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Learning Objectives

Power Notes. Chapter 5. Accounting Systems and Internal Controls. 1. Basic Accounting Systems 2. Internal Control 3. Manual Accounting Systems 4. Adapting Manual Accounting Systems 5. Computerized Accounting Systems. Learning Objectives. C5. Power Notes. Chapter 5.

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Learning Objectives

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  1. Power Notes Chapter5 Accounting Systems and Internal Controls 1. Basic Accounting Systems 2. Internal Control 3. Manual Accounting Systems 4. Adapting Manual Accounting Systems 5. Computerized Accounting Systems Learning Objectives C5

  2. Power Notes Chapter5 Accounting Systems and Internal Controls Slide # Power Note Topics • Internal Control Framework, Procedures • Special Journals, Ledgers • Revenue Journal and Ledgers • Cash Receipts Journal and Ledgers • Purchases Journal and Ledgers • Cash Payments Journal and Ledgers • 3 • 9 • 17 • 23 • 31 • 37 Note: To select a topic type the slide # and press Enter.

  3. Internal Control Framework 1. Control Environment Control Environment

  4. Internal Control Framework 1. Control Environment 2. Risk Assessment Risk Assessment Control Environment

  5. Internal Control Framework 1. Control Environment 2. Risk Assessment 3. Control Procedures Control Procedures Risk Assessment Control Environment

  6. Internal Control Framework 1. Control Environment 2. Risk Assessment 3. Control Procedures 4. Monitoring Monitoring Control Procedures Risk Assessment Control Environment

  7. Internal Control Framework 1. Control Environment 2. Risk Assessment 3. Control Procedures 4. Monitoring 5. Information and Communication Communication Monitoring Control Procedures Risk Assessment Control Environment

  8. Internal Control Procedures • Competent Personnel • Rotating Duties • Assigning Responsibility • Separating Responsibilities for Related Operations • Separating Accounting and Asset Custody • Proofs and Security Measures

  9. Cash General Ledger and Subsidiary Ledgers General Ledger Accts. Receivable Supplies Accts. Payable

  10. Accounts Receivable Subsidiary Ledger Cash Customer Accounts Accts. Receivable A B C D General Ledger and Subsidiary Ledgers General Ledger Supplies Accts. Payable

  11. Accounts Receivable Subsidiary Ledger Cash Customer Accounts Accts. Receivable A B C D Accounts Payable Subsidiary Ledger Creditor Accounts A B C D General Ledger and Subsidiary Ledgers General Ledger Supplies Accts. Payable

  12. Special Journals SELLING BUYING

  13. recorded in Special Journals SELLING Rendering of services on account Revenue Journal BUYING

  14. recorded in recorded in Special Journals SELLING Rendering of services on account Revenue Journal Receipt of cash from any source Cash Receipts Journal BUYING

  15. recorded in recorded in recorded in Special Journals SELLING Rendering of services on account Revenue Journal Receipt of cash from any source Cash Receipts Journal BUYING Purchase of items on account Purchases Journal

  16. recorded in recorded in recorded in recorded in Special Journals SELLING Rendering of services on account Revenue Journal Receipt of cash from any source Cash Receipts Journal BUYING Purchase of items on account Purchases Journal Payment of cash for any purpose Cash Payments Journal

  17. The Revenue Journal Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 3/2 615 MyMusicClub.com 2,200 3/6 616 RapZone.com 1,750 3/18 617 Web Cantina 2,650 3/27 618 MyMusicClub.com 3,000 Totals 9,600 All sales on account are recorded in this journal. Each sales invoice is listed in numerical order. This journal is often referred to as an invoice register.

  18. Posting to the Subsidiary Ledger Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 3/2 615 MyMusicClub.com 2,200 3/6 616 RapZone.com 1,750 3/18 617 Web Cantina 2,650 3/27 618 MyMusicClub.com 3,000 Totals 9,600 Each debit is posted to the accounts receivable subsidiary ledger. Accounts Receivable Subsidiary Ledger MyMusicClub.com Date Item P.R. Debit Credit Balance

  19. Posting to the Subsidiary Ledger Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 3/2 615 MyMusicClub.com 2,200 3/6 616 RapZone.com 1,750 3/18 617 Web Cantina 2,650 3/27 618 MyMusicClub.com 3,000 Totals 9,600 Each debit is posted to the accounts receivable subsidiary ledger. Accounts Receivable Subsidiary Ledger MyMusicClub.com Date Item P.R. Debit Credit Balance 3/2 R35 2,200 2,200

  20. Posting to the Subsidiary Ledger Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 3/2 615 MyMusicClub.com 2,200 3/6 616 RapZone.com 1,750 3/18 617 Web Cantina 2,650 3/27 618 MyMusicClub.com 3,000 Totals 9,600     Each debit is posted to the accounts receivable subsidiary ledger. Accounts Receivable Subsidiary Ledger MyMusicClub.com Date Item P.R. Debit Credit Balance 3/1 R35 2,200 2,200 3/27 R35 3,000 5,200

  21. Posting to the General Ledger Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 3/2 615 MyMusicClub.com 2,200 3/6 616 RapZone.com 1,750 3/18 617 Web Cantina 2,650 3/27 618 MyMusicClub.com 3,000 Totals 9,600     The total is posted to Accounts Receivable AND to Fees Earned. General Ledger Account: Accounts Receivable No. 12 Date Item P.R. Debit Credit Balance  3/1 Bal 3,400

  22. Posting to the General Ledger Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 3/2 615 MyMusicClub.com 2,200 3/6 616 RapZone.com 1,750 3/18 617 Web Cantina 2,650 3/27 618 MyMusicClub.com 3,000 Totals 9,600 (12) (41)     The total is posted to Accounts Receivable AND to Fees Earned. General Ledger Account: Accounts Receivable No. 12 Date Item P.R. Debit Credit Balance  3/1 Bal 3,400 3/31 R35 9,600 13,000

  23. Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Credit Credit Debit 3/1 Rent Revenue 400 400 3/19 Web Cantina 3,400 3,400 3/28 MyMusicClub.com 2,200 2,200 3/30 RapZone.com 1,750 1,750 Totals 400 7,350 7,750 The Cash Receipts Journal All cash received from any source is recorded in this journal. The total Cash Debit column equals the total of the two credit columns.

  24. Posting to the Subsidiary Ledger Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Credit Credit Debit 3/1 Rent Revenue 400 400 3/19 Web Cantina 3,400 3,400 3/28 MyMusicClub.com 2,200 2,200 3/30 RapZone.com 1,750 1,750 Totals 400 7,350 7,750 Each Accounts Receivable credit is posted to the accounts receivable subsidiary ledger. Accounts Receivable Subsidiary Ledger Web Cantina Date Item P.R. Debit Credit Balance  3/1 Bal 3,400 3/27 R35 2,650 6,050

  25. Posting to the Subsidiary Ledger Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Credit Credit Debit 3/1 Rent Revenue 400 400 3/19 Web Cantina 3,400 3,400 3/28 MyMusicClub.com 2,200 2,200 3/30 RapZone.com 1,750 1,750 Totals 400 7,350 7,750  Each Accounts Receivable credit is posted to the accounts receivable subsidiary ledger. Accounts Receivable Subsidiary Ledger Web Cantina Date Item P.R. Debit Credit Balance  3/1 Bal 3,400 3/18 R35 2,650 6,050 3/19 CR14 3,400 2,650

  26. Posting to the General Ledger Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Credit Credit Debit 3/1 Rent Revenue 400 400 3/19 Web Cantina 3,400 3,400 3/28 MyMusicClub.com 2,200 2,200 3/30 RapZone.com 1,750 1,750 Totals 400 7,3507,750 ( )     General Ledger The three highlighted items are posted to the general ledger. Account: Accounts Receivable No. 12 Date Item P.R. Debit Credit Balance  3/1 Bal 3,400 3/31 R35 9,600 13,000

  27. Posting to the General Ledger Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Credit Credit Debit 3/1 Rent Revenue 42 400 400 3/19 Web Cantina 3,400 3,400 3/28 MyMusicClub.com 2,200 2,200 3/30 RapZone.com 1,750 1,750 Totals 400 7,3507,750 ( ) (12) (11)     General Ledger The three highlighted items are posted to the general ledger. Account: Accounts Receivable No. 12 Date Item P.R. Debit Credit Balance  3/1 Bal 3,400 3/31 R35 9,600 13,000 3/31 CR14 7,350 5,650

  28. Account: Accounts Receivable No. 12 General Ledger Accounts Receivable Control Account Date Item P.R. Debit Credit Balance  3/1 Bal. 3,400 3/31 R35 9,600 13,000 3/31 CR14 7,350 5,650 If the accounts receivable account in the general ledger only shows summary totals, where are the individual customer balances?

  29. Account: Accounts Receivable No. 12 General Ledger Accounts Receivable Control Account Date Item P.R. Debit Credit Balance  3/1 Bal. 3,400 3/31 R35 9,600 13,000 3/31 CR14 7,350 5,650 MyMusicClub.com Date Item P.R. Debit Credit Balance 3/2 R35 2,200 2,200 3/27 R35 3,000 5,200 3/28 CR14 2,200 3,000 Accounts Receivable Subsidiary Ledger RapZone.com Date Item P.R. Debit Credit Balance 3/6 R35 1,750 1,750 3/30 CR14 1,750 0 Web Cantina Date Item P.R. Debit Credit Balance 3/1 Bal. 3,400 3/18 R35 2,650 6,050 3/19 CR14 3,400 2,650 

  30. Account: Accounts Receivable No. 12 General Ledger Accounts Receivable Control Account Date Item P.R. Debit Credit Balance  3/1 Bal. 3,400 3/31 R35 9,600 13,000 3/31 CR14 7,350 5,650 MyMusicClub.com Date Item P.R. Debit Credit Balance 3/2 R35 2,200 2,200 3/27 R35 3,000 5,200 3/28 CR14 2,200 3,000 Accounts Receivable Subsidiary Ledger RapZone.com Date Item P.R. Debit Credit Balance 3/6 R35 1,750 1,750 3/30 CR14 1,750 0 Web Cantina Date Item P.R. Debit Credit Balance 3/1 Bal. 3,400 3/18 R35 2,650 6,050 3/19 CR14 3,400 2,650 

  31. The Purchases Journal Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Credit Debit Debit Ref. Amount 3/3 Howard Supplies 600 600 3/7 Donnelly Supplies 420 420 3/12 Jewett Bus. Syst. 2,800 Office Equip. 2,800 3/19 Donnelly Supplies 1,450 1,450 3/27 Howard Supplies 960 960 Totals 6,230 3,430 2,800 All purchases on account are recorded in this journal. The total credits to Accounts Payable equals the total of the two debit columns.

  32. Posting to the Subsidiary Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Credit Debit Debit Ref. Amount 3/3 Howard Supplies 600 600 3/7 Donnelly Supplies 420 420 3/12 Jewett Bus. Syst. 2,800 Office Equip. 2,800 3/19 Donnelly Supplies 1,450 1,450 3/27 Howard Supplies 960 960 Totals 6,230 3,430 2,800 Accounts Payable Subsidiary Ledger Each credit is posted to the accounts payable subsidiary ledger. Howard Supplies Date Item P.R. Debit Credit Balance

  33. Posting to the Subsidiary Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Credit Debit Debit Ref. Amount 3/3 Howard Supplies 600 600 3/7 Donnelly Supplies 420 420 3/12 Jewett Bus. Syst. 2,800 Office Equip. 2,800 3/19 Donnelly Supplies 1,450 1,450 3/27 Howard Supplies 960 960 Totals 6,230 3,430 2,800 Accounts Payable Subsidiary Ledger Each credit is posted to the accounts payable subsidiary ledger. Howard Supplies Date Item P.R. Debit Credit Balance 3/3 P11 600 600

  34. Posting to the Subsidiary Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Credit Debit Debit Ref. Amount  3/3 Howard Supplies 600 600 3/7 Donnelly Supplies 420 420 3/12 Jewett Bus. Syst. 2,800 Office Equip. 2,800 3/19 Donnelly Supp. 1,450 1,450 3/27 Howard Supplies 960 960 Totals 6,230 3,430 2,800     Accounts Payable Subsidiary Ledger Each credit is posted to the accounts payable subsidiary ledger. Howard Supplies Date Item P.R. Debit Credit Balance 3/3 P11 600 600 3/27 P11 960 1,560

  35. Posting to the General Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Credit Debit Debit Ref. Amount 3/3 Howard Supplies 600 600 3/7 Donnelly Supplies 420 420 3/12 Jewett Bus. Syst. 2,800 Office Equip. 2,800 3/19 Donnelly Supp. 1,450 1,450 3/27 Howard Supplies 960 960 Totals 6,2303,430 2,800       General Ledger Date Item P.R. Debit Credit Balance The highlighted items are posted to the general ledger. Account: Accounts Payable No. 21 Date Item P.R. Debit Credit Balance  3/1 Bal. 1,230

  36. Posting to the General Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Credit Debit Debit Ref. Amount  3/3 Howard Supplies 600 600 3/7 Donnelly Supplies 420 420 3/12 Jewett Bus. Syst. 2,800 Office Equip. 18 2,800 3/19 Donnelly Supp. 1,450 1,450 3/27 Howard Supplies 960 960 Totals 6,2303,430 2,800 ( 21) (14) ( )      General Ledger Date Item P.R. Debit Credit Balance The highlighted items are posted to the general ledger. Account: Accounts Payable No. 21 Date Item P.R. Debit Credit Balance  3/1 Bal. 1,230 3/31 P11 6,230 7,460

  37. The Cash Payments Journal Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Debit Debit Credit 3/2 150 Rent Expense 1,600 1,600 3/15 151 Grayco Supplies 1,230 1,230 3/21 152 Jewett Bus. Syst. 2,800 2,800 3/22 153 Donnelly Supp. 420 420 3/30 154 Utilities Expense 1,050 1,050 3/31 155 Howard Supplies 600 600 Totals 2,650 5,050 7,700 All cash payments are recorded in this journal. Every check is listed in numerical order. This journal is often referred to as a check register.

  38. Posting to the Subsidiary Ledger Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Debit Debit Credit 3/2 150 Rent Expense 1,600 1,600 3/15 151 Grayco Supplies 1,230 1,230 3/21 152 Jewett Bus. Syst. 2,800 2,800 3/22 153 Donnelly Supp. 420 420 3/30 154 Utilities Expense 1,050 1,050 3/31 155 Howard Supplies 600 600 Totals 2,650 5,050 7,700 Accounts Payable Subsidiary Ledger Each Accounts Payable debit is posted to the accounts payable subsidiary ledger. Grayco Supplies Date Item P.R. Debit Credit Balance  3/1 Bal. 1,230

  39. Posting to the Subsidiary Ledger Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Debit Debit Credit 3/2 150 Rent Expense 1,600 1,600 3/15 151 Grayco Supplies 1,230 1,230 3/21 152 Jewett Bus. Syst. 2,800 2,800 3/22 153 Donnelly Supp. 420 420 3/30 154 Utilities Expense 1,050 1,050 3/31 155 Howard Supplies 600 600 Totals 2,650 5,050 7,700  Accounts Payable Subsidiary Ledger Each Accounts Payable debit is posted to the accounts payable subsidiary ledger. Grayco Supplies Date Item P.R. Debit Credit Balance  3/1 Bal. 1,230 3/15 CP7 1,230 0

  40. Posting to the General Ledger Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Debit Debit Credit 3/2 150 Rent Expense 1,600 1,600 3/15 151 Grayco Supplies 1,230 1,230 3/21 152 Jewett Bus. Syst. 2,800 2,800 3/22 153 Donnelly Supp. 420 420 3/30 154 Utilities Expense 1,050 1,050 3/31 155 Howard Supplies 600 600 Totals 2,650 5,0507,700 ( )      General Ledger Date Item P.R. Debit Credit Balance The highlighted items are posted to the general ledger. Account: Accounts Payable No. 21  3/1 Bal. 1,230 3/31 P11 6,230 7,460

  41. Posting to the General Ledger Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Debit Debit Credit 3/2 150 Rent Expense 52 1,600 1,600 3/15 151 Grayco Supplies 1,230 1,230 3/21 152 Jewett Bus. Syst. 2,800 2,800 3/22 153 Donnelly Supp. 420 420 3/30 154 Utilities Expense 54 1,050 1,050 3/31 155 Howard Supplies 600 600 Totals 2,650 5,0507,700 ( ) (21) (11)      General Ledger Date Item P.R. Debit Credit Balance The highlighted items are posted to the general ledger. Account: Accounts Payable No. 21  3/1 Bal. 1,230 3/31 P11 6,230 7,460 3/31 CP7 5,050 2,410

  42. Note: To see the topic slide, type 2 and press Enter. Power Notes Chapter5 Accounting Systems and Internal Controls This is the last slide in Chapter 5.

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