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ACCT 1101 > Accounting Systems > Flashcards

Flashcards in Accounting Systems Deck (24)
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1
Q

operation of accounting systems

A

the operation of an accounting system has three basic phases

  • input
  • processing
  • output
2
Q

source documents

A

serve as input entered into journals, which become a chronological record of the transactions

the statements provide useful information for decision making and evaluation of the entity by parties outside the entity and by insiders

3
Q

converting data to information

A

the two terms data and information are often used synonymously, yet a useful distinction between them can be made

  • data is recorded facts
  • information is data that has been processed in some prescribed manner so as to be more useful to a potential user
4
Q

development of an accounting system

A

the system may be designed in‐house and installed by a member of the entity’s own accounting department
the installation and/or revision of an accounting system consists of three phases

systems analysis
- the objective of the systems analysis phase is to gather facts that provide a thorough understanding of a business’s information requirements and the sources of information

systems design
- a new system is developed or improvements are made to an existing system in the systems design phase based on the facts gathered through systems

systems implementation and review

  • this is the final phase in the development or revision of an accounting system
  • major reviews are usually accomplished gradually rather than all at once to help ensure reliable data flows
5
Q

considerations in accounting system development

A

costs versus benefits
- the major benefit comes from the output of the system, which provides timely, reliable and relevant information to managers

compatibility
- the system should be appropriate to the size and nature of the business operations

flexibility/adaptability
- flexibility within an accounting system allows these structural changes to take place without major disruptions to business operations

internal control
- information provided by the system is timely, reliable and relevant to the decision‐making needs of management and external users

6
Q

subsidiary ledgers (format)

A

a large amount of detailed information about a certain general ledger account must be kept in a separate ledger called a subsidiary ledger

the total of the balances of which should equal the balance of the related control account in the general ledger

7
Q

internal control

A

a system designed to help managers control operations

all procedures adopted by an entity to control its activities and protect its assets are described collectively as an internal control system

objectives of internal control is to ensure the reliability of accounting information

a system of internal control helps a business to

  • safeguard its resources against waste, fraud and inefficiency
  • promote the reliability of accounting data
  • encourage compliance with business policies and government regulations
8
Q

internal control principles

A

clearly established lines of responsibility

separation of record keeping and custodianship

fraud and theft

mechanical and electronic devices

adequate insurance

internal auditing

programming controls

physical controls

other controls

9
Q

limitations of internal control systems

A

absolute assurance not possible

the size of an entity’s operations can influence the effectiveness of internal controls

good controls can break down due to tiredness, indifference or carelessness

heavy reliance on segregation of duties of employees

computer fraud is prevalent in computerised accounting systems

10
Q

the general can be used to record all types of transactions

A

sales

purchases of fixed assets on credit

drawings of fixed assets or inventory

cash receipts

cash payments

sales returns and allowances

purchases returns and allowances

adjusting entries

closing entries

reversing entries

11
Q

special journals (format)

A

sales journal

purchases journal

cash receipts journal

cash payments journal

12
Q

sales journal

A

it is used solely for recording sales of inventory on credit

other columns can be added to the sales journal to satisfy the needs of a specific entity

13
Q

advantages of the sales journal

A

each transaction recorded on a single line.

entries do not require a narration.

eliminates posting separate debits and credits during the month

14
Q

procedure of the sales journal

A

from each sales invoice, enter the date of the sale, invoice number, customer’s name and amount of sale on a line in the sales journal

at the end of each day, post each sale to the related customer’s account in the subsidiary ledger

at the end of each month, total the accounts receivable column of the sales journal and post the total amount as a debit to the accounts receivable control account in the general ledger

add the account balances of the accounts receivable subsidiary ledger to verify that the total is equal to the accounts receivable control account balance in the general ledger

15
Q

purchases journal

A

the purchases journal can be set up as either a single‐purpose or a multipurpose journal

cash purchases of inventory are recorded in the cash payments journal.

the transactions are recorded in the cash payments journal, if purchased on credit, they are recorded in the general journal

from the tax invoice received from the supplier, enter the recording date, invoice date, supplier’s name and credit terms

at the end of each day, post each purchase for the full amount owing, including GST, to the related supplier’s account in the subsidiary ledger

at the end of each month, total the amount columns of the purchases journal and post the total of the accounts payable column as a credit to the accounts payable control account in the general ledger

add the account balances of the accounts payable subsidiary ledger to verify that the total is equal to the accounts payable control account balance in the general ledger

16
Q

general journal

A

the general journal is used for adjusting entries, correcting entries and closing entries

temporary abnormal balances will arise in the accounts receivable and accounts payable subsidiary ledgers

abnormal balances can be flagged automatically in a computerised system, and can easily be added to the appropriate classification

abnormal balances can occur due to buying and selling from same customer/supplier

the general journal entry also requires a debit to be made to the accounts payable control account and a credit to the accounts receivable control account

17
Q

cash receipts journal

A

records all transactions involving the receipt of all forms of cash

cash receipts journal therefore has at least two money columns

  • one to record the daily receipts and deposits to the bank
  • one to record discount allowed to customers
18
Q

CRJ debit columns

A

cash at bank

discount allowed

GST payable

19
Q

CRJ credit columns

A

sales

GST payable

accounts receivable

other accounts

20
Q

CRJ procedure

A

the entries in the accounts receivable column are posted daily to the subsidiary ledger

the credits in the other accounts column are posted daily or at other frequent intervals during the month

at the end of the month, the entries in each column are totalled

21
Q

cash payments journal

A

records all payments of cash

used by an entity to make payments are internet banking and cheques drawn on the entity’s bank account

GST Receivable account is credited for any GST adjustments

an ‘other accounts’ column can then be used for all other accounts to be debited

22
Q

CPJ debit columns

A

other accounts

accounts payable

purchases

GST receivable

23
Q

CPJ credit columns

A

cash at bank

discount received

GST receivable

24
Q

CPJ procedure

A

the entries in the accounts payable column are posted daily to the subsidiary ledger

the debits in the other accounts column are posted daily or at other frequent intervals during the month

at the end of the month, the dollar amounts entered in each column are totalled and cross‐added to verify that the debits and credits are equal.

the column totals for accounts payable, purchases, cash at bank and discount received are posted at the end of the month to their respective accounts