Chapter 2

Here’s a slide‐by‐slide “plain English” walkthrough of Chapter 2, so you can see the big picture even without an
AIS background:

Slide 1: What This Chapter Covers

• Big idea: How computers handle everyday business transactions (the “data processing cycle”) and how
companies tie it all together with an ERP system.
• Goals:
1. See the steps a transaction goes through—from typing it in to printing reports.
2. Learn how ERP software helps everybody in a company share the same info.

Slide 2: The Data Processing Cycle

This is the “life story” of any transaction (like a sale or purchase):
1. Input – Someone enters or captures the raw transaction data (e.g., “we sold 3 chairs to Acme Co.”).
2. Storage – The data get organized and saved in files and ledgers.
3. Processing – The system updates totals, creates new records, checks for mistakes.
4. Output – The computer spits out invoices, reports, or lets you ask questions (e.g., “What were last
month’s total sales?”).

Slide 3: Data Input

Before data even enters the computer, three things must happen:
1. Capture the event – Record exactly what happened (e.g., date, item, amount).
2. Check accuracy – Make sure nobody typed “30 chairs” when it was really 3.
3. Follow rules – Ensure the sale was approved by the right person.

Slide 4: Where the Data Comes From

• What you record:
o What happened (sale, purchase, etc.)
o What items or money moved
o Who was involved (customer, employee)
• Source documents:
o Paper forms (purchase orders, invoices)
o Turnaround docs (bills that go out and then come back with extra info)
o Automated capture (e.g., barcode scanners at checkout)

Slide 5: Data Storage Basics

Once data is in the system, it’s organized into:
• Chart of Accounts: A numbered list of all categories (assets, revenues, expenses…).
• Journals: Day‐by‐day logs of each transaction type (sales journal, cash receipts journal).
• Subsidiary Ledgers: Detailed records for specific areas (e.g., a list of each customer’s unpaid invoices).
• General Ledger: The master file that rolls everything up.
You can always trace back from the general ledger to see the original journal entry and source document (the
“audit trail”).
Coding Methods
To keep things tidy, AIS often uses special codes:

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 • Sequential codes: Simply 1, 2, 3… for each new form.
• Block codes: Ranges reserved for a type (e.g., item codes 2000–2999 are refrigerators).
• Group codes: Break a code into pieces that mean different things (e.g., digits 1–3 = product, 4–6 =
location).
• Mnemonic codes: Mix letters and numbers for easy remembering (e.g., “DRY300W” might mean white
dryer, model 300).

Slide 6: Following a Credit Sale (Audit Trail)

• Example: Invoice #156 for $1,876.50 to “KDR Builders.”
• Shows how that one sale:
1. Started on the sales journal,
2. Posted to the accounts‐receivable subsidiary ledger,
3. Updated the general ledger control account.
• If you ever need to check or correct something, you can follow those links step by step.

Slide 7: Processing & Output

• Processing = CRUD:
o Create new records (add a new customer),
o Read data (look up last month’s sales),
o Update records (change the customer’s address),
o Delete records (remove a canceled order).
• Can happen in batches (e.g., run everything at 6 pm) or real time (as soon as the transaction happens).
• Output comes in three flavors:
o Documents (sales invoices, packing slips)
o Reports (monthly profit & loss, inventory status)
o Queries (on‐the‐fly questions like “Which region sold the most?”)

Slide 8: Enterprise Resource Planning (ERP) Systems

An ERP is just one big, shared database and software suite that covers every major business process:
• Revenue cycle (sales & cash collections)
• Expenditure cycle (purchases & payments)
• Production cycle (manufacturing steps)
• Payroll cycle (HR and paychecks)
• General ledger/reporting
Why Companies Love ERPs
• One shared source of truth—no duplicate data entry.
• Better visibility: managers can see what’s happening anywhere in real time.
• Standardized procedures and reports.
• Tighter security and user controls.
The Trade-offs
• Very expensive to buy and run.
• Can take months or years to set up and customize.
• Complex—lots of “moving parts.”
• Users resist learning a whole new system.

Slide 9 (Bonus): Key Terms

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 • Data processing cycle – Input → store → process → output.
• Source/turnaround documents – Where the data originates.
• Chart of accounts – Numbering scheme for accounts.
• Journals, ledgers, audit trail – How transactions are recorded & traced.
• Batch vs. real-time – When processing happens.
• ERP system – One integrated system for the whole company.

Bottom line:
• Transactions move through a clear cycle of capture, storage, processing, and output.
• An ERP bundles all those cycles across every department into one shared system—powerful but
complex.

Chapter 14
Here's a simple explanation of Chapter 14: The Revenue Cycle (Sales to Cash Collections) from your PDF, with
easy language and real‐world examples:

What Is the Revenue Cycle?

It’s the step‐by‐step process a business follows from getting a customer order to collecting cash. The main goal:
Sell products, deliver them, and get paid.

Main Activities in the Revenue Cycle

1. Sales Order Entry
What happens here?
• Customer places an order.
• Business checks if the customer can pay (credit check).
• Inventory (stock) is checked.
• Customer gets a response/confirmation.
Example:
You order a phone online. The store checks if you’ve paid before or owe money, then checks if the phone is in
stock.
Common Problems (Threats):
• Wrong or missing details in the order.
• Fake orders.
• Customer may not pay later (bad credit).
• Not enough stock.
Solutions (Controls):
• Use online forms with validation (no blank fields).
• Require approval for big sales.
• Track inventory live.
• Use customer history to check reliability.

2. Shipping
What happens here?
• Warehouse picks the product (using a "picking ticket").
• The product is packed and shipped.

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 • Documents used: Packing slip (what’s in the box), Bill of Lading (shipping receipt).
Example:
Warehouse staff picks and ships the phone you ordered. You get a tracking number.
Common Problems:
• Wrong item sent.
• Item stolen.
• Wrong address, duplicate shipments.
Solutions:
• Use barcodes to match items to orders.
• Restrict access to inventory rooms.
• Double‐check shipping info with original order.

3. Billing
What happens here?
• Invoice (bill) sent to customer.
• Accounts receivable updated (tracks who owes money).
• Credit memos issued if the customer is overcharged or returns goods.
Example:
You get an email saying “You owe $600 for the phone.”
Common Problems:
• Forgetting to send invoice.
• Wrong amount billed.
• Posting payment to wrong customer.
• Fake refunds.
Solutions:
• Make billing automatic based on sales and shipping.
• Match orders with shipping and billing.
• Separate people in charge of shipping and billing.
• Send monthly statements to customers.

4. Cash Collections
What happens here?
• Customer pays the bill.
• Payment is deposited in the bank.
• Customer account is updated.
Example:
You pay the $600 online via card or bank transfer. The store records the payment.
Common Problems:
• Someone in the company steals the money.
• Business runs out of cash.
Solutions:
• No one person should handle both cash and customer records.
• Use a lockbox (bank receives payments directly).
• Daily deposits.
• Offer discounts for early payment.
• Prepare a cash flow budget to plan spending.
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 General Threats to the Entire Revenue Cycle
These problems can happen at any stage:
Threat Solution
Wrong or outdated customer data Restrict who can update data, audit changes
Leaked private info (like card data) Use encryption and access controls
Data loss from crashes Backup systems and recovery plans
Poor sales performance Use reports to track and improve performance

Key Terms (Simplified)

Term Meaning
Sales Order Customer’s request for goods or services.
Credit Limit Max amount customer is allowed to owe.
Picking Ticket List of items to pick from inventory.
Packing Slip List of items packed and sent to customer.
Sales Invoice Bill sent to customer.
Credit Memo Adjustment for overbilling or returns.
Lockbox Bank receives payments for business directly.
EFT Customer pays electronically (bank to bank).
Cash Flow Budget Plan showing expected cash in and out.

Real-World Example
Online Store Revenue Cycle:
1. You order a laptop from an online store (Sales Order).
2. They check if you’ve paid or have a limit (Credit Check).
3. They confirm stock and ship it (Shipping).
4. They email you a bill (Billing).
5. You pay by card (Cash Collection).
6. They record your payment and thank you.

Chapter 15
Here’s a simple explanation of Chapter 15: The Expenditure Cycle (Purchasing to Cash Disbursements), using
plain language and real‐life examples.

What Is the Expenditure Cycle?

This is how a business buys goods/services and pays for them.
Main goal:
Get what the company needs at the lowest possible total cost (including cost, quality, and timing).

Main Steps in the Expenditure Cycle

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1. Order Goods or Services
What happens?
• The business decides what, when, and how much to buy.
• A purchase requisition is created (request to buy).
• The purchase order is sent to a supplier.
Example:
A café runs low on coffee beans. The manager creates a purchase request. A purchase order is sent to a coffee
supplier.
Common Problems (Threats) and Solutions (Controls)
Threat Example Solution
Buying too little or too Coffee stock runs out or too much is Use a live inventory system and do physical
much wasted counts
Buying unneeded items Staff orders gadgets they don't need Require approval before buying
Paying too much Overpriced office chairs Compare supplier prices, ask for quotes
Low‐quality products Cheap cups that break easily Use trusted suppliers and review new ones
Unreliable suppliers Supplier delivers late Track supplier performance
Kickbacks (bribes) Staff gets gifts for choosing a supplier Ban gifts, rotate jobs, require disclosures

2. Receiving Goods or Services

What happens?
• The goods arrive.
• Staff checks: "Is this what we ordered?"
• A receiving report is created to record what was received.
Example:
The café receives 10 bags of coffee beans. The team checks if it matches the purchase order.
Problems and Solutions
Threat Example Solution
Accepting items not Delivery shows up
Only accept goods with a valid purchase order
ordered unplanned
Staff sign receiving reports, rewards for catching
Counting mistakes Wrong quantity logged
errors
Beans go missing from Lock storage, track inventory moves, separate
Theft
storage duties

3. Approve Supplier Invoice

What happens?
• The business gets an invoice (bill).
• It checks the invoice matches:
o The purchase order
o The receiving report
• All 3 together make a voucher package.
• Approval is given to pay.

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Example:
The supplier charges $500 for the 10 coffee bags. The accountant checks if the order and delivery match the
bill.
Problem
• Mistakes in invoice (e.g., overcharging)
Solution: Always verify invoice against the order and receiving report.

4. Cash Disbursements (Making Payments)

What happens?
• The business pays the supplier (by check, EFT, etc.)
• Records are updated.
Example:
The café pays the supplier for the coffee beans via online transfer.
Problems and Solutions
Threat Example Solution
Missing early payment Pay after discount
File invoices by due date
discounts period
Paying for 15 bags, got
Paying for goods not received Match invoice to delivery records
10
Only pay original invoices, cancel documents after
Duplicate payments Paying same bill twice
payment
Separate who writes and signs checks, reconcile bank
Theft of cash Employee steals check
accounts
Check alteration Check amount changed Use tamper‐proof checks and special ink

General Threats to the Whole Process

Problem Control
Wrong or outdated supplier info Only allow authorized users to edit master data
Sensitive info leaks (e.g., prices) Use encryption and access control
Data loss (e.g., power outage) Regular backups and disaster recovery plans

Key Terms (Explained Simply)

Term Meaning
Expenditure Cycle Buying things the business needs and paying for them
Purchase Requisition Internal request to buy something
Purchase Order Formal order sent to the supplier
Receiving Report Document showing what was delivered
Voucher Package Set of documents used to approve payment (invoice + PO + receiving report)
Kickbacks Illegal gifts to staff to influence buying decisions
Procurement Card Company credit card for small purchases
Disbursement Voucher Document that authorizes payment
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 Real-Life Example
Example: A Small Clothing Store
1. Store runs low on jeans (Purchasing).
2. Sends a purchase order to a supplier.
3. Receives 100 jeans. Staff checks the quantity and quality (Receiving).
4. Gets a bill from the supplier. Accountant checks everything matches (Invoice Approval).
5. Payment is made by bank transfer (Cash Disbursement).

Chapter 17
This PDF is a presentation slide deck on Chapter 17: The Human Resources Management and Payroll Cycle
from an Accounting Information Systems textbook. Let me explain each page in simple words:

Page 1: Title and Learning Objectives

Topic: Introduction to HRM and Payroll Cycle
Main ideas:
• This chapter talks about the HRM (Human Resources Management) and Payroll Cycle.
• Three goals (learning objectives) of the chapter:
1. Understand the main tasks, decisions, and info needs in the HRM/payroll cycle, and how to deal
with common problems (threats).
2. Learn about each step of the payroll process and how to control risks.
3. Understand how companies can outsource (give work to outside parties) HR and payroll work.

Page 2: HRM Process and General Problems

Topic: HRM steps and risks
HRM Activities (what HR does):
• Hire new people
• Train them
• Give them tasks (job assignments)
• Pay them (compensation)
• Evaluate their performance
• Fire them (if needed)
General problems (threats):
1. Wrong or fake data
2. Leaked personal info
3. Lost or destroyed data
4. Hiring wrong or dishonest people
5. Breaking labor laws
Controls (how to prevent problems):
• Use data protection tools
• Limit who can see/change important data
• Keep backup copies
• Do proper background checks before hiring
• Stay updated on employment laws

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Page 3: Payroll Activities and Problems
Topic: Steps of payroll and their risks
Steps in Payroll:
1. Update employee info
2. Check time worked (via time sheets)
3. Prepare payroll (calculate salaries, taxes)
4. Give out pay
5. Pay taxes and other deductions
Problems (threats) and how to fix them:
• Wrong or fake data: Limit access, double‐check updates
• Wrong time data: Supervisors should review, use automated tools
• Payroll errors: Check data processing, supervisors should review calculations

Page 4: Distributing Pay and Preventing Problems

Topic: Risks when giving out salaries
Threats:
1. Paycheck theft or fraud
2. Not paying taxes or other deductions
3. Paying late
4. Wrong amount paid
Controls:
• Keep checks and check‐signing machine safe
• Use a special bank account only for payroll
• Set systems to send payments automatically and on time
• Check accuracy using built‐in system controls and supervisors

Page 5: Why Outsource Payroll

Topic: Outsourcing payroll tasks
Reasons to outsource:
• Save money and reduce mistakes
• Get access to better benefits for employees
• Free up company computers and staff to do other jobs

Page 6: Key Terms

Topic: Important vocabulary
1. HRM/payroll cycle: All the steps from hiring to paying employees
2. Knowledge management systems: Tools for managing employee info
3. Time card/sheet: Records of hours worked
4. Payroll/deduction register: Records of payment and deductions
5. Earnings statement: What an employee gets paid and why
6. Payroll clearing account: Temporary account to manage payroll money
7. Flexible benefits plan: Employees choose from different benefits
8. Payroll service bureau: Company that handles payroll for others
9. PEO (Professional Employer Organization): A firm that manages HR tasks for client businesses

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 Chapter 18
Here's a simple, step-by-step explanation of each page in the PDF titled "Chapter 18: General Ledger and
Reporting System" from the book Accounting Information Systems:

Page 1: Introduction & Learning Objectives

Main idea: This chapter is about how companies keep track of all their financial records and make reports.
What you’ll learn:
1. What activities happen in the general ledger and reporting system.
2. What problems can happen and how to prevent them.
3. How companies update their general ledger (main record of all accounts).
4. Why and how they adjust entries before making reports.
5. How to prepare financial statements (like income statements).
6. How companies make managerial reports and use tools like:
o XBRL (for reporting),
o Balanced scorecard (to measure company performance).

Page 2: The Whole Process & General Problems

4 Main Activities:
1. Update the general ledger
2. Post adjusting entries (fix or update data)
3. Prepare financial statements (formal reports)
4. Make reports for managers (to help them make decisions)
Common Problems (Threats) in the Cycle:
1. Wrong or fake data
2. Data leaks (someone sees secret financial data)
3. Losing important data
How to prevent (Controls):
• Use systems that check for mistakes
• Control who can see or edit the general ledger
• Keep backups and have a disaster plan

Page 3: Updating the General Ledger

Threats (Problems):
1. Wrong updates (by mistake or fraud)
2. Unauthorized changes (by someone who shouldn't)
Controls:
• Use reliable data entry systems
• Reconcile (compare and check) data with reports
• Keep an audit trail (a record of all changes)
• Limit who can make entries

Page 4: Adjusting Entries

What are Adjusting Entries?
These are changes made at the end of a period (month, quarter) to reflect correct info.
Types:
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 1. Accruals: Record something now, get cash later (e.g., unpaid wages)
2. Deferrals: Got cash earlier, record expense now (e.g., prepaid rent)
3. Estimates: Expected expenses over time (e.g., depreciation)
4. Revaluations: Update values based on current market or new methods
5. Corrections: Fix errors in previous entries
Threats:
• Mistakes in entries
• Unauthorized changes
Controls:
• Use standard entries
• Check with spreadsheets or software
• Reconcile reports
• Keep audit trails

Page 5: Making Reports

Preparing Financial Statements (like income, balance sheet)
Problems:
1. Wrong statements
2. Fake info (fraud)
3. Poor report or graph design
Controls:
• Use tested software
• Train staff in financial rules (IFRS, XBRL)
• Use audits to check
• Use clear, useful visual tools (graphs, dashboards)
• Apply responsibility accounting and balanced scorecard

Page 6: Technology & Rules That Affect Reporting

Important Terms:
• IFRS: Global accounting rules
• GAAP: U.S. accounting rules
• XBRL: A language used to share financial data easily online (required by SEC)
Companies must know how these systems and rules affect their reports.

Page 7: Managerial Reports and Performance

Tools managers use:
• Responsibility accounting: Report results based on manager duties
• Flexible budget: Budget that changes depending on actual activity
• Balanced scorecard: Measures both financial and non‐financial performance in 4 areas:
1. Money (Financial)
2. Customers
3. Internal processes
4. Learning and innovation
• Graphs: Show data clearly with visuals

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 Page 8: Key Terms
These are important words you should know:
• Journal voucher file: Where journal entries are stored
• Trial balance: List of all account balances
• XBRL terms: Instance document, taxonomy, schema, linkbases – these help structure financial data for
computers
• Balanced scorecard, flexible budget, dashboards: Tools for better company performance tracking

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