISED ACCOUNTING Advantages Reduction in processing costs Speed of processing Error reduction Automatic posting Automatic production of documents and reports Improved reporting and decision making Faster response time 25 COMPUTERISED ACCOUNTING continued Disadvantages Failed systems Power failure Viruses Hackers Fraud