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Essential Elements and Basic Activities of Accounting Systems

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48 views

Essential Elements and Basic Activities of Accounting Systems

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not funny didn't laugh
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Chapter 3

Essential Elements and Basic Activities of


Accounting Systems

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Learning Objectives

 Discuss the significant similarities between paper-


based accounting systems and computerized
accounting systems.
 Identify the essential elements of a paper-based
accounting system.
 Understand the basic activities of a paper-based
accounting system.

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Learning Objectives (cont.)

 Identify the essential elements of a computerized


accounting system.
 Understand the basic activities of a computerized
accounting system.
 Compare batch posting in a computerized
accounting system to real-time posting.

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Why Review Paper-based
Accounting Systems?

 Paper-based Accounting Systems:


- Provide a simple and familiar context in which to
understand the issues of computerized accounting
system.

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Similarities Between Paper-based and
Computerized Accounting Systems

 Essential elements:
- Where data are captured, recorded, processed,
stored, and reported?
 Basic activities:
- How data are captured, recorded, processed,
stored, and reported in the essential elements?

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Paper-Based Accounting Systems

 Essential Elements:
- Source documents
- Accounts
- Chart of accounts
- Journals (special and general)
- Ledgers (subsidiary and general)
- Outputs

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Paper-Based Accounting Systems
(cont.)
 Source Documents Samples:
- Purchase order
- Bill of lading
- Cash receipts prelist
- Time card

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Paper-Based Accounting Systems
(cont.)

 Accounts:
- Classifies monetary measurements of business
activities of a similar nature
- Number varies with needs of the organization
 Chart of Accounts:
- List of all account names and codes

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Paper-Based Accounting Systems
(cont.)

 Journals:
- Book of Original Entry
* Special
* General
 Ledgers:
- Transaction data by account
* General
* Subsidiary
© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Paper-Based Accounting Systems
(cont.)

 Accounting System Outputs Samples:


- Sales order
- Sales invoice
- Schedule of aged accounts receivable
- Receiving report

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Paper-Based Accounting Systems
(cont.)

 Accounting System Outputs Samples (cont.):


- Balance Sheet
- Statement of Income
- Statement of Changes in Ownership Equity
- Statement of Cash Flows

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Paper-Based Accounting Systems
(cont.)

 Basic Activities :
- Completing source documents
- Recording transactions in appropriate journals
- Posting (copying) data from the journals to the
appropriate accounts in the subsidiary ledgers
and the general ledger
- Preparing output documents and reports

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Computerized Accounting Systems

 Essential Elements:
- Source Documents
- Reference Files
- General Ledger Master File
- Subsidiary Ledger Master Files
- Open Files
- Transaction Files

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Computerized Accounting Systems

 Essential Elements (Cont.):


- Other Files
* Scratch
* Backup
* Archive
* Program

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Computerized Accounting Systems

 Essential Elements (Cont.):


- Outputs
* The major difference in outputs from a
computerized system and a paper-based
system is in the number and speed with which
outputs from a computerized system can be
generated.

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Computerized Accounting Systems

 Basic Activities:
- Preclassifying transactions according to types
(such as sales, cash receipts, purchases, cash
disbursements)
- Creating a transaction file for each class of like
transactions for each data capturing period
- Updating, or posting to, the subsidiary ledger
master files and open files

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Computerized Accounting Systems

 Basic Activities (cont.):


- Summarizing transaction files and transferring
the summarized data to a general journal
transaction file
- Updating, or posting to, the general ledger
master file
- Preparing documents and reports

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Batch Versus Real-Time Posting

 Batch Posting:
- Advantages
Can use proof list to check input BEFORE posting
to catch errors.
Posting/updating done when no conflicting activity
- Disadvantage
Master and open files up to date only after batch
posted

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Batch Versus Real-Time Posting

 Real-time Posting:
- Advantage:
Availability of up-to-the-minute information
- Disadvantages:
Entering erroneous data
Expensive in resources, personnel time

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Batch Versus Real-Time Posting

 Best Uses of Batch and Real-Time Posting:


- Real-time:
when up-to-date information is critical
- Batch:
all other times to minimize costs and to
ensure the maximum number of
data-entry errors have been eliminated from
transaction files before posting occurs
© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.
Summary

- A review of a paper-based accounting


system is a good start point for understanding
computerized accounting system.
- The essential elements and basic activities of
paper-based and computerized accounting
system are reviewed and introduced .
- Many accounting systems today have the
capability of real-time posting.

© 2007 Thomson, a part of the Thomson Corporation. Thomson, the Star logo, and Atomic Dog are trademarks used herein under license.  All rights reserved.

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