pertemuan 09 the traditional accounting information system matakuliah: m0034 /informasi dan proses...

Pertemuan 09 The Traditional Accounting

Information System

Matakuliah : M0034 /Informasi dan Proses Bisnis Tahun : 2005

Versi : 01/05

Learning Outcomes

Pada akhir pertemuan ini, diharapkan mahasiswa

akan mampu :

• Menjelaskan siklus akuntansi

Outline Materi

• Tahapan Akuntansi dan tujuannya

• Sistem Akuntansi Tradisional

By Hollander, Denna, Cherrington

PowerPoint slides by: Bruce W. MacLean, Bruce W. MacLean,

Faculty of Management, Faculty of Management,

Dalhousie UniversityDalhousie University

Accounting, Information Technology, and Business Solutions, 2nd Edition

The McGraw-Hill Companies, Inc., 2000

Irwin/McGraw-Hill

The Traditional Accounting Information System

Chapter 3

Irwin/McGraw-Hill The McGraw-Hill Companies, Inc., 2000

ObjectivesDescribe the nature of the traditional accounting

cycle and its relationship to business events

Describe the impact of IT on the traditional accounting system

Describe how the traditional accounting system architecture limits accounting’s ability to enhance value

Describe the limitations of the traditional accounting system architecture


Pacioli: The Father of Traditional Accounting

Pacioli was not really the inventor, but was “the first accountant to combine his knowledge with the technology that enabled authors to print books using a movable type and a printing press to instruct the world on the subject in print”.

Pacioli documented the double entry, chart of account classification scheme used to record and store accounting data.

To keep the accounts in balance, Pacioli proposed a rigorous process for recording, maintaining, and reporting accounting data. Pacioli suggested the use of three books: the memorandum book, the journal and the ledger.

The memorandum book should include notations of every transaction, large and small, in whatever currency was being used and in as much detail as time and circumstance allowed.

The journal was the source for the ledger, where the double entry bookkeeping was done. It was in the ledger that the businessman could learn before

anyone else whether he was a success or a failure


Rules for Accounting Chart of Accounts See Exhibit 3-1

classify and summarize financial measurements nominal accounts vs real accounts

One compendium of sample charts of accounts and accounting procedures for different industries is The Encyclopedia of Accounting Systems

Charles Sprague “Any occurrence [accounting transaction] must be either an increase or a decrease of values, and there are three classes of values [assets, liabilities, and equity] ... in every transaction at least two of the occurrences must appear ... on opposite sides of the above list.”

Assets = Liabilities + Owner’s Equity

Assets = Liabilities + EquitiesDebit Credit Debit Credit Debit Credit(Left) (Right) (Left) (Right) (Left) (Right)

Increase Decrease Decrease Increase Decrease Increase+ - - + - +


Exhibit 2-1 Sample Chart of Accounts

Current Assets Cash 110 Accounts Receivable 130 Allowance for Doubtful Accounts 140 Inventory 160 Prepaid Insurance 180 Notes Receivable 190

Property, Plant, and Equipment: 200 Land 210 Building 220 Accumulate Depreciation Building 230 Equipment 240 Accumulated Deprec. Equipment 250

Current Liabilities: Accounts Payable 310

Long-Term Debt: Bonds Payable 410

Stockholder’s Equity: Common Stock 510 Capital in Excess 520 Retained Earnings 550 Revenue and Expense Summary 590

Revenue: Revenue 610 Interest Revenue 620 Rent Revenue 630

Expenses: Purchases 710 Freight on Purchases 720 Purchase Returns 730 Selling Expenses 740 General and Admin. Expenses 750 Interest Expense 760 Extraordinary Loss (pretax) 770

Account Title Account Account Title Account


Exhibit 3-2: Steps in the Accounting Cycle and Their Objectives

During the accounting period

Step Description Objective1 Identify Transaction or

Event to be RecordedTo gather information, generally in the form of source documents, about transactions or events

2 Journalize Transaction and Events

To identify, assess and record the economic impact of transactions on the firm in a chronological record ( a journal), in a form that facilitiates transfer to the accounts

3 Posting from Journals to Ledgers

To transfer the information from the journal to the ledger, the device that stores the accounts



Step Description Objective4 Prepare Unadjusted

Trial BalanceTo provide a convenient listing to check for debit-credit equality, and a starting point for adjusting entries

5 Journalize and Post Adjusting Journal Entries

To record accruals, expiration of deferrals, estimations, and other events often not signaled by a new source document

6 Prepare Adjusted Trial Balance

To check for debit-credit equality and to simplify preparation of the financial statements

7 Prepare Financial Statements

To communicate summarized financial information to external decision makers

8 Journalize and Post Closing Entries

To close temporary accounts and transfer the net income amount to retained earnings

9 Prepare Post-Closing Trial Balance

To check for debit-credit equality after the closing entries

At the end of the accounting period



At the beginning of the next accounting period

Step Description Objective10 Journalize and Post

Reversing EntriesTo simplify certain subsequent journal entries and reduce accounting costs.

Financialstatementsand notes

Auditstatementsand notes

Journals

Recordtransaction

data

Ledgers

Post journaldata to the

ledger

Trialbalance

Prepare andadjust the

trial balance

Businessevent

Nonfinancialsystems Information

customers

Accounting Cycle Process

Analyzebusiness

event data

Ignoreeventdata

Correct andadjust

Financialstatement

notes

Preparestatementsand notes

Financialstatementsand notes



Step : Identify Accounting Transactions to be Recorded

The purposes of this first step are to identify the business events that can be considered accounting transactions and to collect relevant economic data about those transactions. Accounting transactions are the business events that cause a change in the organization’s assets, liabilities, or owner’s equity. These events include Exchanges of resources and obligations between the reporting firm and

outside parties (reciprocal transfers or non-reciprocal transfers) Internal Events within the firm that affect its resources or obligations but

that do not involve outside parties Economic and environmental events beyond the control of the company

(changes in values)

Accounting transactions are typically accompanied by a source document prepared by someone other than the accountant


Step 2 - Journalize Accounting Transaction Data

Measure and record the economic impact of transactions

Transactions are recorded in a journal - Debit, Credit, date, account number, amounts ,and descriptions

General journal and Special Journals Historical Cost Principle Posting References and page numbers

General JournalPage J-16

Date Accounts and Explanation Post. Amount1998 Ref. Debit Credit2-Jan Equipment 150 15,000

Cash 101 5,000 Notes Payable 215 10,000


Step 3: Post Journal Data to Ledgers The process of transferring transaction data from the journals to

the ledger accounts is called posting General Ledger and Subsidiary Ledgers Totals of Special Journal Columns are posted An audit trail should provide the capability to trace an individual

transaction from its initial recording all the way through the accounting process to the final figures in the financial statements

Reconciliation is the process of summing the subsidiary ledgers and comparing the total with the balance in the general ledger control account

General Ledger

Cash Acct. 1001998 1998

Jan. 1 balance $18,700 Jan. 2 J-16 $5,000

Equipment Acct. 1501998 1998

Jan. 1 balance $62,000Jan. 2 J-16 $15,000

Notes Payable Acct. 2161998

Jan. 2 J-16 $10,000


Step 4: Prepare Unadjusted Trial Balance

The unadjusted trial balance is a list of general ledger accounts and their account balances

Convenient method of determining that the sum of the Debit account balances equals the sum of the Credit account balances

If the trail balance does not balance the source of the error must beinvestigated


Exhibit 3-5 Unadjusted Trail Balance Illustrated

Sonora, Inc.Unadjusted Trial Balance

31-Dec-98

Account Debit CreditAssets: Cash $67,300

Accounts Receivable 45,000Allowance for Doubful AccountsNotes Receivable 8,000Inventory (Jan. 1 balance, periodic system) 75,000Prepaid Insurance 600Land 8,000Building 160,000Accumulated depreciation, building 90,000Equipment 91,000Accumulated depreciation, equipment 27,000

Liabilities Accounts Payable 29,000Bonds Payable 50,000

Owner's Equity Common Stock 150,000Contributed Capital in exces of par 20,000Retained Earnings 31,500

Revenues Sales Revenue 325,200Interest Revenue 500Rent Revenue 1,800

Expenses Purchases 130,000Freight on purchases 4,000Purchase Returns 2,000Selling expenses 104,000General and Administration 23,600Interest expense 2,500Extraordinary loss (pretax) 9000

728,000.00$ 728,000.00$

Click to Open


Step 5: Journalize and Post Adjusting Entries

Adjusting entries are required when their is no source document to trigger a transaction Passage of time ( interest or

depreciation) Correct Errors Record Changes in Estimates Recording Deferrals Recording Accruals Reclassifying balances Recognizing inventory losses

Source documents from earlier

transactions are the primary information sources for adjusting

entries.


Step 6: Prepare Adjusted Trial Balance

The adjusted trial balance lists all the account balances that will appear in the financial statements (with the exception of retained earnings, which does not yet reflect the current year’s net income and dividends).

The purpose of the adjusted trial balance is to confirm debit-credit equality, taking all Adjusting journal entries into consideration. Confirm Debit Credit Balance

Source for preparation of the Financial Statements


Step 7 Prepare Financial Statements The primary objective of financial accounting is to provide

information that is useful to decision-makers. Financial statements can be produced for a period of any duration. However, monthly, quarterly, and annual statements are the most common.

The income statement, retained earnings statement, and balance sheet are prepared directly from the adjusted trial balance.

The temporary account balances are transferred to the income statement, and the permanent account balances are transferred to the balance sheet. FS

Adjusted Trial Balance Adjusting Entries Income Statement Balance SheetAccount Debit Credit Debit Credit Debit Credit Debit Credit Debit CreditCash $67,300 $67,300 $67,300Accounts Receivable 45,000 45,000 45,000Allowance for Doubful AccountsNotes Receivable 8,000 (1) 2,000 8,000 8,000Inventory (Jan. 1 balance, periodic system) 75,000 75,000 75,000Prepaid Insurance 600 600 600Land 8,000 8,000 8,000Building 160,000 160,000 160,000Accumulated depreciation, building 90,000 90,000 90,000Equipment 91,000 91,000 91,000Accumulated depreciation, equipment 27,000 27,000 27,000Accounts Payable 29,000 29,000 29,000Bonds Payable 50,000 50,000 50,000Common Stock 150,000 150,000 150,000Contributed Capital in exces of par 20,000 20,000 20,000Retained Earnings 31,500 (1) 2,000 31,500 31,500Sales Revenue 325,200 325,200 325,200Interest Revenue 500 500 500Rent Revenue 1,800 1,800 1,800Purchases 130,000 130,000 130,000Freight on purchases 4,000 4,000 4,000Purchase Returns 2,000 2,000 2,000Selling expenses 104,000 104,000 104,000General and Administration 23,600 23,600 23,600Interest expense 2,500 2,500 2,500Extraordinary loss (pretax) 9000 9000 9000

728,000.00$ 728,000.00$ 728,000.00$ 728,000.00$

Net Income 56400 56400

329,500.00$ 329,500.00$ $454,900 453,900.00$

Adjusted Trial Balance Adjusting Entries Income Statement Balance SheetAccount Debit Credit Debit Credit Debit Credit Debit Credit Debit CreditCash $67,300 $67,300 $67,300Accounts Receivable 45,000 45,000 45,000Allowance for Doubful AccountsNotes Receivable 8,000 (1) 2,000 8,000 8,000Inventory (Jan. 1 balance, periodic system) 75,000 75,000 75,000Prepaid Insurance 600 600 600Land 8,000 8,000 8,000Building 160,000 160,000 160,000Accumulated depreciation, building 90,000 90,000 90,000Equipment 91,000 91,000 91,000Accumulated depreciation, equipment 27,000 27,000 27,000Accounts Payable 29,000 29,000 29,000Bonds Payable 50,000 50,000 50,000Common Stock 150,000 150,000 150,000Contributed Capital in exces of par 20,000 20,000 20,000Retained Earnings 31,500 (1) 2,000 31,500 31,500Sales Revenue 325,200 325,200 325,200Interest Revenue 500 500 500Rent Revenue 1,800 1,800 1,800Purchases 130,000 130,000 130,000Freight on purchases 4,000 4,000 4,000Purchase Returns 2,000 2,000 2,000Selling expenses 104,000 104,000 104,000General and Administration 23,600 23,600 23,600Interest expense 2,500 2,500 2,500Extraordinary loss (pretax) 9000 9000 9000

728,000.00$ 728,000.00$ 728,000.00$ 728,000.00$

Net Income 56400 56400

329,500.00$ 329,500.00$ $454,900 453,900.00$


Step 8 Journalize and Post Closing Entries

Closing entries reduce the temporary accounts (e.g., revenues, expenses, and dividends) to a zero (closed) balance.

Closing entries are recorded in the general journal at the end of the accounting period and are posted to the appropriate ledger accounts.

Permanent accounts are not closed because they carry asset, liability, and owner's equity balances to the next accounting period.

The retained earnings account is the only permanent account involved in the closing process.


Step 9 Prepare Post-Closing Trial Balance

A post-closing trial balance lists only the balances of the permanent accounts after the closing process is finished. (The temporary accounts have zero balances.)

This step is taken to check for debit-credit equality after the closing entries are posted.

Firms with a large number of accounts find this a valuable procedure because the chance of error increases with the number of accounts and postings.

The retained earnings account is now stated at the ending balance and is the only permanent account with a balance different from the one shown in the adjusted trial balance.


Step 10 Journalize and Post Reversing Entries

At the beginning of the next period, the accountant may prepare and post reversing entries to compensate for the difference in timing between the occurrence of an actual economic reality, and the recording of the economic event in the accounting system.

Reversing entries use the same accounts and amounts as adjusting entries but with the debits and credits reversed.

These entries reverse adjusting entries made at the end of one period and prepare the accounting records for normal processing of business events in the new period.

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