Key Terms

accounting information system (AIS)

set of business processes that record transactions using journals and ledgers (for paper systems) and computer files (for computerized systems) to keep track of a company’s transactions, process the data associated with these transactions, and produce output useful for internal and external decision-making and analysis

accounts payable subsidiary ledger

special ledger that contains information about all vendors and the amounts we owe them; the total of all accounts in the accounts payable subsidiary ledger must equal the total of accounts payable control account in the general ledger

accounts receivable control

accounts receivable account in the general ledger

accounts receivable subsidiary ledger

special ledger that contains information about all customers and the amounts they owe; the total of all accounts in the accounts receivable subsidiary ledger must equal the total of accounts receivable control account in the general ledger

artificial intelligence

computerized systems that are taught to use reasoning and other aspects of human intelligence to mimic some of the tasks humans perform

audit trail

step-by-step trail of evidence documenting the history of a transaction from its inception and all the steps it went through until its completion

big data

data sets from online transactions and other sources that are so large that new software and methods have been created to analyze and mine them so they can provide insight into trends and patterns of the business

blockchain

underlying technology Bitcoin is built on; provides a single shared ledger used by all of the parties to a transaction resulting in cheaper, more secure, and more private transactions

cash disbursements journal

special journal that is used to record outflows of cash; every time cash leaves the business, usually when we issue a check, we record in this journal

cash receipts journal

special journal that is used to record inflows of cash; every time we receive checks and currency from customers and others, we record these cash receipts in this journal

cloud computing

using the internet to access software and information storage facilities provided by companies (there is usually a charge) rather than, or in addition to, storing this data on the company’s computer hard drive or in paper form

cryptocurrency

digital currency that uses encryption techniques to verify transfer of the funds but operates independently of a bank

data

parts of accounting transactions that constitute the input to an accounting information system

data analytics

analyzing the huge amount of data generated by all the electronic transactions occurring in a business

data/information storage

way to save data and information; can be on paper, computer hard drive, or through the internet to save in the cloud

enterprise resource planning (ERP)

system that helps a company streamline its operations and helps management respond quickly to change

expert system

software program that is built on a database; software asks question and uses the response to ask the next question or offer advice

forensic accounting

using accounting and computer skills to look for fraud and to analyze financial records in hard copy and electronic formats

point of sale

point of time when a sales transaction occurs

point-of-sale system (POS)

computerized system to record and process a sale immediately when it occurs, usually by scanning the product bar code

purchases journal

special journal that is used to record purchases of merchandise inventory on credit; it always debits the merchandise inventory account (if using the perpetual inventory method) or the Purchases account (if using the periodic method)

sales journal

special journal that is used to record all sales on credit; it always debits accounts receivable and credits sales, and if the company uses the perpetual inventory method it also debits cost of goods sold and credits merchandise inventory

schedule of accounts payable

table showing each amount owed and to whom it must be paid; total of the schedule should equal the total of accounts payable in the general ledger

schedule of accounts receivable

table showing each customer and the amount owed; total of the schedule should equal the total of accounts receivable in the general ledger

source document

paper document or electronic record that provides evidence that a transaction has occurred and includes details about the transaction

special journal

book of original entry that is used to record transactions of a similar type in addition to the general journal

turn-around document

paper document that starts off as an output document from one part of the accounting information system (billing sends bill to customer), that becomes input to another part of the accounting information system upon completion of the next phase of the process (accounts receivable receives payment made on bill)