Kế toán, kiểm toán - Chương 3: The accounting information system

The Accounting Information SystemKimmel ● Weygandt ● KiesoFinancial Accounting, Eighth Edition3Explain how accounts, debits, and credits are used to record business transactions.CHAPTER OUTLINEAnalyze the effect of business transactions on the basic accounting equation.12LEARNING OBJECTIVESIndicate how a journal is used in the recording process.3Explain how a ledger and posting help in the recording process.4Prepare a trial balance.5Accounting Information System System of collecting and processing transaction data and communicating financial information to decision-makers.LEARNING OBJECTIVEAnalyze the effect of business transactions on the basic accounting equation.1LO 1 Accounting information systems rely on a process referred to as the accounting cycle.Accounting Information SystemAnalyze business transactionsJournalizePostTrial BalanceAdjusting EntriesAdjusted Trial BalanceFinancial StatementsClosing EntriesPost-Closing Trial BalanceMost businesses use computerized accounting systems.LO 1 Transactions are economic events that require recording in the financial statements.Not all activities represent transactions.Assets, liabilities, or stockholders’ equity items change as a result of some economic event.Dual effect on the accounting equation.ACCOUNTING TRANSACTIONSLO 1 Question: Are the following events recorded in the accounting records?EventPurchase computerCriterionPay rentRecord/ Don’t RecordDiscuss guided trip options with potential customerIllustration 3-1Transaction identification process ACCOUNTING TRANSACTIONSIs the financial position (assets, liabilities, or stockholders’ equity) of the company changed?LO 1 AssetsLiabilitiesStockholders’ Equity=+Basic Accounting EquationThe process of identifying the specific effects of economic events on the accounting equation.ANALYZING TRANSACTIONSLO 1 Illustration 3-2 Expanded accounting equationANALYZING TRANSACTIONSLO 1 Event (1). On October 1, cash of $10,000 is invested in Sierra Corporation by investors in exchange for $10,000 of common stock.1. +10,000 +10,000ANALYZING TRANSACTIONSLO 1 Event (2). On October 1, Sierra borrowed $5,000 from Castle Bank by signing a 3-month, 12%, $5,000 note payable.1. +10,000 +10,0002. +5,000 +5,000ANALYZING TRANSACTIONSLO 1 Event (3). On October 2, Sierra purchased equipment by paying $5,000 cash to Superior Equipment Sales Co.3. -5,000 +5,0001. +10,000 +10,0002. +5,000 +5,000ANALYZING TRANSACTIONSLO 1 Event (4). On October 2, Sierra received a $1,200 cash advance from R. Knox, a client.4. +1,200 +1,2003. -5,000 +5,0001. +10,000 +10,0002. +5,000 +5,000ANALYZING TRANSACTIONSLO 1 Event (5). On October 3, Sierra received $10,000 in cash from Copa Company for guide services performed.4. +1,200 +1,2005. +10,000 +10,0003. -5,000 +5,0001. +10,000 +10,0002. +5,000 +5,000ANALYZING TRANSACTIONSLO 1 Event (6). On October 3, Sierra Corporation paid its office rent for the month of October in cash, $900.4. +1,200 +1,2005. +10,000 +10,0006. -900 -9003. -5,000 +5,0001. +10,000 +10,0002. +5,000 +5,000ANALYZING TRANSACTIONSLO 1 Event (7). On October 4, Sierra paid $600 for a one-year insurance policy that will expire next year on September 30.4. +1,200 +1,2005. +10,000 +10,0006. -900 -9007. -600 +6003. -5,000 +5,0001. +10,000 +10,0002. +5,000 +5,000ANALYZING TRANSACTIONSLO 1 Event (8). On October 5, Sierra purchased an estimated three months of supplies on account from Aero Supply for $2,500.4. +1,200 +1,2005. +10,000 +10,0006. -900 -9007. -600 +6008. +2,500 +2,5003. -5,000 +5,0001. +10,000 +10,0002. +5,000 +5,000ANALYZING TRANSACTIONSLO 1 Event (9). On October 9, Sierra hired four new employees to begin work on October 15.4. +1,200 +1,2005. +10,000 +10,0006. -900 -9007. -600 +6008. +2,500 +2,5003. -5,000 +5,0001. +10,000 +10,0002. +5,000 +5,000An accounting transaction has not occurred.ANALYZING TRANSACTIONSLO 1 Event (10). On October 20, Sierra paid a $500 dividend.4. +1,200 +1,2005. +10,000 +10,0006. -900 -9007. -600 +6008. +2,500 +2,50010. -500 -5003. -5,000 +5,0001. +10,000 +10,0002. +5,000 +5,000ANALYZING TRANSACTIONSLO 1 Event (11). Employees have worked two weeks, earning $4,000 in salaries, which were paid on October 26.4. +1,200 +1,2005. +10,000 +10,0006. -900 -9007. -600 +6008. +2,500 +2,50010. -500 -50011. -4,000 -4,0003. -5,000 +5,0001. +10,000 +10,0002. +5,000 +5,000ANALYZING TRANSACTIONSLO 1 INVESTOR INSIGHTWhy Accuracy MattersWhile most companies record transactions very carefully, the reality is that mistakes still happen. For example, bank regulators fi ned Bank One Corporation (now JPMorgan Chase) $1.8 million because they felt that the unreliability of the bank’s accounting system caused it to violate regulatory requirements. Also, in recent years Fannie Mae, the government chartered mortgage association, announced a series of large accounting errors. These announcements caused alarm among investors, regulators, and politicians because they feared that the errors might suggest larger, undetected problems. This was important because the home-mortgage market depends on Fannie Mae to buy hundreds of billions of dollars of mortgages each year from banks, thus enabling the banks to issue new mortgages. Finally, before a major overhaul of its accounting system, the financial records of Waste Management Company were in such disarray that of the company’s 57,000 employees, 10,000 were receiving pay slips that were in error. The Sarbanes-Oxley Act was created to minimize the occurrence of errors like these by increasing every employee’s responsibility for accurate financial reporting.LO 1 Transaction AnalysisA tabular analysis of the transactions for the month of August is shown below. Describe each transaction.DO IT!1LO 1 1. Company issued shares of stock for $25,000 cash.2. Company purchased $7,000 of equipment on account.3. Company received $8,000 cash in exchange for services performed.4. Company paid $850 for this month’s rent.Double-entry systemEach transaction must affect two or more accounts to keep the basic accounting equation in balance.Recording done by debiting at least one account and crediting another.DEBITS must equal CREDITS.Debit and Credit ProceduresLEARNING OBJECTIVEExplain how accounts, debits, and credits are used to record business transactions.2LO 2 If Debits are greater than Credits, the account will have a debit balance.$10,000Transaction #2$3,000 $15,0008,000Transaction #3BalanceTransaction #1DEBIT AND CREDIT PROCEDURESLO 2 $10,000Transaction #2$3,000BalanceTransaction #1 $1,0008,000Transaction #3DEBIT AND CREDIT PROCEDURESIf Debits are greater than Credits, the account will have a debit balance.LO 2 Assets - Debits should exceed credits.Liabilities – Credits should exceed debits. Procedures for Assets and Liabilities▼ HELPFUL HINTThe normal balance is the side where increases in the account are recorded.LO 2 Investments by stockholders and revenues increase stockholders’ equity (credit). Dividends and expenses decrease stockholder’s equity (debit).Procedures for Stockholders’ EquityLO 2 Revenues increase stockholder’s equity.Expenses have the opposite effect: expenses decrease stockholders’ equity.The effect of debits and credits on revenue and expense accounts is the same as their effect on stockholders’ equity.Procedures for Stockholders’ EquityLO 2 INVESTOR INSIGHTKeeping ScoreThe Chicago Cubs baseball team has these major revenue and expense accounts: Revenues Expenses Admissions (ticket sales) Players’ salaries Concessions Administrative salaries Television and radio Travel Advertising Ballpark maintenanceChicago CubsLO 2 STOCKHOLDERS’ EQUITY RELATIONSHIPSILLUSTRATION 3-15Stockholders’ equityrelationshipsLO 2 LO 2 Normal Balance CreditNormal Balance DebitDEBIT/CREDIT RULES Balance Sheet Income Statement=+=-AssetLiabilityEquityRevenueExpenseDebitCreditSUMMARY OF DEBIT/CREDIT RULESLO 2 Relationship among the assets, liabilities and stockholders’ equity of a business: The equation must be in balance after every transaction. For every Debit there must be a Credit.ILLUSTRATION 3-16AssetsLiabilities=Stockholders’ EquityBasic EquationExpanded Basic Equation+SUMMARY OF DEBIT/CREDIT RULESLO 2 SUMMARY OF DEBIT/CREDIT RULESReview QuestionDebits:increase both assets and liabilities.decrease both assets and liabilities.increase assets and decrease liabilities.decrease assets and increase liabilities.LO 2 SUMMARY OF DEBIT/CREDIT RULESReview QuestionAccounts that normally have debit balances are:assets, expenses, and revenues.assets, expenses, and equity.assets, liabilities, and dividends.assets, dividends, and expenses.LO 2 The Recording ProcessLEARNING OBJECTIVEIndicate how a journal is used in the recording process.3LO 3 Analyze business transactionsJournalize the transactionPost to ledger accountsAnalyze each transaction in terms of its effect on the accounts.Enter the transaction information in a journal.Transfer the journal information to the appropriate accounts in the ledger.THE RECORDING PROCESSAnalyze business transactionsJournalize the transactionPost to ledger accountsAnalyze transactionEntertransactionTransfer from journal to ledgerILLUSTRATION 3-17The recording processLO 3 Transactions recorded in chronological order in a journal before they are transferred to the accounts.Contributions to the recording process:Discloses the complete effects of a transaction.Provides a chronological record of transactions.Helps to prevent or locate errors because the debit and credit amounts can be easily compared.THE JOURNALLO 3 Journalizing - Entering transaction data in the journal.Illustration: Presented below is information related to Sierra Corporation. Oct. 1 Sierra issued common stock in exchange for $10,000 cash. 1 Sierra borrowed $5,000 by signing a note. 2 Sierra purchased equipment for $5,000.Instructions - Journalize these transactions.THE JOURNALLO 3 THE JOURNAL Oct. 1 Sierra issued common stock in exchange for $10,000 cash.General JournalCashCommon Stock10,00010,000Oct. 1LO 3 THE JOURNAL Oct. 1 Sierra borrowed $5,000 by signing a note.General JournalCashNotes Payable5,0005,000Oct. 1LO 3 THE JOURNAL Oct. 2 Sierra purchased equipment for $5,000.General JournalEquipmentCash5,0005,000Oct. 2LO 3 THE JOURNALILLUSTRATION 3-18Recording transactions injournal formLO 3 ACCOUNTING ACROSS THE ORGANIZATIONBoosting ProfitsMicrosoft originally designed the Xbox 360 to have 256 megabytes of memory. But the design department said that amount of memory wouldn’t support the best special effects. The purchasing department said that adding more memory would cost $30—which was 10% of the estimated selling price of $300. The marketing department, however, “determined that adding the memory would let Microsoft reduce marketing costs and attract more game developers, boosting royalty revenue. It would also extend the life of the console, generating more sales.” As a result of these changes, Xbox enjoyed great success. But, it does have competitors. Its newest video game console, Xbox One, is now in a battle with Sony’s Playstation4 for market share. How to compete? First, Microsoft bundled the critically acclaimed Titan fall with its Xbox One. By including the game most Xbox One buyers were going to purchase anyway, Microsoft was making its console more attractive. In addition, retailers are also discounting the Xbox, which should get the momentum going for increased sales. What Microsoft is doing is making sure that Xbox One is the center of the home entertainment system in the long run.LO 3 Journal EntriesThe following events occurred during the first month of business of Hair It Is Inc., Kate Browne’s beauty salon:Issued common stock to shareholders in exchange for $20,000 cash.Purchased $4,800 of equipment on account (to be paid in 30 days).Interviewed three people for the position of stylist.The three activities are recorded as follows:DO IT!31. Cash 20,000 Common Stock 20,0002. Equipment 4,800 Accounts Payable 4,8003. No entry because no transaction occurred.LO 3 The Accounting CycleLEARNING OBJECTIVEExplain how a ledger and posting help in the recording process.4LO 4 Analyze business transactionsPost to ledger accountsJournalize the transactionTrial BalanceAdjusting EntriesAdjusted Trial BalanceFinancial StatementsClosing EntriesPost-Closing Trial BalanceThe Ledger is comprised of the entire group of accounts maintained by a company. THE LEDGERILLUSTRATION 3-19The general ledgerLO 4 Listing of accounts used by a company to record transactions.CHART OF ACCOUNTSILLUSTRATION 3-20Chart of accounts for SierraCorporationLO 4 General LedgerJ1The process of transferring journal entry amounts to ledger accounts.POSTINGGeneral JournalCashCommon Stock10,00010,000Oct. 1J1Oct. 1Stock issued10,00010,000101LO 4 POSTINGReview QuestionPosting:normally occurs before journalizing.transfers ledger transaction data to the journal.is an optional step in the recording process.transfers journal entries to ledger accounts.LO 4 ETHICS INSIGHTA Convenient OverstatementSometimes a company’s investment securities suffer a permanent decline in value below their original cost. When this occurs, the company is supposed to reduce the recorded value of the securities on its balance sheet (“write them down” in common financial lingo) and record a loss. It appears, however, that during the financial crisis of 2008, employees at some financial institutions chose to look the other way as the value of their investments skidded. A number of Wall Street traders that worked for the investment bank Credit Suisse Group were charged with intentionally overstating the value of securities that had suffered declines of approximately $2.85 billion. One reason that they may have been reluctant to record the losses is out of fear that the company’s shareholders and clients would panic if they saw the magnitude of the losses. However, personal self-interest might have been equally to blame—the bonuses of the traders were tied to the value of the investment securities.Source: S. Pulliam, J. Eaglesham, and M. Siconolfi , “U.S. Plans Changes on Bond Fraud,” Wall Street Journal Online (February 1, 2012).Credit Suisse GroupLO 4 Follow these steps:1. Determine what type of account is involved.2. Determine what items increased or decreased and by how much.3. Translate the increases and decreases into debits and credits.RECORDING PROCESS ILLUSTRATEDILLUSTRATION 3-21Investment of cash bystockholdersLO 4 LO 4 ILLUSTRATION 3-22LO 4 ILLUSTRATION 3-23ILLUSTRATION 3-24LO 4 ILLUSTRATION 3-25LO 4 ILLUSTRATION 3-26LO 4 ILLUSTRATION 3-27LO 4 LO 4 ILLUSTRATION 3-28ILLUSTRATION 3-29LO 4 ILLUSTRATION 3-30LO 4 ILLUSTRATION 3-31LO 4 LO 4 JOURNALIZING SUMMARYILLUSTRATION 3-32General journal for Sierra CorporationLO 4 Illustration 3-32 ILLUSTRATION 3-33General ledger for Sierra CorporationPOSTING SUMMARYSelected transactions from the journal of Faital Inc. during its first month of operations are presented below. Post these transactions to T-accounts.PostingDO IT!4LO 4 The Accounting CycleLEARNING OBJECTIVEPrepare a trial balance.5LO 5 Analyze business transactionsPost to ledger accountsJournalize the transactionPrepare a Trial BalanceAdjusting EntriesAdjusted Trial BalanceFinancial StatementsClosing EntriesPost-Closing Trial BalanceA list of accounts and their balances at a given time.Accounts are listed in the order in which they appear in the ledger. Purpose is to prove that debits equal credits.May also uncover errors in journalizing and posting.Useful in the preparation of financial statements.TRIAL BALANCE▼ HELPFUL HINTNote that the order ofpresentation in the trial balance is: Assets Liabilities Stockholders’ equity Revenues ExpensesLO 5 TRIAL BALANCEILLUSTRATION 3-34Sierra Corporation trial balanceLO 5 The trial balance may balance even when a transaction is not journalized, a correct journal entry is not posted, a journal entry is posted twice, incorrect accounts are used in journalizing or posting, or offsetting errors are made in recording the amount of a transaction. ETHICS NOTE An error is the result of an unintentional mistake. It is neither ethical nor unethical. An irregularity is an intentional misstatement, which is viewed as unethical.LIMITATIONS OF A TRIAL BALANCELO 5 Review QuestionA trial balance will not balance if: a correct journal entry is posted twice. the purchase of supplies on account is debited to Supplies and credited to Cash.a $100 cash dividends is debited to the Dividends account for $1,000 and credited to Cash for $100.a $450 payment on account is debited to Accounts Payable for $45 and credited to Cash for $45.TRIAL BALANCELO 5 Trial BalanceDO IT!5The following accounts come from the ledger of SnowGo Corporation at December 31, 2017.Equipment $88,000 Dividends 8,000 Accounts Payable 22,000Salaries and Wages Expense 42,000Accounts Receivable 4,000Service Revenue 95,000Common Stock $20,000Salaries and Wages Payable 2,000Notes Payable (due in 3 months) 19,000Utilities Expense 3,000Prepaid Insurance 6,000Cash 7,000Prepare a trial balance in good form.LO 5 LO 5 KEY POINTSA Look at IFRSLEARNING OBJECTIVECompare the procedures for the recording process under GAAP and IFRS.6SimilaritiesTransaction analysis is the same under IFRS and GAAP.Both the IASB and the FASB go beyond the basic definitions provided in the textbook for the key elements of financial statements, that is assets, liabilities, equity, revenues, and expenses. The implications of the expanded definitions are discussed in more advanced accounting courses.LO 6 A Look at IFRSKEY POINTSSimilaritiesAs shown in the textbook, dollar signs are typically used only in the trial balance and the financial statements. The same practice is followed under IFRS, using the currency of the country where the reporting company is headquartered. A trial balance under IFRS follows the same format as shown in the textbook.LO 6 A Look at IFRSKEY POINTSDifferencesIFRS relies less on historical cost and more on fair value than do FASB standards.Internal controls are a system of checks and balances designed to prevent and detect fraud and errors. While most public U.S. companies have these systems in place, many non-U.S. companies have never completely documented the controls nor had an independent auditor attest to their effectiveness.LO 6 A Look at IFRSLOOKING TO THE FUTUREThe basic recording process shown in this textbook is followed by companies around the globe. It is unlikely to change in the future. The definitional structure of assets, liabilities, equity, revenues, and expenses may change over time as the IASB and FASB evaluate their overall conceptual framework for establishing accounting standards.LO 6 IFRS PracticeWhich statement is correct regarding IFRS?IFRS reverses the rules of debits and credits, that is, debits are on the right and credits are on the left.IFRS uses the same process for recording transactions as GAAP.The chart of accounts under IFRS is different because revenues follow assets.None of the above statements are correct.A Look at IFRSLO 6 IFRS PracticeA trial balance:is the same under IFRS and GAAP.proves that transactions are recorded correctly.proves that all transactions have been recorded.will not balance if a correct journal entry is posted twice.A Look at IFRSLO 6 IFRS PracticeOne difference between IFRS and GAAP is that:GAAP uses accrual-accounting concepts and IFRS uses primarily the cash basis of accounting.IFRS uses a different posting process than GAAP.IFRS uses more fair value measurements than GAAP.the limitations of a trial balance are different between IFRS and GAAP.A Look at IFRSLO 6 “Copyright © 2016 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in Section 117 of the 1976 United States Copyright Act without the express written permission of the copyright owner is unlawful. Request for further information should be addressed to the Permissions Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages, caused by the use of these programs or from the use of the information contained herein.”COPYRIGHT