ACCOUNTING RECORDS - It should be limited in order to prevent and detect unauthorized and

illegal access to the firm’s assets. The physical assets at risk in the
- By following the audit trail, management can discover where an revenue cycle are inventories and cash.
error has occurred. - These assets must be protected by imploring safety methods such as
- Audit Trail: chronological record of all activities and changes made establishing a warehouse security, using a safe or night deposit, and
to a set of data in a system. locking cash drawers for maximum protection.
- SPECIFIC TECHNIQUES THAT CONTRIBUTE TO THE AUDIT - Cash and inventories should be protected as these two are valuable
TRAIL- these are some helpful techniques that can be done to assets for a business and it help build not just the customer’s trust but
expedite the auditing trail: also the brand’s reputation in the business world.
o Prenumbered Documents- includes sales order, shipping - Restricting access to documents that control physical assets should
notices, remittance advices, etc; that are sequentially also be implored as information is also one of the important assets at
numbered by the printer and allow every transaction to be risk.
identified uniquely. It is usually used in verifying data and
tracing transactions. INDEPENDENT VERIFICATION
o Special Journals- sales journal and cash receipts journal;
- Verify the accuracy and completeness of the task that other functions
provides a concise record of an entire class of event
in the process perform.
o Subsidiary Ledgers- inventory and A/R subsidiary ledgers
- Must occur at key points in the process where errors can be detected
are used for capturing transaction event details in the
quickly in order to be effective.
revenue cycle
- Independent verification controls in the revenue cycle exist at the
o General Ledgers- basis for financial statement preparation.
following points:
Revenue cycle affects sales, inventory, cost of goods sold,
o Shipping function- verifies goods sent from the warehouse
AR, and cash; completes the audit trail
are correct in type and quantity
o Files- contribute additionally to the audit trail:
o Billing function- ensures that the sales order matches the
 Open sales order file- status of customers order
shipping notice to ensure customers are billed correctly;
 Shipping log- shipped orders during the period
summarizes sales journal
 Credit records file- customer credit data
o General ledger function- reconciles journal vouchers and
 Sales order pending file- open orders not yet
summary reports prepared independently in different
shipped
function areas
 Back-order file- order for out-of-stock items
- Discrepancies between the numbers supplied by these various
 Journal voucher file- compilation of all journal
sources will signal errors that need to be resolved before posting to
vouchers
the general ledger can take place.

ACCESS CONTROLS
 Automating – means using machines, technology and computer
programs to perform tasks or actions automatically and without
human intervention.
COMPUTER-BASED ACCOUNTING SYSTEMS (CBAS)  8. *Revenue Recognition*: The system recognizes revenue once
the goods or services are delivered, and any contingencies (like
 Automation- using technology to improve efficiency and
returns) are accounted for.
effectiveness of tasks; replicates the traditional process it replaces
 9. *Accounts Receivable*: The system updates the accounts
 Reengineering- rethinking the business process and the work flow;
receivable records, reflecting the amount owed by the customer.
 - improve operational performance and reduce costs by identifying
 10. *Reporting and Analytics*: Automated batch sales systems
and eliminating nonvalue-added tasks;
often generate reports and analytics on sales performance,
 - replacing traditional procedures with procedures that are innovative
customer trends, and revenue forecasts.
and often very different from those previously existed.
 11. *Audit Trails*: The system maintains detailed records of all
AUTOMATED BATCH SALES transactions for auditing purposes, ensuring transparency and
compliance.
 Automated batch sales in the revenue cycle of an Accounting  12. *Integration*: Throughout these processes, the AIS
Information System (AIS) involve several key processes: integrates with other systems, such as the general ledger, to ensure
 1. *Order Entry*: The process begins when a customer places an accurate financial reporting. Automated batch sales streamline the
order. In an automated system, this can happen through various revenue cycle, reducing errors, improving efficiency, and
channels, such as online ordering or electronic purchase orders. providing real-time data for decision-making and financial
 2. *Order Verification*: The system verifies the order's reporting.
accuracy, checking for things like product availability, pricing,
and customer credit limits.
 3. *Inventory Management*: If the ordered items are physical REENGINEERING SALES ORDER PROCESSING USING REAL-
products, the system updates inventory levels to reflect the items TIME TECHNOLOGY
being reserved for the customer.
 4. *Invoicing*: An invoice is generated automatically, including
o A real-time sales order is a purchase request made by a
details of the order, pricing, taxes, and any applicable discounts.
customer that is processed immediately as it's received. In
This invoice is sent to the customer electronically or in print.
this system, there's no delay or waiting; the order is
 5. *Credit Authorization*: If the customer has a credit account,
entered into the system, verified, and fulfilled instantly,
the system may check their credit status and authorize the sale
ensuring quick and efficient customer service. This
based on predefined credit limits.
approach is commonly used in online shopping where
 6. *Payment Processing*: Once the customer receives the
customers expect immediate confirmation and fast
invoice, they initiate payment through various means, such as delivery of their orders (Shopee, Lazada, Shein, etc)
credit card, electronic funds transfer, or check. The system
records the payment.
 7. *Shipping and Delivery*: If it's a physical product, the system
generates a packing list and shipping label. It tracks the shipment
and may provide tracking information to the customer.

o Automated cash receipts process is a system that
handles incoming payments from customers in a
streamlined and efficient way.
o 1. *Payment Collection*: Customers make payments
using various methods like credit cards, electronic
transfers, or checks. It involves:
o 2. *Payment Processing*: The system automatically
records and processes these payments without manual
intervention. It verifies the payment details and matches
them with outstanding invoices or orders.
o 3. *Receipt Generation*: Receipts or payment
confirmations are automatically generated and sent to
customers. These receipts detail the amount paid, the
invoice or order numbers, and the payment method.
o 4. *Accounts Receivable Update*: The system updates
the accounts receivable records, reducing the amount
owed by the customer by the payment amount.
o 5. *Bank Reconciliation*: If payments are made via
checks or electronic transfers, the system reconciles the
bank records with the payment data to ensure accuracy.
o 6. *Reporting*: Automated cash receipt systems often
generate reports to track payment trends, outstanding
balances, and cash flow. This automated process helps
businesses efficiently manage and record their incoming
payments, reducing the risk of errors and improving
financial transparency.
A Point of Sale (POS) system is like a digital cash register used in
businesses to process sales transactions. It's a computerized system where
customers make payments for products or services at a physical or online
store. It calculates the total cost, handles payment methods (cash, card,
digital wallets), and generates receipts. Additionally, it often tracks
inventory, provides sales reports, and helps businesses manage their sales
operations efficiently.
Reengineering using Electronic Data Interchange (EDI) is a process of
redesigning and optimizing business operations by replacing traditional
paper-based communication with electronic methods.
1. *EDI Basics*: Electronic Data Interchange (EDI) is a technology that
allows businesses to exchange standardized electronic documents, like
purchase orders and invoices, seamlessly and without manual data entry.
2. *Streamlining Operations*: Reengineering with EDI involves
reevaluating and reconfiguring business processes to take advantage of
this electronic communication. It eliminates the need for physical
paperwork, reducing manual errors, and speeding up processes.
3. *Data Exchange*: Instead of sending physical documents, businesses
use EDI to exchange data electronically with their trading partners,
suppliers, or customers. This can include order placement, order
acknowledgment, shipment notices, and payment information.
4. *Integration*: EDI systems are integrated into the organization's
software and systems, like Enterprise Resource Planning (ERP) or
inventory management systems, ensuring that data flows seamlessly
through various departments.
5. *Efficiency and Cost Savings*: By automating document exchange,
reengineering with EDI reduces processing time and costs associated with
manual data entry, paper handling, and postal services.
6. *Accuracy*: EDI minimizes human errors in data entry, improving
data accuracy and reducing the risk of disputes and delays in transactions.
7. *Compliance*: EDI often adheres to industry and regulatory
standards, ensuring that businesses stay compliant with requirements for
data exchange.
8. *Real-time Visibility*: Businesses gain real-time visibility into their
supply chain and financial processes, enabling better decision-making and
quicker responses to changing conditions. In summary, reengineering
with EDI involves transforming traditional, paper-based business
processes into more efficient, accurate, and automated electronic
processes, ultimately improving overall operational efficiency and
reducing costs.
Electronic Data Interchange (EDI) is a system that enables businesses
to exchange structured electronic documents with each other in a
standardized format. Here's a simple explanation of how it works:
1. *Document Creation*: Businesses create electronic documents like
purchase orders, invoices, shipping notices, and more using their internal
systems or software.
2. *Translation*: These electronic documents are then translated into a
standardized EDI format. This format uses codes and segments to
represent information in a way that both the sending and receiving
systems can understand.
3. *Transmission*: The EDI documents are transmitted securely from
one business's computer system to another. This can be done through
various methods like Value-Added Networks (VANs), direct connections,
or the internet.
4. *Receipt*: The receiving business's EDI system receives the
document, verifies its integrity, and acknowledges receipt to the sender.
This ensures data integrity and helps prevent data loss during
transmission.
5. *Translation (Again)*: The receiving system translates the EDI
document back into a format that its internal systems can understand and
process.
6. *Integration*: The translated data is integrated into the recipient's
internal systems, such as Enterprise Resource Planning (ERP) or
accounting software, without the need for manual data entry.
7. *Processing*: The recipient's system processes the data and takes
appropriate actions, such as updating inventory, generating invoices, or
confirming an order.
8. *Response*: If needed, a response document may be generated and
sent back to the sender, confirming the successful processing of the
original request. EDI works on a set of agreed-upon standards and
protocols, ensuring that different businesses can communicate
electronically regardless of their specific internal systems. This
automation streamlines business processes, reduces errors, speeds up
transactions, and improves efficiency in supply chains and other business
interactions.
A PC-based accounting system is a type of financial software that runs
on a personal computer (PC) and is used to manage an organization's
accounting and financial transactions. It's a software program installed on
a regular computer (like a laptop or desktop) that helps individuals or
businesses keep track of their finances. Users can input income, expenses,
and other financial data, and the software organizes and calculates
everything, making it easier to manage money, create reports, and prepare
for tax purposes. It's a user-friendly tool for financial record-keeping and
analysis.
The purpose of a PC-based accounting system is to facilitate the
efficient management of an organization's financial information and
transactions. It serves several functions beyond basic financial record-
keeping:
1. *Transaction Recording*: It allows users to record financial
transactions, including income, expenses, purchases, and sales, in an
organized manner.
2. *Financial Data Organization*: The system organizes financial data
into categories and accounts, making it easier to track and analyze various
aspects of an organization's finances.
3. *Automated Calculations*: It performs automatic calculations for
tasks like addition, subtraction, multiplication, and division, reducing the
risk of manual errors.
10. *User Access Control*: To maintain data security, PC-based
accounting systems typically allow administrators to control who can
access and modify financial data.
11. *Audit Trail*: They often maintain an audit trail, which is a record
of all changes made to financial data, to enhance transparency and
compliance.
12. *Data Export and Integration*: Users can export financial data for
use in other software or integrate it with other business systems, like
Customer Relationship Management (CRM) or Enterprise Resource
Planning (ERP) software. In summary, a PC-based accounting system is
designed to streamline financial management tasks, provide accurate and
up-to-date financial information, and support decision-making processes
for individuals, small businesses, and larger organizations.

4. *Financial Reporting*: Users can generate various financial reports,

such as income statements, balance sheets, and cash flow statements, to
assess the financial health of their organization.

5. *Budgeting and Forecasting*: Many PC-based accounting systems

include budgeting tools to help users plan and manage their finances for
the future.

6. *Invoicing and Billing*: Some systems offer features for creating and
sending invoices to clients or customers, tracking payments, and
managing accounts receivable.

7. *Bank Reconciliation*: Users can reconcile their bank statements

with their accounting records to ensure accuracy and detect discrepancies.

8. *Tax Compliance*: The software often assists with tax-related tasks,

such as calculating tax liabilities, generating tax reports, and preparing
financial data for tax filings.

9. *Inventory Management*: For businesses that deal with inventory,

these systems may offer inventory tracking and management features.