Accounting Process Review - Module 1

Module 1: Review of the Accounting Process

• This module covers a review of the accounting process within AE21 - IT Applications Tools for Business.
• Learning objectives include describing the accounting process, reinforcing electronic spreadsheet use, explaining accounting controls, and discussing spreadsheet capabilities/limitations.
• The accounting process involves a flow of financial transactions that are documented and processed.

Contents

• Learning objectives set the goals for the module.
• Introduction provides context for the subject.
• An organizational and internal control structure is visual representation of how a company operates to achieve goals.
• Source documents are used to record financial transactions.
• Accounting policies and practice are sets of guidelines that shape the processes.
• The accounting equation and the double entry system are fundamental to financial record-keeping.
• A chart of accounts helps categorize financial transactions.
• Understanding balances of accounts is crucial for maintaining accurate records.

Introduction

• The introduction includes a diagram of the accounting process and its relation to departments, internal controls, and recording financial events.
• Key financial transactions are documented through source documents (Receipts, invoices, etc.)
• Recording financial activities is crucial for generating financial statements that include income, balance sheets, and cash flow.

Organizational and Internal Control Structures

• Structure is a visual representation of how an organization operates to achieve long-term goals.
• Without a structure it can be difficult to execute operations effectively.
• Structure helps define reporting lines, clarify roles, and establish a compensation scheme for each position.
• Structures lead to efficiency and effectiveness.
• Internal control is the process of ensuring organizational objectives, compliance with laws, reliable financial reporting, operational efficiency, and effectiveness,

Source Documents

• Source documents are written records that demonstrate a financial transaction between parties or entities.
• Examples include sales invoices, receipts, and other official documentation.
• These are vital for financial record-keeping.

Accounting Policies & Practice

• Accounting policies and practices are principles and procedures for handling financial information.
• They cover areas like budgeting, general ledger creation, reporting, cash management, receivables and payables, employee payroll, cost allocation, and fixed assets.

Accounting Equation & Double Entry System

• The accounting equation is Assets = Liabilities + Equity.
• Assets are resources owned by a business.
• Liabilities are what a company owes.
• Equity represents the owners' claims on the business' assets.
• The double-entry system ensures accounting principles are followed, preserving equality and accuracy of financial statements.

Chart of Accounts

• A chart of accounts is a tool for categorising financial transactions.
• It's an index of all accounts within a company's general ledger, enabling efficient record-keeping.
• The chart breaks down financial activities into subcategories.

Balances of Accounts

• Understanding increases and decreases in assets, liabilities, owner's equity, and other elements like income and expenses is crucial.
• Increases and decreases are recorded by debits and credits.
• This ensures accurate financial reporting.

Accounting Cycle

• The accounting cycle is a series of steps to process and record financial transactions.
• Identifying and analyzing transactions is the first step in the cycle.
• These are recorded in the general journal and ledger