7.1 Define and Describe the Components of an Accounting Information System
- An accounting information system is a set of business processes that record transactions using journals and ledgers (a paper-based system) or computer files (using a computerized system) to keep track of a company’s money and other assets.
- The key steps in an accounting information system are input, processing, and output.
- Input: This is any way to record the transaction.
- Processing: This is a method of combining similar kinds of information (like adding all cash sales together to get a total that is separate from all credit sales; and then adding everything to find total sales).
- Output: Any way used to display the results of the processing is output.
- Source document: This is a record that a transaction has taken place; it is often used at the input stage.
- Storage: This is any method used to save the results generated by the system. Data that is stored is retrieved and used in the input, processing, or output stage. Additional data and information are also stored during these processes.
7.2 Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders
- We use special journals to keep track of similar types of transactions.
- We use special journals to save time because the same types of transactions occur over and over.
- To decide which special journal to use, first ask, “Is cash involved?” If the answer is “Yes,” then use either the cash receipts or cash disbursements journal.
- The cash receipts journal always debits cash but can credit almost anything (primarily sales, Accounts Receivable, or a new loan from the bank).
- The cash disbursements journal always credits cash but can debit almost anything (Accounts Payable, Notes Payable, sales returns and allowances, telephone expense, etc.).
- The sales journal always debits Accounts Receivable and always credits Sales. If the company uses a perpetual inventory method, it also debits cost of goods sold and credits inventory.
- The purchases journal always debits Purchases (if using the periodic inventory method) or Inventory (if using the perpetual inventory method) and credits Accounts Payable.
- We post the monthly balance from each of the special journals to the general ledger at the end of the month.
- We post from all journals to the subsidiary ledgers daily.
- We use the general journal for transactions that do not fit anywhere else—generally, for adjusting and closing entries, and can be for sales returns and/or purchase returns.
- The accounts receivable subsidiary ledger contains all of the details about individual accounts.
- The total of the accounts receivable subsidiary ledger must equal the total in the Accounts Receivable general ledger account.
- The accounts payable subsidiary ledger contains all of the details about individual accounts payable accounts.
- The total of the accounts payable subsidiary ledger must equal the total in the Accounts Payable general ledger account.
7.3 Analyze and Journalize Transactions Using Special Journals
- Rules of cash receipts journals: Use any time you receive cash. Always debit Cash and credit Accounts Receivable or some other account.
- Rules of cash disbursements journals: Any time a check is issued, there should be a credit to cash and a debit to AP or typically an expense. Always credit Cash and debit Accounts Payable or some other account.
- Rules of sales journals: Use only for sales of goods on credit (when customers charge the amount). Always debit Accounts Receivable and credit Sales and debit Cost of Goods Sold and credit Merchandise Inventory when using a perpetual inventory system.
- Rules of purchases journals: Use only for purchase of goods (inventory) on credit (when you charge the amount). Always debit Merchandise Inventory when using a perpetual inventory system (or Purchases when using a periodic inventory system) and credit Accounts Payable.
- Post daily to the subsidiary ledgers.
- Monthly, at the end of each month, after totaling all of the columns in each journal, post to the general ledger accounts which include the Accounts Receivable and Accounts Payable (general ledger) controlling accounts. Note that the only column that you do not post the total to the general ledger account is the Other Accounts column. There is no general ledger account called Other accounts. As mentioned, each entry in that column is posted individually to its respective account.
7.4 Prepare a Subsidiary Ledger
- A schedule of accounts receivable is a list of all individual accounts and balances that make up accounts receivable.
- A schedule of accounts payable is a list of all individual accounts and balances that make up accounts payable.
7.5 Describe Career Paths Open to Individuals with a Joint Education in Accounting and Information Systems
- Data analytics, artificial intelligence systems, data security credentials, blockchain applications, and forensic accounting are some of the areas that provide newer career avenues for accounting professionals.
- Taxes will continue to be prepared using software that pulls information from the accounting information system.
- Integrating accounting software with inventory management and electronic payment as used by Walmart and Amazon will set new standards of business process automation.
- Forensic accounting, data security, artificial intelligence, and data analytics, are all areas for which companies and government agencies will be seeking accounting graduates who are also knowledgeable about information systems.