Accounting Information

System
SLIDESMANIA
 Parts of an Information System
People
People are competent end users working to increase their productivity. End users use
hardware and software to solve information-related or decision-making problems.

Procedures
Procedures are manuals and guidelines that instruct the end users on how to use the
software and hardware.

Software
Software is another name for programs ─ instructions that tell the computer how to process
data. There are basically two kinds of software:
SLIDESMANIA
 System Software
System software is background software that helps a computer manage its internal
resources.
Example: Windows and Linux

Application Software
Application software performs useful work on general-purpose problems. The two types of
applications software are basic applications and advanced applications.
Basic Applications include:
• Browser
• Word Processor
• Spreadsheet
• Database Management System
• Presentation Graphics
SLIDESMANIA
 Advanced Applications include:
• Multimedia
• Web Publishers
• Graphics Programs
• Virtual Reality
• Artificial Intelligence
• Project Managers

Hardware
Hardware consists of input devices, the system unit, secondary storage, output devices, and
communication devices.

Input Devices
Input devices translate data and programs that humans can understand into a form the
computer can process.
SLIDESMANIA
 The System Unit
The system unit consists of electronic circuitry with two parts:
Central Processing Unit (CPU)
Memory (primary storage)

Secondary Storage
Secondary storage stores data and programs.

Output Devices
Output devices output processed information from CPU.

Communications Devices
These send and receive data and programs from one computer to another. A device that
connects a microcomputer to a telephone is a modem.
SLIDESMANIA
 Data
Data is the raw material for data processing. Data consists of numbers, letters, and symbols
and relates facts, events, and transactions. A file is a collection of characters organized as a
single unit.
SLIDESMANIA
 Accounting Information System

● An accounting information system is a combination of personnel, records, and

procedures that a business uses to meet its need for financial information.
● Most firms have an accounting manual that specifies the policies and procedure
to be followed within the accounting information system.
SLIDESMANIA
 An effective accounting information system should achieve the
following objectives:

• To process the information efficiently at the least cost.

• To protect entity’s assets, to ensure that data are reliable, and to
minimize wastes and the possibility of theft or fraud.
• To be in harmony with the entity’s organizational and human factors.
• To be able to accommodate growth in the volume of transactions and
organizational changes.
SLIDESMANIA
 The Accounting
Process

Economic Accounting
Activities Information

Decision Makers
SLIDESMANIA
 Types of Accounting Information Systems

• Manual Systems- rely on human processing and utilize paper-based journals

and ledgers.
• Computer-Based Transaction Systems- replace paper records with computer
records.
• Database systems- embed accounting data within the business event data on
which they are based.
SLIDESMANIA
 Stages of Data Processing
• Processing of raw data into useful accounting information then finally into
summarized reports follows the usual input-processing-output progression.
• Each transaction entered into the accounting system should be supported by source
documents.
• The computer, with the use of the accounting software processes the inputs.
• The manual system of journalizing, posting, preparing the trial balance and
updating the accounts are done mostly instantaneously.
SLIDESMANIA
 Elements of Financial
Statements
SLIDESMANIA
 Elements of Financial Statements

Element Definition or Description

Asset A present economic resource controlled by the entity as a result of past events. An
economic resource is a right that has the potential to produce economic benefits.
Liability A present obligation of the entity to transfer an economic resource as a result of past
events.
Equity The residual interest in the assets of the entity after deducting all liabilities.
Income Increases assets, or decreases in liabilities, that result in increases in equity, other than
those relating to contributions from holders of equity claims.
Expenses Decreases in assets, or increases in liabilities, that result in equity, other than those
relating to distributions to holders of equity claim.
SLIDESMANIA
 Financial Position
Asset
A present economic resource controlled by the entity as a result of past events. An economic resource is
a right that has the potential to produce economic benefits. There are three aspects to these definitions:
“right”; “potential to produce economic benefits”; and “control”.

Rights that have the potential to produce economic benefits take many forms including:
(a) rights that correspond to an obligation of another party, for example:
i. rights to receive cash
ii. rights to receive goods or services
iii. Rights to exchange economic resources with another party on favorable terms
iv. Rights to benefit from an obligation of another party to transfer an economic resource if a
specified uncertain future event occurs.
SLIDESMANIA
 (b) rights that do not correspond to an obligation of another party, for example:
i. rights over physical objects, such as property, plant and equipment or inventories.
ii. rigths to use intellectual property.

An economic resource could produce economic benefits for an entity by entitling or enabling it to do,
for example, one or more of the following:
a) Receive contractual cashflows or another economic resource;
b) Exchange economic resources with another party on favorable terms;
c) Produce cash inflows or avoid cash outflows;
d) Receive cash or other economic resources by selling economic resource; or
e) Extinguish liabilities by transferring the economic resource.

An entity controls an economic resource if it has the present ability to direct the use of the economic
resource and obtain the economic benefits that may flow from it.
SLIDESMANIA
 Liability
A liability is a present obligation of the entity to transfer an economic resource as a result of past
events. For a liability to exist, three criteria must all be satisfied:
a) The entity has an obligation;
b) The obligation is to transfer an economic resource; and
c) The obligation is a present obligation that exists as a result;t of past events

• An obligation is a duty or responsibility that an entity has no practical ability to avoid.

• An obligation is always owed to another party (or parties).
• It is not necessary to know the identity of the party (or parties) to whom the obligation is owed.
SLIDESMANIA
 Obligations to transfer an economic resource include, for example:
a) obligations to pay cash.
b) obligations to deliver goods or provide services.
c) obligations to exchange economic resources with another party on unfavorable terms.
d) Obligations to transfer an economic resource if specified uncertain event occurs.
e) obligations to issue a financial instrument if that financial instrument will oblige the entity to
transfer an economic resource.

A present obligation exists as a result of past events only if:

f) The entity has already obtained economic benefits or taken an action; and
g) As a consequence, the entity will or may have to transfer an economic resource that it would not
otherwise have had to transfer.
SLIDESMANIA
 Equity
Equity is the residual interest in the assets of the enterprise after deducting its liabilities. In other
words, they are the claims against the entity that do not meet the definition of liability.

Equity may pertain to any of the following depending on the form of business organization:
• In a sole proprietorship, there is only one owner’s equity account.
• In a partnership, an owner’s equity account exists for each partner.
• In a corporation, owner’s equity or shareholders’ equity consists of share capital, retained
earnings and reserves representing appropriations of retained earnings among others.
SLIDESMANIA
 Financial Performance
Income is increases in assets, or decreases in liabilities, that result in increases in equity,
other than those relating to contributions from holders of equity claims.

Expenses are decreases in assets, or increases in liabilities, that result in decreases in

equity, other than those relating to contributions from holders of equity claims.
SLIDESMANIA
 Thank you!
Reporters:
Gallardo, Chyeda Jubie Anne
Mirano, Mary Rose
SLIDESMANIA