Module 1 Review of the Accounting Process PDF

MODULE 1: AE21 - IT APPLICATIONS TOOLS FOR BUSINESS REVIEW OF THE ACCOUNTING PROCESS CONTENTS  LEARNING OBJECTIVES  INTRODUCTION  ORGANIZATIONAL AND INTERNAL CONTROL STRUCTURES  SOURCE DOCUMENTS  ACCOUNTING POLICIES & PRACTICE  ACCOUNTING EQUATION & THE DOUBLE ENTRY...

MODULE 1: AE21 - IT APPLICATIONS TOOLS FOR BUSINESS REVIEW OF THE ACCOUNTING PROCESS CONTENTS  LEARNING OBJECTIVES  INTRODUCTION  ORGANIZATIONAL AND INTERNAL CONTROL STRUCTURES  SOURCE DOCUMENTS  ACCOUNTING POLICIES & PRACTICE  ACCOUNTING EQUATION & THE DOUBLE ENTRY SYSTEM  CHART OF ACCOUNTS  BALANCES OF ACCOUNTS LEARNING OBJECTIVES At the end of this unit, the student should be able to:  Describe the accounting process.  Reinforce and apply knowledge and skills in the use of electronic spreadsheet.  explain the significance of accounting controls and  Discuss the capabilities and limitations in the use of electronic spreadsheet. INTRODUCTION ORGANIZATIONAL & INTERNAL CONTROL STRUCTURES o Organizational structure is a visual representation of how the an organization is shaped and how the company will achieve its long-term goals. o Without this, employees might encounter difficulty in terms of whom they will report and it will give unclear direction to execute certain tasks. o It is beneficial for the company to structure the organization, o It provides the compensation scheme, salary grading and ranges for each position o It will create efficiency and effectiveness to the operations & processes of the company. o It can help setting strategies on how each employees and the group can achieve their goals and track their growth & development o It will give emphasis on the internal control structuration of the organization which provides protection of the company’s assets, ensure compliance, formulation of policies, employee performance evaluation & financial reporting SOURCE: https://creately.com/blog/diagrams/types-of-organizational-charts/ ORGANIZATIONAL & INTERNAL CONTROL STRUCTURES o Internal control “a process for assuring of an organization’s objectives in operational effectiveness and efficiency, reliable financial reporting, and compliance with laws, regulation and policies.” o Internal control structure, to be effective, includes an organizational plans and procedures that gives: o Protection to its assets against theft and waste. o Ensure compliance with the organizations regulations, policies and laws o Evaluate the performance of all employees o Ensuring accurateness and reliability to the operating and accounting data. o In order to protect the company’s assets, it is important to have: o Segregation of employee duties o Assignment of specific duties o Job rotations for employees o Engage in protective mechanical devices (e.g. Cash registers, etc.) o Maintain complete and accurate accounting records. ORGANIZATIONAL & INTERNAL CONTROL STRUCTURES SOURCE: http://www.poongsan.co.kr/eng/sustainability/ethics/internal-control-and-monitoring/  SOURCE DOCUMENTSBased on BIR (Accountable forms) PRINCIPAL RECEIPTS/INVOICES - Is a written account evidencing the sale of goods and/or services issued to customers in an ordinary course of business w/c necessary includes (1) VAT/Non-VAT Sales Invoice and (2) VAT/Non-VAT Official Receipts https://taxacctgcenter.ph/bir-official-receipts-and-sales-invoices-in-the-philippines/  SOURCE DOCUMENTSBased on BIR (Accountable forms) SUPPLEMENTARY RECEIPTS/INVOICES - Is a written account evidencing that a transaction has been made between the seller and the buyer of goods and/or services, forming part of the books of accounts of business tax payer for recording, monitoring and control purposes such as document evidencing delivery, agreement to sell or transfer of goods and services: - Delivery Receipts - Order Slips, Debit/Credit memo - Purchase order - Job order - Provisional/temporary receipt - Acknowledgement receipt - Collection receipt - Cash receipt - Bill of lading - Billing statement - Statement of Account https://taxacctgcenter.ph/bir-official-receipts-and-sales-invoices-in-the-philippines/ ACCOUNTING POLICIES & PRACTICE o Accounting Policies are set of principles, procedures, and best practices implemented by the an organization’s management that are relevant in preparing financial reports. o “It includes accounting methods, measurement systems, and procedures for disclosures.” Accounting PRINCIPLES are accounting RULES, while Accounting POLICIES are ways of the company to adhere to those rules. https://www.investopedia.com/terms/a/accounting-policies.asp o Examples of Accounting policies and practices are: o Budgeting: Sales, COST, admin expenses, inventories o General Ledger: Creation of Chart of Accounts, Recording or Transactions and Journalizing of financial transactions o Reporting: BOD, Internal, Funding sources, Cash flow & Tax reports o Cash Management: Cash Receipts, Petty Cash, Bank Reconciliation o Receivables: Sales Order, Customer Accreditations, Billing & Invoicing o Payables: Cash Disbursements, Accruals, PO, Credit card, Procurement, Check vouchers, Liquidation & Reimbursement of expenses o Payroll: Payroll processing, New hires and termination of employees, timekeeping, admin salaries allocation procedures o Cost allocation plan: Direct & Indirect expenses o Fixed & Other Assets: Assets Control, Capitalization & depreciation, prepayments, etc. ACCOUNTING EQUATION & DOUBLE ENTRY SYSTEM Asset Liability Equity Normal Balance Debit Credit Credit Increase + - - Decrease - + + Income Statement +/- ACCOUNTING CYCLE CHART OF ACCOUNTS https://altruic.com/blog/a-sample-chart-of-accounts-for-nonprofit-organizations A chart of accounts (COA) is an index of all the financial accounts in the general ledger of a A chart of accounts (COA) is a financial company. In short, it is an organizational tool that organizational tool that provides a provides a digestible breakdown of all the complete listing of every account in financial transactions that a company conducted the general ledger of a company, broken during a specific accounting period, broken down down into subcategories. into subcategories. https://www.investopedia.com/terms/c/chart-accounts.asp https://www.investopedia.com/terms/c/chart-accounts.asp BALANCES OF ACCOUNTS Account Category Increases Normal Balance Recorded by Debit Credit Debit Credit Assets ✓ ✓ Liabilities ✓ ✓ Owner’s Equity Capital ✓ ✓ Withdrawals ✓ ✓ Income ✓ ✓ Expense ✓ ✓