School
University of WaterlooDepartment
Accounting & Financial ManagementCourse Code
AFM341Professor
Jee Hae- LimThis preview shows pages 1-3. to view the full 36 pages of the document.
Chapter 1
–Business Process: A set of related activities associated with providing
goods and services to customers
–Transaction Cycles: Groups of related events that typically occur in a
particular sequence
–Events: Activities that happen at a particular point in time
○E.g. Customer places an order, goods are shipped, and a sales report is
printed
– There are three main transaction cycles:
○Acquisition (purchasing) cycle; the process of purchasing and paying
for goods or services
○Conversion cycle; the process of transforming resources acquired into
goods
○Revenue cycle; the process of providing goods or services to
customers and collecting cash
–Management Information System (MIS): A system that captures data
about an organization, stores and maintains the data, and provides
meaningful information for management
–Accounting Information System (AIS): A subsystem of a management
information system (MIS) that provides accounting and financial information
as well as other information obtained in the routine processing of accounting
transactions
– Three components of AIS:
○People
○Process
○Technology
–Enterprise Resource Planning (ERP): An information system that spans
functional boundaries and integrates the information flow of the entire
organization
– What an AIS does:
○Produces external reports
○Supports routine activities
E.g. Taking customer orders, delivering goods and services,
billing customers, and collecting cash
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○Decision support
E.g. Knowing which products are selling well and which
customers are doing the most buying
○Planning and Control
E.g. Analysis of revenues and expenses can be done at the
individual product level
○Implementing Internal Control
Internal Control: Includes policies, procedures, and
information systems used to protect a company’s assets from
loss or embezzlement and to maintain accurate financial data
–Applications: Computer programs that are used to serve a particular
purpose. Work processing, electronic spreadsheet, and accounting software
are examples of applications
– Interaction between an accounting information and a user consists primarily
of:
○Recording events, often using on-screen forms
○Entering information about suppliers, customers, employees, and
products
○Printing documents, such as purchase orders and sales invoices
○Printing reports, such as financial statements and sales analysis
○Conducting ad hoc inquiries
–Off-the-shelf Software: Commercial software that is ready-made and
available for sale to the general public
– Five roles in which accountants use technology:
○User
○Manager
○Consultant
Accounting consultants have responded to rising challenges in
the field by:
•Specializing in certain industries
•Specializing in the accounting software of only one or two
suppliers
•Devoting themselves or their staff to full-time consulting
○Evaluator
Internal auditor
External auditor
Assurance Services: Services provided by independent
professionals who assess the reliability of information needed by
external decision makers
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○Provider of accounting and tax services
Chapter 2
– In order to evaluate an AIS, accountants need to:
○Know what information to look for
○Know where to get information
○Develop a plan to obtain information
○Organize the information in meaningful ways
– The revenue cycles of different organizations are similar and include some or
all of the following operations:
○Respond to customer inquiries
○Develop agreements with customers to provide goods and services in
the future
○Provide services or ship goods to the customer
○Bill customer
○Collect cash
○Deposit cash in the bank
○Prepare reports
– As with the revenue cycle, the acquisition cycles of different types of
organizations are similar since most include some or all of the following
operations:
○Consult with suppliers
○Process requisitions
○Develop agreements with suppliers to purchase goods or services in
the future
○Receive goods or services from the supplier
○Recognize claim for goods and services received
○Select invoices for payment
○Write checks
– Guidelines for Recognizing Events:
○Recognize the first event in a process when a person or department
within an organization becomes responsible for an activity
○Ignore activities that do not require participation by an internal agent
Internal Agent: People or departments within an organizational
unit who are responsible for various events in a business
process. Examples: salespeople, shipping employees, and order
takers
○Recognize a new event when responsibility is transferred from one
internal agent to another
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