AModel

forPr
ocessi
ngAccount
ingI
nfor
mat
ion
Account
ingI
nfor
mation
Syst
em AModelf
orPr
ocessi
ngAccount
ingI
nfor
mat
ion

CHAPTERNO1

AModelf
orPr
ocessi
ngAccount
ingI
nfor
mat
ion
I
ntr
oduct
ion:
AnAI
Sinvest
edbyesteemedProf.Kav
enOskerhel
dist
hesy
stem of
r
ecor
ds;abusi
nesskeepst
omai nt
aini
tsaccount
ingsyst
em.

Thisincludest hepur
chase,salesandotherfi
nanci
alprocessofthe
business.Thepur poseofAISi
st oaccumulatedataandprovi
dedecisionmaker
s
(I
nvestors,Creditorandmanager s)withi
nfor
mat i
ontomakedeci si
on.Whil
ethi
s
waspr eviousl
yapaperbasedpr ocess,mostmoder nbusi
nessesnowuse
accountingsoftwar esuchasUBS, MYOBandPEACHTREEet c.

AI
Sprovi
deeff
ici
entdeli
ver
yofinfor
mationneededtoperfor
m necessar
y
accounti
ngworkandtoassistdel
i
veryofaccur
ateandinfor
mativedatatouser
,
especial
l
ythosewhoarenotfamil
iarwi
ththeaccounti
ngandfinanci
alrepor
ti
ng
areathemsel
ves.

Whyisitnecessaryforanaccount
anttohav
eknowl edgeof
computeraswellasaccountingsyst
em t
owor kef
fecti
vel
yand
eff
ici
ent
lyinmoder norgani
zati
on?ORWhyst udyAccount
ing
Inf
ormati
onSy st
em?

I
mpor
tanceofAI
S:
I
nt hepastfewdecadest hestudyofaccountinginf ormat i
onsystem has
becomei mpor t
antf orall
account ants.Priort
ocomput eri
zepr ocessi
ng,
accountingsystem usedmanual t
echnologiesthatweremucheasi erto
understand.Microcomput er
s,howev er,
hav emadecomput erspracti
calforeven
thesmal l
estorganizati
ons.Becauseal mostev er
yorganizat i
ont odayuses
comput erstoprocessaccount ingdat a,youmustunder standnotonl ythe
conceptualprocessbutal sothet echnologiesusedinthepr ocess.Thestudyof
AIShelpsanaccount antinfol
lowingway s.

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Account
ingI
nfor
mation
Syst
em AModelf
orPr
ocessi
ngAccount
ingI
nfor
mat
ion

 Asanaudi
tor
,youmustknowhowt orev
iewcomput
er-basedsy
stem and
topl
anandexecut
eaudi
tprocedur
esusingt
hem.

 Asamanagementaccountant
,youwi
llworkdai
lywi
thcomputer
ized
sy
stem andpar
ti
cipat
einproj
ectt
eam t
hatdevel
opsnewones.

 Manyaccountingstudent
salsobecomemanagementconsul
tant
sor
syst
em anal
ysts.Theseaccount
antswor
kful
lti
medevelopi
ngnew
account
ingsystems.

What
everyourcar
eermaybe, youmustst
udyandunder
standaccount
ing
i
nfor
mati
onsystem.Itwi
llenhancey
ourcapabi
li
ti
esandj
obopportuni
ti
es.

Ev
ent
sandAccount
ingTr
ansact
ions:

Ev
ent
s:
Theevent
sthataf
f ectanyorganizat
ionarearesultofit
sint
eract
ionswi
th
i
tsenv
ironmentwhi
chincludeseconomi c,social
,pol
i
ticalet
c.AISrecor
d,
summarizeandr
eporteventsari
singfrom theseenti
ti
es.

Tr
ansact
ions:
Anyeventt
hathasadeter
minabl
emonet ar
yimpactont
heor
gani
zat
ion
mustberecogni
zedasanaccounti
ngtr
ansact
ion.

HumanandComput
erResour
ces:
Asystem ofhumanandcomput erresour
cesrecor
ds,pr
ocesses,and
repor
tseventsf r
om theorgani
zati
on’
senv ir
onment.Whenthesystem contai
ns
onlyhumanr esources,
i samanual
ti system.Ifi
tusesonlycomputerresources,
i
tisacomput ersyst
em.Wheni tusesbothhumanandcomput erresources,iti
s
acomput er
-basedsy st
em.

Mostor
gani
zat
iontodayusescomput er
-basedaccount
inginfor
mati
on
syst
em.Eachor
gani
zati
on’
scomput er
-basedsystem hasadif
ferentmixof
comput
eri
zedandmanualmethods.

Further
mor e,manycomput
erandmanualsyst
em employthesame
pr
ocedures.Inthesecases,
under
standi
ngmanual
met hodsmakesiteasi
ert
o
mastercomputerizedones.

Com posedBy:Usm anAli Page3

Account
ingI
nfor
mation
Syst
em AModelf
orPr
ocessi
ngAccount
ingI
nfor
mat
ion

Technol
ogyandAI
S:
Inolderaccount ingsystem, j
ournalsandledgersareboundv olumesin
whichbookkeepersmanual l
yr ecordjournalandadjust
ingentr
ies.Anaccountant
thenmanuallypreparest r
ialbalanceandr eport
susingal ar
gewor ksheetbutin
modernsystem, j
our nalsandl edgerstakestheform ofcomputerfil
es.Comput er
progr
amspostent r
iesandpr eparetheaccountingreport
s.Accountantcontr
ol’
s
thi
sprocessbypr ovidinginputsandbydet ermi
ninghowt heseprogramswor k.

TheAccount
ingPr
ocess/
Cycl
e:
Thesequenceofaccounti
ngprocedur
eswhichisrequir
edtoberepor
ted
i
nt hesamemannerev eryyeari
scall
edaccount
ingprocess/cycl
e.The
accounti
ngcycleconsi
stsofthefol
l
owingsixst
eps.

1.Jour
nal
ize:
Thefir
ststepi ntheaccountingcy cleisrecor
dingt hetransact
ion.
Someoneanal yzest heevent,deter
mi nest heaccountsitaffects,i
denti
fi
es
whet hereachaccounti sdebi t
edorcr edited,andentersthet r
ansacti
on
chronol ogi
call
yinaj ournal
.Mostor ganizat i
onalsousesev eralspecial
j
our nalsdesignedt orecordspecifi
cty pesoft r
ansactions.Commonspeci al
j
our nalsincl
udet hecashr eceipt
sjournal, t
hecashdi sbursement sj
ournal
,
thepay rollj
ournal,
andt hesalesjournal.

2.Post
:
I
npost i
ng,t
hesecondst ep,anaccountinginfor
mat i
onsy stem
transfersjour
nalentr
iest ol
edgers.Aledgeri
sasummar y,byaccount,ofal
l
transactionsaff
ecti
ngt hataccount.Thusaft
erposting,tr
ansactionsare
recordedbyaccountr atherthaninchronol
ogicalsequence.Thisst epmakes
i
tpossi bletosummar izetheeffect
sofalltheeventsaffecti
ngthe
organization.

Mostor ganizati
onalsousessubsidi
aryledgers,whi
chcont ai
ndet
ail
ed
i
nformationexplainingthegenerall
edger’
scontrolaccounttot
al.Common
subsidi
aryledgersincludetheaccountspayabl
esubsi di
aryl
edger, t
he
propert
yledger,andt hestockhol
ders’
ledger.

3.Pr
epar
eaTr
ialbal
ance:

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Account
ingI
nfor
mation
Syst
em AModelf
orPr
ocessi
ngAccount
ingI
nfor
mat
ion

Thisisstept
hreeintheaccount
ingcycl
e.Dur i
nganyaccounti
ng
per
iod,account
ingi
nformati
onsystem j
ournal
izesandpostal ar
genumber
oft
ransacti
ons.Pri
ortoproduci
ngaccounti
ngr eport
s,thesy
stem
summar i
zestheeff
ectofallt
heeventsinatri
al bal
ance.

4.Pr
epar
eAdj
ust
ingEnt
ri
es:
Thef ourt
hst epi ntheaccount i
ngcy cleist hepreparati
onofadj usti
ng
entri
es.Whencr eati
nganaccount ingi nformat i
onsy st
em, ananalyst
i
dentifiesstandardorr ecurri
ngjour nalentries,whi chareadjusti
ngent ri
es
madeatt heendofeachr eporti
ngper iodt orecogni zeaccrual
sanddef er
rals.
Somet imesanaccount antal soproposesadj ustingent r
iestocor r
ect
previ
ouser rorsinjournali
zingt r
ansact ions.Anaccount antorbookkeeper
preparesadj ust
ingentries,recordst hem int hejour nal
,andpost sthem tothe
l
edger .Thesealtertheaccountbal ancesshowni nt hetri
albalance.

5.Pr
epar
eAccount
ingRepor
ts:
Thefif
thstepintheaccount i
ngcycleisprepari
ngtheaccount
ing
repor
ts.Thistaskiseasierifthesy st
em fi
rstpreparesasecondtr
ialbal
ance.
Becauseitsdebitandcredittotalsrefl
ectt
headj ust
mentsmadei nstepfour,
accountant
scal li
ttheadjustedt r
ialbal
ance.From theadj
ustedtr
ial
balance,
accountant
spr eparetherepor t
s.

6.Cl
oset
heBooks:
Af
terprepari
ngtheaccounti
ngrepor
ts,account
ant
sprepar
ethe
accounti
ngrecordsforthenextr
eport
ingperi
od.Thisi
ncl
udesthepost
ingof
cl
osingandrev er
singj
ournalent
ri
es.

Closingentri
estransferbal
ancesfrom revenueandexpenseaccounts
i
ntothei ncomesummar yaccount
.Thebal ancei
nt hisaccount
,whichequal
s
Netincome, i
sthentransfer
redtotheRetainedEarningsaccount,
leavi
ng
zer
obal ancesi ntheseaccountsinprepar
at i
onforthenextperi
od.

Accountantsalsopostreversi
ngentri
es,socalledbecausetheyare
thereverseoftheaccr ualanddeferr
aladj
usti
ngjournalentr
iesmadeear l
i
er.
Theser ever
singentr
iesr esett
hebalancesinaccrualanddeferr
alaccounts
atzeroandensur ethatexpensesandr evenuesofthepr i
orperi
odarenot
i
ncludedi nthoseofthef oll
owi
ngper i
od.

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Account
ingI
nfor
mation
Syst
em AModelf
orPr
ocessi
ngAccount
ingI
nfor
mat
ion

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