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BSB110 - Accounting > Topic 7 - Accounting Information Systems > Flashcards

Topic 7 - Accounting Information Systems Flashcards

1
Q

What are the principles of accounting information systems?

A
  1. Cost effectiveness:
    Cost versus benefits consideration.
  2. Useful output:
    Relevant, reliable, understandable, timely, comparable.
  3. Flexibility:
    Technological advances, increased competition, changing accounting principles, organisational growth, government regulation and de-regulation.
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2
Q

What are the four phases in developing an accounting system?

A

Analysis, Design, Implementation and Follow Up

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3
Q

Why must an accounting system have adequate controls?

A
  • The assets of the business are safeguarded
  • To ensure information provided by the system:
    Is faithfully represented
    Relevant
    Timely
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4
Q

What is an internal control?

A

An essential part of risk management that consists of all the processes used by management and staff to:

  • Provide efficient and effective operations and;
  • Comply with laws, regulations and internal policies.
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5
Q

What are the two aspects of internal controls?

A

Administrative controls and accounting controls.

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6
Q

What are administrative controls?

A

They provide operational efficiency and adherence to policy and procedures

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7
Q

What are accounting controls?

A

They are the methods and procedures used to protect assets and ensure that transactions are recorded appropriately.

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8
Q

What does corporate governance represent?

A

Represents the framework of rules, relationships, systems and processes within which authority is exercised within the organisation:
- Internal audit is an element of good corporate governance that involves monitoring the effectiveness of internal controls.

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9
Q

What are the principles of internal control?

A
  1. Establishment of responsibility.
  2. Segregation of duties:
    - Related activities.
    - Accountability for assets.
  3. Documentation procedures.
  4. Physical, mechanical and electronic controls.
  5. Independent internal verification.
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10
Q

Explain establishment of responsibility.

A
  • Assigning specific duties to specific personnel (or positions)
  • Assigning appropriate duties for the skill level of the staff members
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11
Q

Explain segregation of duties.

A
  • Separation of operations from accounting
  • Separation of the custody of assets from accounting
  • Separation of the authorisation of transactions from the custody of related assets
  • Separation of duties within the accounting function
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12
Q

Explain documentation procedures.

A

Documents should be pre-numbered and standardised (e.g. sales invoices)

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13
Q

Explain physical, mechanical and electronic controls.

A

Fireproof vaults, alarms, video surveillance

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14
Q

Explain independent internal verification.

A

Internal audit function and board audit committees

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15
Q

What are the limitations of internal control?

A
  • cost versus benefits
  • human imperfection
  • business size.
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16
Q

What is forensic accounting?

A
  • The application of accounting knowledge and analysis in the context of civil and criminal litigations and investigations.
  • Proactive risk reduction strategies.
17
Q

What are the three phases accounting information systems involve?

A
  • Input
  • Processing
  • Output
18
Q

What do accounting systems do?

A

Raw transactions are transformed into financial statements to provide information for decision making.

19
Q

What internal control principles are applied in the sales and receivables cycle?

A
  • Segregation of duties – different personnel are involved in the sales transaction to ensure independent verification at each step.
  • Documentation procedure – signatures required at certain stages to identify responsible party.
20
Q

What internal control principles are applied in the purchases and payments cycle?

A

Establishment of responsibility – appropriate level of skill and knowledge to assess inventory levels.

21
Q

What are subsidiary ledgers?

A

Groups of accounts with a common characteristic. Details from subsidiary ledgers are summarised in the general ledger control account.

22
Q

What are the two common subsidiary ledgers?

A
  • Accounts Receivable (customers) which collects transaction data of individual customers.
  • Accounts Payable (suppliers) which collects transaction data of individual creditors.
23
Q

What are the advantages of subsidiary ledgers?

A
  • Show transactions in a single account providing up to date information.
  • Free the general ledger of excessive details.
  • Provide effective control.
  • Enable segregation of duties.
24
Q

What are special journals?

A

Special journals are used to record similar types of transactions.

Examples:
Sales Journal
Cash Receipts Journal
Purchases Journal
Cash Payments Journal.
25
Q

What are the advantages of special journals?

A
  • Enable segregation of duties.

- Simplifies posting process to general ledger.

26
Q

What is the sales journal used for?

A

Used to record sales of inventory on account (on credit).

Cash sales are recorded in the Cash Receipts Journal.

27
Q

How do you post the sales journals?

A
  • Postings made daily to individual accounts receivable in the subsidiary ledger.
- At the end of the month column totals of sales journal are posted to the general ledger:
Debit to Accounts Receivable account
Credit to Sales account
Debit to Cost of Sales account
Credit to Inventory account
28
Q

What is the cash receipts journal used for?

A
  • Used to record all receipts of cash.
- Debit columns:
Cash
Discount Allowed.
- Credit columns:
Accounts Receivable
Sales
Other accounts.
- Debit and Credit column:
Cost of Sales and Inventory.
29
Q

How do you post the cash receipts journals?

A
  • All column totals (excluding other accounts) posted to account specified.
  • Individual accounts in ‘other accounts’ posted separately to relevant individual general ledger accounts.
  • Individual amounts, posted in total to Accounts Receivable Control account, posted to individual Subsidiary Ledger accounts.
30
Q

What is the purchases journal used for?

A
  • Used to record purchases of inventory on account (on credit).

Cash purchases of inventory are recorded in the Cash Payments Journal.

Some businesses expand the Purchases Journal to a multicolumn journal. This records ALL purchases on account and is posted in the same manner as the multicolumn Cash Receipts Journal and Cash Payments Journal.

31
Q

How do you post the purchases journals?

A
  • Postings made daily to individual accounts payable in the subsidiary ledger.
  • At the end of the month column totals of purchases journal are posted to the general ledger:
  • Debit to Inventory account.
    Credit to Accounts Payable account.
32
Q

What is the cash payments used for?

A
  • Used to record all cash payments.
- Credit columns:
Cash Paid
Discount Received.
- Debit columns:
Accounts Payable
Cash Purchases
Other accounts paid.
33
Q

How do you post the cash payments journals?

A
  • All column totals (excluding other accounts) posted to account specified.
  • Individual accounts in ‘other accounts’ posted separately to relevant individual general ledger accounts.
  • Individual amounts, posted in total to Accounts Payable Control account, posted to individual Subsidiary Ledger accounts.
34
Q

What are the effects of special journals on the general ledger?

A
  • Reduces number of transactions requiring recording in the general journal.

Where Control and Subsidiary Ledgers used:
Journalising: both control account and subsidiary ledger must be identified.
Posting: transaction posted to control account and subsidiary account.

35
Q

What do computerised accounting information systems do?

A

Computer accounting programs that perform the double entry steps in the accounting cycle (i.e. journalising, posting and preparation of trial balance and reports).

36
Q

What are the advantages of computerised systems?

A
  • Ability to process large number of transactions quickly.
  • Automatic posting of transactions.
  • Error reduction.
  • Fast response time.
  • Flexible and fast report production.
37
Q

What are the disadvantages of computerised systems?

A
  • Use of inappropriate and/or incompatible software and hardware.
  • Need for reliable back-up procedures.
  • Lack of computer system skills.
  • Computer viruses and hackers.
  • Fraud and embezzlement.

BSB110 - Accounting (10 decks)

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