Accounting Information Systems and Business Processes Part I

CHAPTER 7

Business Process Fundamentals

Overview of Financial Accounting Cycle

• Journals• Ledgers• Trial Balances and Financial Statements

Coding Systems

• Numeric Codes (numbers only)• Alphanumeric Codes (numbers and letters)– Types of Codes:

• Mnemonic Codes• Sequence Codes• Block Codes• Group Codes

- Factors to consider when designing an accounting code: Must serve some useful purpose Must be consistent

S M L XL

Outputs of an AIS• Reports to management• Reports to investors and creditors• Files that retain transaction data• Files that retain current data (e.g. inventory

records)Hard copy reportsSoft copy reportsE- copy reportsAudio outputs

Designing Reports

Characteristics of Good Reports

• Useful• Convenient format• Easy to identify– Heading– Page number– Date

• Consistent– Over time– Across departmental or divisional levels– With general accounting practice

Source Documents:

• They dictate the kind of data to be collected and help ensure consistency and accuracy in recording data

• They encourage the completeness of accounting data

• They serve as distributors of information for individuals or departments

• They help establish the authenticity of accounting data

SALES PROCESS

Inputs to sales process

• Sales order• Sales invoice• Remittance advice• Shipping notice• Debit/ credit

memoranda

Outputs to sales process

• Financial statement information

• Customer billing statement

• Aging report• Bad debt report• Cash receipts forecast• Customer listing• Sales analysis report

PUCHASING PROCESS

Inputs to purchasing process

• Purchase requisition• Purchase order• Vendor listing• Receiving report• Bill of lading• Packing slip• Debit/ credit

memoranda

Outputs to purchasing process

• Financial statement information

• Vendor checks• Check register• Discrepancy reports• Cash requirements

forecast• Sales analysis report

Current trends in business processes

• Business process outsourcing– Business without boundaries– Offshoring

• Business process management software

Accounting Information Systems and Business Processes • Part II

CHAPTER 8

Human resource management process

Inputs to HR management

process• Personnel action forms• Time sheets• Payroll deduction

authorization• Tax withholding forms

Outputs to HR management

process• Financial statement

information• Employee listings• Paychecks• Check register• Deduction reports• Tax (regulatory)

reports• Payroll summaries

Fixed asset management processing

Inputs to fixed asset management process• Purchase requisition• Receiving reports• Supplier invoices• Construction work

orders• Repair and

maintenance records• Fixed asset change

forms

Outputs to fixed asset management process• Financial statement

information• Fixed asset register• Depreciation register• Repair and

maintenance report• Retired asset report

The production process

• Job costing information system• Process costing information system• Activity based costing• Just in time inventory systems• Lean production/ manufacturing• Lean accounting

Inputs to production process

• Materials requisition form

• Bill of materials• Master production

schedule• Production order• Job time cards

Outputs to production process

• Financial statement information

• Material price list• Periodic usage reports• Inventory status reports• Production cost reports• Manufacturing status

reports

The financing process

Inputs to financing process

• Remittance advice• Deposit slips• Checks• Bank statements• Stock market data• Interest data• Financial institution

profiles

Outputs to financing process

• Financial statement information

• Cash budget• Investment reports• Debt and interest

reports• Financial ratios• Financial planning

model reports

Professional service organizations

• No merchandise inventory• Emphasis on professional employees• Difficulty in measuring the quantity and

quality of output• Small size

TIME AND BILLING INFORMATION SYSTEM

Not-for-profit organizations

• Staffed by volunteers as well as professional employees

• Do not emphasize maximizing net income• Not as affected by market forces as are for-

profit organizations• Sometimes have political emphasis

FUND ACCOUNTING SYSTEM

Health care organizations

• Do not provide tangible goods to customers• Staffed by professional employees• Public• Operate on a not-for-profit basis• Output is difficult to measure

THIRD PARTY BILLING

Business process reengineering

• Continuous process that involves the analysis of identifying areas for improvement of an existing process

Introduction to Internal Control Systems

CHAPTER 9

Sarbanes-Oxley Act of 2002

• Section 404– Management is responsible for establishing and

maintaining an adequate internal control structure

Internal Control System

• Four objectives– Safeguard assets– Check the accuracy and reliability of accounting

data– Promote operational efficiency– Enforce prescribed managerial policies

Control Environment

• Management’s oversight, integrity and ethical principles that guide an organization– Attention and direction of the board of directors– Top management’s philosophy and operating style

• Policies and procedures that management develops– To assign authority and responsibility across the

organization– To develop its employees

Risk Assessment

• Purpose– Identify organizational risk– Analyze their potential in terms of costs and

likelihood of occurrence – Implement only those controls whose projected

benefits outweigh their costs

Control Activities• Policies and procedures that the management

develops to protect its assetsInformation and Communication

• Inform employees about their roles and responsibilities pertaining to internal controlMonitoring

• Evaluation of design and operation of controls and then initiative corrective action when specific controls are not functioning properly

Updates on Risk Assessment

• 2004 Enterprise Risk Management Framework– objective setting– Event identification– Risk response

Examples of control activities

• Good audit trail• Sound personnel policies and procedures• Separation of duties• Physical protection of assets– Inventory controls– Document controls– Cash controls

• Review of operating performance

Types of controls

• Preventive controls• Detective controls• Corrective controls

Evaluating controls• Cost-benefit analysis• A risk matrix