IT M3 PDF - Accounting And Digitization

MODULE 3 The Digitization of Accounting System using MS Excel for Reportorial Requirements SALES INVOICE Accountant’s not only do the normal accounting work like paper Sales Invoice is sometimes called cash sales invoice, charge invoice, wo...

MODULE 3 The Digitization of Accounting System using MS Excel for Reportorial Requirements SALES INVOICE Accountant’s not only do the normal accounting work like paper Sales Invoice is sometimes called cash sales invoice, charge invoice, works. Other times the accountants are tasked to do things like or service income. It documents the services rendered or the designing a company’s official documents and forms. These commodities sold by the customer. Like the official receipt, all documents and forms are essential in the business operations. information can be located at the option of the designing accountant. Other information can also be incorporated in the invoice depending on the need of the business enterprise. In accounting, the documents and forms should be properly supported to prove that transactions have transpired. It is observed in consonance with the accounting principle of objectivity. This principle, states that a transaction should always be accurate and well documented. In order to be objective, it must be reliable and verifiable. A business document is used for external purposes-these are the business’ sales invoice, cash sales invoice, charge income, official receipt, provisional receipt, etc. The Bureau of Internal Revenue controls these documents. The person who makes the printed copy of these documents is usually responsible for their registration to the BIR. This is necessary because this is one of the control measures adopted by our government to monitor and impose taxes to those who are doing business in our country. Failure to register these PROVISIONAL RECEIPT documents with the BIR has due penalty as per tax code. They are The provisional receipt is similar to the official receipt. The only issued to parties who are transacting with business enterprises. difference is that the collectors issue the document upon arriving at the office and endorse the collection to the company cashier, who Business forms, on the other hand, are used for internal purpose and will then acknowledge it by issuing an official receipt. they do not need to be registered with the BIR. They are used for the purpose of consistency. Examples of these forms are the payroll Also, some companies use provisional receipt if the payment made forms, journal voucher, cash receipt voucher, check voucher, sales by themcustomer is in a form of check. When the collection is report form, purchase order, canvass sheet, requisition form, deposited and cleared with the bank, an official receipt will be issued. receiving report, warehouse issue slips, etc. In accounting, we need to be consistent in all things so that we can attain the comparability of the financial figures that will be shown in our financial statements. The provisional receipt is considered as temporary receipt and therefore, cannot be considered as a good evidence to be kept. Business documents and business forms are used by all business enterprises depending on their needs. Their purpose is for the OFFICIAL RECEIPT company to establish a good internal control of all their business activities. In this way, individuals directing the business (managers) and owners are assured that the resources of the company are properly managed. DESIGN of BUSINESS FORMS AND DOCUMENTS To design the accounting system of the business enterprise, it requires the real artistic ability of the accountant. It is especially done in close coordination with the owners who require the accountant to design the forms and documents that will entail long- term usage and protect the image they want for their business. Some owners are even very particular about the color tone, font size, and layout of the documents. Aside from the presentation, the BIR also requires accuracy and completeness of the essential information that should be found in the document. Nevertheless, the BIR is not Components of the Official Receipt: particular where the accountant places the information on the The name of the business enterprise, the address, and the proprietor taxability of business entity and the taxability of the customer. These (if single proprietorship) are the extra considerations that an accountant should take before The Tax Identification Number (TIN). Usually placed below item no.1; this is very important, especially for the control procedures of designing the documents. the BIR. The amount. Must be written in words and in figures and the In designing a company’s business forms and documents we may information, which will indicate the nature of the payment; and the use the MS application for the company to easily design it. nature of payment is very important for the posting purpose in the subsidiary ledger. The form of payment. If the collection is made in cash, then the same amount must be seen as deposit in the bank as cash deposit. If it is a check collection, the same must be seen as deposit in bank as check deposit. If the check is returned for insufficient fund, then, it is easy to check and trace. The signature of the authorized person to accept collection. This is also very important because the company will not honor unauthorized signature. The control number. Can be written anywhere within the document. The journal voucher is the form where the company journalizes its SOURCE DOCUMENTS transactions. All transactions should be fitted in the different forms Transaction and events are the starting points in the accounting used by the company. For example: If it is a cash receipt transaction, cycle use the cash receipt voucher; if it is a payment transaction, use the By relying on source documents transactions and events can be check voucher; and if it relates to other than receipt or payment, use analyzed as to how they will affect performance and financial the journal voucher. position. Identify and describe transactions and events entering the accounting process Original written evidences contain information about the nature and the amounts of the transactions. THE JOURNAL Chronological record of the entry’s transactions. Journal entry shows all the effects of a business transaction in terms of debits and credits. Each transaction is initially recorded in a journal rather than general ledger. A journal is called the book of original entry. Nature and volume of transactions of the business determine the number and type of journals needed. The general journal is the simplest journal. FORMAT Date Account Titles and Explanation P.R. (posting reference) Debit Credit ACCOUNTING CYCLE Step1 Identification of events to be recorded SIMPLE AND COMPOUND ENTRY Step2 Transactions are recorded in the Journal Simple Entry Step3 Journal entries are posted to the Ledger only two accounts are affected Step4 Preparation of a Trial Balance one account is debited , the other account is credited Step5 Preparation of the Worksheet including Adjusting Entries Some transactions require the use of more than two Step6 Preparation of the Financial Statements accounts. Step7 Adjusting Journal Entries are Journalized and Posted Compound Entry Step8 Closing Journal Entries are Journalized and Posted three or more accounts Step9 Preparation of a Post-Closing Trial Balance Step10 Reversing Journal Entries are Journalized and Posted TRANSACTIONS ARE JOURNALIZED Step 2 This cycle is repeated each accounting period Transaction or event-identified and measured. Step 1-3 –accomplished during the period Recorded in the journal Step 4-9 –occur at the end of the period The process of recording a transaction is called journalizing. Step 10 –optional and occurs at the beginning of the next period A=L+OE Asset = Liability + Owner’s Equity Note that the rules of double-entry system are observed in each transaction: Two or more accounts are affected by each transaction  The sum of the debits for every transaction equals the sum of the If the sum of an account’s debits is greater than the sum of its credits credits, that account has a debit balance. The equality of the accounting equation is always maintained If the sum of its credits is greater, that account has a credit balance THE LEDGER Grouping of the entity’s accounts Reference book of the accounting system Used to classify and summarize transactions Prepare data for basic financial statements. Classified into two general groups Balance Sheet or permanent accounts(A,L&OE) Income Statement of temporary accounts(I&E) PREPARATION OF WORKING PAPER CHART OF ACCOUNTS The first step in the preparation of working paper is writing the A listing of all the accounts and their account numbers in the ledger heading, which is known as chart of accounts. has three components: The chart is arranged in the financial statement order The name of the company; Assets The working paper title; and Liabilities The date of the end of the period for which you are preparing the Owner’s Equity working paper. Income Expenses Afterwards, write the first column heading m which is the trial balance (debit and credit). The accounts in the trial balance columns are taken from the ledger balances as of the period your preparing such working paper. The next four columns are the adjustments and the adjusted trial balance. Here, we plot the adjustments in the working paper. In the adjustment, observe the number preceding the amount of the adjustments. We call these figures as the adjustment reference numbers. These figures are used for easy tracking in case the adjustment columns do not balance. Posting means transferring the amounts from the journal to the appropriate accounts in the ledger. Debits in the journal are posted as debits in the ledger, and credits in the journal as credits in the ledger. Steps Transfer the date of the transaction from the journal to the ledger Transfer the page number from the journal to the journal There is a possibility of imbalance in the two columns. However, if reference(J.R.) column of the ledger the succeeding rules in extending your figures are followed, there Post the debit figure from the journal as a debit figure in the ledger will be no problem with balancing. and the credit figure from the journal as a credit figure in the ledger Enter the account number in the posting reference column of the A debit in the trial balance and a debit in the adjustment columns journal once the figure has been posted to the ledger. mean that we add the two figures and place the total to the debit side of the adjusted trial balance. A credit in the trial balance and a credit in the adjustment columns mean that we have to add the two figures and place the total to the credit side of the adjusted trial balance. Ledger Accounts After Posting Each account balance is determined by footing (adding) all the debits and credits.  A debit in the trial balance and a credit in the adjustment columns mean that we have to get the difference and place the difference in the column with the greater value. The next stage is the preparation of the Financial Statements. The A credit in the trial balance and a debit in the adjustment columns first statement will be the income statement. The working paper is mean that we have to get the difference and place the difference in referred to in preparing the financial statements. The following table the column having the greater value. shows the comparison of the working paper and the financial statements. USE OF WORKING PAPER IN PREPARING THE FINANCIAL STATEMENT Take note of the basic rules in extending your figures to your adjusted trial balance. Now, we will extend figures to the remaining four (4) columns of our working paper. These are the financial columns called the Income Statement columns and the balance sheet columns. Observe the income statement in its formal presentation. It has no more debits and credits because it is already a formal statement showing the result of the operation. Basically, all the figures in the income statement columns of the working paper appear also in the income statement of the formal presentation. Now that it is done, it will be our basis to extend our figures to financial columns. The following are the basic rules for the Now, you can better appreciate your working paper, otherwise, you extension: will encounter difficulty in the preparation of your income statement. Generally, the cash to first totals are properly arranged according to the accounting equation. Assets, liabilities, investments (owner’s capital), withdrawal (owner’s drawing) Revenue, expenses Based on this premise, from cash account up to drawing account extend to balance sheet columns. If it is a debit in the adjusted trial balance, then, extend to the debit side; also of the balance sheet column. If it is a credit in the adjusted trial balance, extend it to the credit side of the balance sheet column. The revenue accounts to expense accounts will be extended to income statement column. If it is a debit in the adjusted trial balance, extend the figures to the debit side of the income statement column. If it is a credit in the adjusted trial balance, extend the figures to the credit side of the income statement column. Below the first total are account titles that are added because these In the same manner, there will be no more debits and credits in the accounts do not yet exist before the adjustments. Therefore, they formal balance sheet presentation. All the information in the sheet require your knowledge about account titles and their classification. was taken from the balance sheet columns of the working paper. But the general rule will be: “If is a revenue or an expense account, extend to income statement columns: otherwise, extend these accounts to balance sheet columns.” IMPORTANCE OF DIGITIZATION IN THE ACCOUNTING SYSTEM Digitization is important in conduct of business operation as it provides many benefits to its users, customers and to the business itself. From the previous lesson we learned the importance in the computerization of the manual system of the business. The use of Microsoft Applications as the part of the automation of business process will speed up the process. In accounting, the system should always be reliable, effective and efficient in order for the business to operate well. The automation of company’s client information as well as the data needed in the normal business course of operation is beneficial to the company’s overall effectiveness. Not only it provides productivity to the accountants but it also make the work easier and faster. Even though companies today, provide its organization the use of Accounting Information System or the Accounting Software the need for MS Excel is still important as you can easily modify reports according to the need of its users.