3.2 Accounting Information System and Accounting Cycle Flashcards
What is an Accounting Information System (AIS)?
A system that a business uses to collect, store and process accounting data and prepare financial reports so that that information can be used by stakeholders for decision making.
State the four stages of the Accounting Cycle.
or
List the stages of the accounting cycle.
Or
State the order in which each type of transaction is processed through the accounting information system.
i. identifying and recording transactions in the journal and post the journal entries to the ledger accounts
ii. adjusting the accounts
iii. reporting by preparing the financial statements based on the adjusted trial balance
iv. closing the temporary / nominal accounts with journal entries
Please refer to Page 19 of your POA Textbook.
What does a computerised accounting information system generally comprise of?
- Source documents
- Journal
- Ledgers
- Trial Balance
- Statement of Financial Performance
- Statement of Financial Position
State the purposes of source documents.
- provides proof / evidence (objectivity theory) to capture the occurrence of a transaction.
- Provides details of a business transaction that are needed for recording.
State the purpose of a receipt.
Acknowledges payment received from customers immediately after the business has sold goods or provided services. Receipts are issued for cash purchases and sales.
State the purpose of a remittance advice.
Informs credit supplier / seller / trade payable that payment by cheque has been made for a specific invoice / bill.
State the purpose of an invoice.
Informs credit customers / buyers / Trade Receivables of the amount owed after the business sold goods or provided services on credit.
State the purpose of a credit note.
Reduces the amount owed by credit customers / buyers / consumers / Trade Receivables:
- who were previously overcharged; or
- after goods were returned.
OR
Corrects an overcharge
State the purpose of a debit note.
Increases the amount owed by credit customers / buyers / consumers / Trade Receivables who were previously undercharged.
OR
Corrects an undercharge.
State the purpose of a payment voucher.
Processes payment to credit suppliers / sellers / Trade Payables:
- must be approved by authorised personnel; and
- must be supported by original supplier’s invoice.
State the purpose of a bank statement.
Checks and tallies against the business records of its cash at bank account.
State the source document for credit purchases and sales.
Invoice
State the source document for cash purchases and sales.
Receipts
What are business transactions?
Activities carried out by the business.
What is a cash transaction?
Payment is made at the same time or immediately during a cash sale or purchase.
What is a credit transaction?
Payment is delayed or postponed during a credit sale or purchase.
What is the main difference between cash and credit transactions?
The timing of the payment.
Cash transactions refer to events where payment is made at the same time during a cash sale or purchase while credit transactions refer to events where payment is delayed during a credit sale or purchase.
How are transactions recorded?
At the original cost that it occurred (historical cost theory)
Identify the source document for the following transaction:
Credit sale of goods
Invoice
Identify the source document:
Undercharged customer for goods sold earlier.
Debit Note
Identify the source document:
Customer returned wrong / spoilt / damaged goods to credit supplier / seller / goods provider.
Credit note
State the source document:
Business deposited cash into the business bank account.
Bank statement
What are the commonly seen exam questions for source documents?
According to the historical cost concept, state the value of the item to be recorded:
Business bought a mini fridge to store its perishable goods costing $500.
$500
