5-1 1 accounting systems 5. 5-2 2 click to edit master title style click to edit master text styles...

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Accounting Systems

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1 Define and describe an accounting system.

2 Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals.

3 Describe and give examples of other subsidiary ledgers and modified special journals.

Accounting Systems

After studying this chapter, you should be able to:

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4 Describe and illustrate the use of a computerized accounting system.

5 Describe the basic features of e-commerce.

Accounting Systems (continued)

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Define and describe an accounting system.

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An accounting system is the methods and procedures for collecting, classifying, summarizing, and reporting a business’s financial and operating information.

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Accounting System

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As a business grows and changes, accounting systems also change in the following three-step process:• Step 1. Analyze user information

needs.• Step 2. Design the system to meet

the user needs.• Step 3. Implement the system.

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Accounting Systems Growth Process

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Once a system has been implemented, feedback, or input from the users of the information can be used to analyze and improve the system.

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Feedback

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Internal controls are policies and procedures that protect assets from misuse, ensure that business information is accurate, and ensure that laws and regulations are being followed.

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Internal Controls

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Processing methods are the means by which the system collects, summarizes, and reports accounting information. These methods may be either manual or computerized.

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Processing Methods

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Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals.

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A large number of individual accounts with a common characteristic can be grouped together in a separate ledger called a subsidiary ledger.

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Subsidiary Ledger

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The primary ledger, which contains all of the balance sheet and income statement accounts, is called a general ledger.

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General Ledger

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Each subsidiary ledger is represented in the general ledger by a summarizing account, called a controlling account.

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Controlling Account

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The individual customers’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts receivable subsidiary ledger or customers ledger.

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The individual creditors’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts payable subsidiary ledger, or creditors ledger.

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General Ledger and Subsidiary LedgersExhibit 1

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Each special journal is designed to be used for recording a single kind of transaction that occurs frequently.

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Special Journal

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SELLING

Providing services on account

Revenue JournalRevenue Journalrecorded in

Receipt of cash from any source

Cash Receipts JournalCash Receipts Journalrecorded in

Special Journals

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Purchase of items on account

Purchases JournalPurchases Journalrecorded in

Payment of cash for any purpose

Cash Payments JournalCash Payments Journalrecorded in

Special Journals

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BUYING

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The all-purpose two-column journal, called the general journal or simply the journal can be used for entries that do not fit into any of the special journals.

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General Journal

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The revenue journal is used for recording fees earned on account. Cash fees earned would be recorded in the cash receipts journal.

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Other Special Journals

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Revenue JournalExhibit 2

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Revenue Journal Postings to Ledger

Exhibit 3

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Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit

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Exhibit 3 in Steps

Click here to skip “Exhibit 3 in Steps”

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6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00

27 618 Accessories by Claire 3 0 0 0 00

2010

Mar. 2 615 Accessories by Claire 2 2 0 0 00

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Exhibit 3 in Steps

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Revenue Journal Page 35

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6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00


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Date Item P.R. Debit Credit Balance

Mar. 2 R35 2,200 2,200

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Accounts Receivable Subsidiary Ledger

Accessories by Claire

Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit

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Exhibit 3 in Steps

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6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00



Mar. 2 R35 2,200 2,200

2010


Accessories by Claire

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6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00


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Exhibit 3 in Steps

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Exhibit 3 in Steps


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6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00


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2010


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ACCOUNT Accounts Receivable Account No. 12

Balance

Dr. Cr.Date Dr. Cr.Item

Post. Ref.

2010Mar. 1 Balance 3 400 00

31 9 600 00 13 000 00 R35

The debit total is posted from the revenue journal to Accounts Receivable in the general ledger.

Revenue Journal, page 35

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Page 35

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6 (12)

Indicates a debit posting of $9,600 to Accounts Receivable (General Ledger Account 12)

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2010


6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00


31 9 6 0 0 00

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ACCOUNT Fees Earned Account No. 41

Balance

Date Dr. Cr.ItemPost.

Ref.

2010

Mar. 31 9 600 00 R35

The credit total is posted from the revenue journal to Fees Earned in the general ledger.

Revenue Journal, page 35

9 600 00

Dr. Cr.

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Indicates a credit posting of $9,600 to Fees Earned (General Ledger Account 41)

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18 617 Web Cantina 2 6 5 0 00


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The following revenue transactions occurred during December:

Record these transactions in a revenue journal as illustrated in Exhibit 2 (Slide 23).

Dec. 5 Invoice No. 302 to Butler Company for services provided on account, $5,000.

Dec. 9 Invoice No. 303 to JoJo Enterprises for services provided on account, $2,100.

Dec. 15 Invoice No. 304 to Double D, Inc. for services provided on account, $3,250.

Example Exercise 5-12

Revenue Journal

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9 303 JoJo Enterprises 2 1 0 0 00

15 304 Double D Inc. 3 2 5 0 00

Dec. 5 302 Butler Company 5 0 0 0 00

2Example Exercise 5-1 (continued)

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For Practice: PE 5-1A, PE 5-1B

Follow My Example 5-1

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All transactions that involve the receipt of cash are recorded in a cash receipts journal. Every entry recorded in the cash receipts journal will involve a debit to the “Cash Dr.” column.

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Cash Receipts Journal

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Cash Receipts Journal and Postings

Exhibit 4

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Mar. 1 Rent Revenue 400 400

CASH RECEIPTS JOURNAL

Other Accounts Post Accounts Receivable Cash

Date Account Credited Ref. Cr. Cr. Dr.

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2010

19 Web Cantina 3,400 3,400

28 Accessories by Claire 2,200 2,200

30 RapZone 1,750 1,750

Date Item P.R. Debit Credit Cr. Bal.

ACCOUNT Rent Revenue Acct. No. 42

GENERAL LEDGER

42

CR14

Exhibit 4 in Steps

Click the button to skip “Exhibit 4 in Steps”

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Mar. 12010

400

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Web Cantina

Mar. 1 Bal. 3,400

18 R35 2,650 6,050

2010

3,400 2,650

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19 Web Cantina 3,400 3,400


30 RapZone 1,750 1,750


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CR14

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After all journalizing and posting to individual accounts for the month is complete, the columns are totaled.

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2010

19 Web Cantina 3,400 3,400


30 RapZone 1,750 1,750

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400 7,350 7,750( ) ( ) ( )

A checkmark indicates that items in this column are

posted individually.

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The total amount of the accounts in the accounts receivable subsidiary ledger should match the balance in the general ledger’s Accounts Receivable account.

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Accounts Receivable—(Controlling)

Balance, March 1, 2010 $3,400

Total debits (from revenue journal) 9,600

Total credits (from cash receipts journal) (7,350)

Balance, March 31, 2010 $5,650

NetSolutions’ Accounts Receivable Subsidiary LedgerCustomer Balance Summary Report, March 31, 2010

Accessories By Claire $3,000

RapZone 0

Web Cantina 2,650

Total accounts receivable $5,650

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Accounts Receivable Subsidiary LedgerThe debits and credits from two transactions are presented in the following customer account:

Describe each transaction and the source of each posting.

NAME Sweet Tooth ConfectionsADDRESS 1212 Lombard St.

July 1 Bal. 6257 Inv. 35 R12 86 711

31 Inv. 31 CR4 122 589

Date Item P.R. Dr. Cr. Balance

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July 7 Provided $86 services on account to Sweet Tooth Confections, itemized on invoice 35. Amount posted from page 12 of the revenue journal.

31 Cash of $122 was collected from Sweet Tooth Confections (invoice 31). Amount posted from page 4 of the cash receipts journal.

Example Exercise 5-2 (continued)

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The purchases journal is designed for recording all purchases on account.

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Purchases Journal

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Purchases Journal and Postings

Exhibit 5

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Exhibit 5 in Steps

Accts. OtherPost Payable Supplies Accounts Post

Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount

PURCHASES JOURNAL Page 11

2010

Mar. 3 Howard Supplies 600 600 7 Donnelly Supplies 420 420

12 Jewett Bus. Sys. 2,800 Off. Equip. 2,80019 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 960

Click on button to skip “Exhibit 5 in Steps”

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2010





Note that the March 12 purchase of office equipment for $2,800 is recorded as a debit in the “Other Accounts Dr.” column. Also note that the account title is written in for proper posting.

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2010




Mar 3 600 6002010

Accounts Payable Subsidiary Ledger

Howard Supplies

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Accts. Other Post Payable Supplies AccountsPost


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12 Jewett Bus. Sys. 2,800 Off. Equip. 18 2,80019 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 960

This posting reference indicates Office Equipment (Account 18) was debited in the general ledger for $2,800.

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Accts. Other Post Payable Supplies AccountsPost


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At the end of March, all columns are totaled and equality of debits and credits is verified. Then the total amount in the “Accounts Payable Cr.” and “Supplies Dr.” columns are posted. Because Office Equipment was posted earlier, the $2,800 total is not posted.

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7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 18 2,80019 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 96031 6,230 3,430 2,800

( ) ( ) ( )




2010

Mar. 3 Howard Supplies 600 600

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ACCOUNT Accounts Payable No. 21

GENERAL LEDGER


Mar. 1 Bal 1,2306,230 7,46031 P11

2010

Supplies would be debited for $3,430 and

14 written in the parentheses.

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Purchases Journal

The following purchase transactions occurred during October for Helping Hand Cleaners:

Oct. 11 Purchased cleaning supplies for $235, on account, from General Supplies.

19 Purchased cleaning supplies for $110, on account, from Hubble Supplies.

24 Purchased office equipment for $850, on account, from Office Warehouse.

Record these transactions in a purchases journal as illustrated at the top of Exhibit 5 (Slide 47).

5-54Click the button to go to Slide 47. To return to this slide type “54” and press “Enter.”

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Example Exercise 5-3 (continued) 2

PURCHASES JOURNAL



Oct. 11 General Supplies 235 235 19 Hubble Supplies 110 110 24 Office Warehouse 850 Off. Equip. 18 850

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All transactions involving a credit to Cash are recorded in the cash payments journal.

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Cash Payments Journal

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Cash Payments Journal and Postings

Exhibit 6

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CASH PAYMENTS JOURNAL

Other AccountsCk. Post Accounts Payable Cash

Date No. Account Debited Ref. Dr. Dr. Cr

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2010Mar. 2 150 Rent Expense 1,600 1,600

On March 2, issued Check 150 for rent of $1,600.

Exhibit 6 in Steps

Left click button to skip “Exhibit 6 in Steps”

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The accounts listed in the “Other Accounts Dr.” column are posted on a regular basis. Rent Expense is posted to account number 52.

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2010Mar. 2 150 Rent Expense 1,600 1,600

General Ledger

Account Rent Expense

Mar. 2 1,600 1,600

Date Item P.R. Dr. Cr. Balance2010

Account No. 52

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15 151 Grayco Supplies 1,230 1,230

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CASH PAYMENTS JOURNAL PAGE 7



2010Mar. 2 150 Rent Expense 1,600 1,600

On March 15, issued Check 151 to Grayco Supplies on account, $1,230.

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Let’s post to the accounts payable subsidiary ledger at this time to keep the creditors’ account current.

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2010Mar. 2 150 Rent Expense 1,600 1,600



Grayco Supplies

Mar. 3 Bal. 1,230


1,230 --- 15 CP7

2010

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Now, let’s journalize the remainder of March’s cash disbursements. Following that, let’s post to the individual creditors’ accounts.

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2010Mar. 2 150 Rent Expense 1,600 1,600

15 151 Grayco Supplies 1,230 1,23021 152 Jewett Business Sys. 2,800 2,80022 153 Donnelly Supplies 420 42030 154 Utilities Expense 1,050 1,05031 155 Howard Supplies 600 600

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2010Mar. 2 150 Rent Expense 1,600 1,600

15 151 Grayco Supplies 1,230 1,23052

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21 152 Jewett Business Sys. 2,800 2,80022 153 Donnelly Supplies 420 42030 154 Utilities Expense 1,050 1,05031 155 Howard Supplies 600 600

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The journal is ruled, summed, and verified for equality of debits and the “Cash Cr.” column.

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2008Mar. 2 150 Rent Expense 1,600 1,600





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2010Mar. 2 150 Rent Expense 1,600 1,600


31 2,650 5,050 7,700

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21 152 Jewett Business Sys. 2,800 2,80022 153 Donnelly Supplies 420 42030 154 Utilities Expense 1,050 1,05031 155 Howard Supplies 600 600

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2008Mar. 2 150 Rent Expense 1,600 1,600





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2010Mar. 2 150 Rent Expense 1,600 1,600


31 2,650 5,050 7,700

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The totals for “Accounts Payable Dr.” and “Cash Cr.” are posted.

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Accounts Payable (Control)

Balance, March 1, 2010 $1,230Total credits (from purchases journal) 6,230Total debits (from cash payments journal) (5,050)Balance, March 31, 2010 $2,410

NetSolutionsSupplier Balance Summary Report

March 31, 2010

Donnelly Supplies $1,450Grayco Supplies 0Howard Supplies 960Jewett Business Systems 0Total $2,410

Accounts Payable Control Account and Subsidiary Ledger

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The debits and credits from two transactions are presented in the following creditor’s (supplier’s) account:

Describe each transaction and the source of each posting.

NAME Lassiter Services, Inc.

ADDRESS 301 St. Bonaventure Ave.

Aug. 1 Bal. 32012 Inv. 101 CP36 200 12022 Inv. 106 P16 140 260


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Aug. 12 Paid $200 to Lassiter Services, Inc. on account (Inv. 101). Amount posted from page 36 of the cash payments journal.

22 Purchased $140 of services on account from Lassiter Services, Inc. itemized on Invoice 106. Amount posted from page 16 of the purchases journal.

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Describe and give examples of other subsidiary ledgers and modified special journals.

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A business may modify its special journals by adding one or more columns for recording transactions that occur frequently.

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Nov. 2 NetSolutions issued Invoice No. 842 to Litten Company for $4,770, which included sales taxes of $270.

3 Issued Invoice No. 843 to Kauffman Supply Company for $1,166, which included sales taxes of $66.

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Modified Special Journal

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The state of Tennessee has a 7% sales tax. Volunteer Services, Inc., a Tennessee company, had two revenue transactions as follows:Aug. 3 Issued Invoice No. 58 to Helena Company for

services provided on account, $1,400, plus sales tax.

19 Issued Invoice No. 59 to K-Jam Enterprises forservices provided on account, $900, plus sales tax.

Record these transactions in a revenue journal as illustrated in the previous slides.


Modified Revenue Journal

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Revenue Journal

Aug. 3 58 Helena Company 1 498 00 1 400 00 98 00

19 59 K-Jam Enterprises 963 00 900 00 63 00

Invoice Accts. Rec. Fees Earned Sales Tax. PayDate No. Account Debited PR Dr. Cr. Cr.

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Describe and illustrate the use of a computerized accounting system.

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Computerized Accounting System

1. Computerized systems simplify the record-keeping process in that transactions are recorded in electronic forms and, at the same time, posted electronically to general and subsidiary ledger accounts.

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2. Computerized systems are generally more accurate than manual systems.

3. Computerized systems provide management with current account balance information to support decision making, since account balances are posted as the transactions occur.

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Describe the basic features of e-commerce.

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Using the Internet to perform business transactions is termed e-commerce.

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e-Commerce

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When transactions are between a company and a consumer, it is termed B2C (business-to-consumer) e-commerce.

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Three more advanced areas where the Internet is being used for business purposes are:1. Supply chain management (SCM)

2. Consumer relationship management (CRM)

3. Product life-cycle management (PLM)

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5-1 1 accounting systems 5. 5-2 2 click to edit master title style click to edit master text styles...

Documents

subsidiary ledger slide

accounting system slide

general ledger slide

account slide

feedback slide

special journal slide

manual accounting system

computerized accounting