Problem Solving Survival Guide Volume I: Chapters 1-12 to accompany Accounting Principles, 11th Edition

CHAPTER 7

ACCOUNTING INFORMATION SYSTEMS

OVERVIEW

As transactions increase in number, so do the recordings and postings required to account for business activities. To deal with transactions the accountant employs (1) special journals to efficiently organize and expedite the recording and posting process for transactions which occur frequently and (2) subsidiary ledgers to free the general ledger of details. A business may have a computerized accounting system or it may rely on a manual system. The steps in the accounting cycle remain the same whether or not the system is automated.

SUMMARY OF LEARNING OBJECTIVES

1. Identify the basic concepts of an accounting information system. The basic principles in developing an accounting information system are cost effectiveness, useful output, and flexibility. Most companies use a computerized accounting system. Smaller companies use entry-level software such as QuickBooks or Sage50. Larger companies use custom-made software packages which often integrate all aspects of the organization.
2. Describe the nature and purpose of a subsidiary ledger. A subsidiary ledger is a group of accounts with a common characteristic. It facilitates the recording process by freeing the general ledger from details of individual balances.
3. Explain how companies use special journals in journalizing. Companies use special journals to group similar types of transactions. ...