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Accounting Systems

0. 5. Accounting Systems. 0. After studying this chapter, you should be able to:. Define an accounting system and describe its implementation. Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals. 0.

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Accounting Systems

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  1. 0 5 Accounting Systems

  2. 0 After studying this chapter, you should be able to: • Define an accounting system and describe its implementation. • Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals.

  3. 0 After studying this chapter, you should be able to: • Describe and give examples of additional subsidiary ledgers and modified special journals. • Apply computerized accounting to the revenue and collection cycle. • Describe the basic features of e-commerce.

  4. 0 5-1 Objective 1 Define an accounting system and describe its implementation.

  5. 0 5-1 Accounting Systems Growth Process 5

  6. 0 5-1 Three Step Process as a Business Grows and Changes Step 1: Analysis • Identify the needs of those who use the business’s financial information. • Determine how the system should provide this information.

  7. 0 5-1 Step 2: Design • The system is designed so that it meets the users’ needs. Step 3: Implementation • The system is implemented and used.

  8. 0 5-1 Feedback Once a system has been implemented, feedback, or input from the users of the information can be used to analyze and improve the system.

  9. 0 5-1 Internal Controls Internal controlsare policies and procedures that protect assets from misuse, ensure that business information is accurate, and ensure that laws and regulations are being followed.

  10. 0 5-1 Processing Methods Processing methods are the means by which the system collects, summarizes, and reports accounting information. These methods may be either manualor computerized.

  11. 0 5-2 Objective 2 Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals.

  12. 0 5-2 A large number of individual accounts with a common characteristic can be grouped together in a separate ledger called a subsidiary ledger.

  13. 0 5-2 The primary ledger, which contains all of the balance sheet and income statement accounts, is called a general ledger.

  14. 0 5-2 Each subsidiary ledger is represented in the general ledger by a summarizing account, called a controlling account.

  15. 0 5-2 The individual customers’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts receivable subsidiary ledger orcustomers ledger.

  16. 0 5-2 The individual creditors’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts payable subsidiary ledger, orcreditors ledger.

  17. Accounts Receivable Subsidiary Ledger Customer Accounts A B C D Accounts Payable Subsidiary Ledger Creditor Accounts A B C D 0 5-2 General Ledger and Subsidiary Ledgers General Ledger Cash 11 Accts. Rec. 12 Supplies 14 Accts. Pay. 21 17

  18. recorded in Revenue journal recorded in Cash receipts journal 0 5-2 Special Journals SELLING Providing services on account Receipt of cash from any source 18

  19. recorded in Purchases journal BUYING recorded in Cash payments journal 0 5-2 Special Journals Purchase of items on account Payment of cash for any purpose 19

  20. 0 5-2 Special Journals The all-purpose two-column journal, called the general journal or simply thejournalcan be used for entries that do not fit into any of the special journals.

  21. 0 5-2 The revenue journal is used for recording fees earned on account. Cash fees earned would be recorded in the cash receipts journal.

  22. Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2008 1 2 3 4 5 6 Mar. 2 615 Accessories by Claire 2 2 0 0 00 0 5-2 Posting the Revenue Journal 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 22

  23. Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2008 1 2 3 4 5 6 Mar. 2 615 Accessories by Claire 2 2 0 0 00 2008 Mar. 2 R35 2,200 2,200 0 5-2 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 Accounts Receivable Subsidiary Ledger Accessories by Claire Date Item P.R. Debit Credit Balance 23

  24. Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2008 1 2 3 4 5 6 Mar. 2 615 Accessories by Claire 2 2 0 0 00 2008 Mar. 2 R35 2,200 2,200 0 5-2 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 Accounts Receivable Subsidiary Ledger Accessories by Claire Date Item P.R. Debit Credit Balance 24

  25. Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2008 1 2 3 4 5 6 Mar. 2 615 Accessories by Claire 2 2 0 0 00 0 5-2 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 25

  26. Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2008 1 2 3 4 5 6 Mar. 2 615 Accessories by Claire 2 2 0 0 00 31 9 6 0 0 00 0 5-2 Exhibit 2 Revenue Journal 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 26

  27. Revenue Journal, page 35 0 5-2 The debit total is posted from the revenue journal to Accounts Receivable in the general ledger. Accounts Receivable Account No. 12 ACCOUNT Balance Post. Ref. Dr. Cr. Date Item Cr. Dr. 2008 Mar. 1 Balance 3 400 00 31 9 600 00 13 000 00 R35 27

  28. Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2008 1 2 3 4 5 6 Mar. 2 615 Accessories by Claire 2 2 0 0 00 31 9 6 0 0 00 0 5-2 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 (12) Indicates a debit posting of $9,600 to Accounts Receivable (General Ledger Account 12) 28

  29. Revenue Journal, page 35 0 5-2 The credit total is posted from the revenue journal to Fees Earned in the general ledger. Fees Earned Account No. 41 ACCOUNT Balance Post. Ref. Dr. Cr. Date Item Cr. Dr. 2008 Mar. 31 R35 9 600 00 9 600 00 29

  30. Page 35 Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2008 1 2 3 4 5 6 Mar. 2 615 Accessories by Claire 2 2 0 0 00 31 9 6 0 0 00 0 5-2 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 (41) (12) Indicates a credit posting of $9,600 to Fees Earned (General Ledger Account 41) 30

  31. Example Exercise 5-1 0 5-2 The following revenue transactions occurred during December: 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. Record these transactions in a revenue journal as illustrated in Exhibit 2. 31

  32. Page Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Follow My Example 5-1 1 2 3 4 5 6 1 2 3 4 5 6 0 5-2 Dec. 5 302 Butler Company 5 0 0 0 00 9 303 JoJo Enterprises 2 1 0 0 00 15 304 Double D Inc. 3 2 5 0 00 For Practice: PE 5-1A, PE 5-1B 32

  33. 0 5-2 Cash Receipts Journal All transactions that involve the receipt of cash are recorded in a cashreceipts journal. Every entry recorded in the cash receipts journal will involve a debit to the “Cash Dr.” column.

  34. CASH RECEIPTS JOURNAL Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 2008 Mar. 1 Rent Revenue 400 400 19 Web Cantina 3,400 3,400 28 Accessories by Claire 2,200 2,200 30 RapZone 1,750 1,750 2008 Mar. 1 400 400 0 5-2 Cash Receipts Journal and Postings 42 GENERAL LEDGER ACCOUNT Rent Revenue Acct. No. 42 Date Item P.R. Debit Credit Cr. Bal. 34 CR14

  35. 2008 Mar. 1 Bal. 3,400 18 R35 2,650 6,050 0 5-2 CASH RECEIPTS JOURNAL Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 2008 42 Mar. 1 Rent Revenue 400 400 19 Web Cantina 3,400 3,400 28 Accessories by Claire 2,200 2,200 30 RapZone 1,750 1,750 Accounts Receivable Subsidiary Ledger Web Cantina Date Item P.R. Debit Credit Balance 35 CR14 19 3,400 2,650

  36. 0 5-2 After all journalizing and posting for the month to individual accounts is complete, the columns are totaled.

  37. 0 5-2 Posted Cash Receipts Journal CASH RECEIPTS JOURNAL Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 2008 42 Mar. 1 Rent Revenue 400 400 19 Web Cantina 3,400 3,400 28 Accessories by Claire 2,200 2,200 30 RapZone 1,750 1,750 400 7,350 7,750 ( ) (12) (11) A checkmark indicates that the items in this column are posted individually. 37

  38. 0 5-2 After posting, the total amount of the accounts in the accounts receivable subsidiary ledger should match the balance in the general ledger’s Accounts Receivableaccount.

  39. 0 5-2 Accounts Receivable—(Controlling) Balance, March 1, 2008 $3,400 Total debits (from revenue journal) 9,600 Total credits (from cash receipts journal) (7,350) Balance, March 31, 2008 $5,650 NetSolutions Customer Balance Summary Report, March 31, 2008 Accessories By Claire $3,000 RapZone 0 Web Cantina 2,650 Total accounts receivable $5,650 39

  40. Example Exercise 5-2 0 5-2 The debits and credits from two transactions are presented in the following customer account: NAME Sweet Tooth Confections ADDRESS 1212 Lombard St. Date Item P.R. Dr. Cr. Balance July 1 Bal. 625 7 Inv. 35 R12 86 711 31 Inv. 31 CR4 122 589 Describe each transaction and the source of each posting. 40

  41. Follow My Example 5-2 0 5-2 July 7 Provided $86 services on account to Sweet Tooth Confections, itemized on invoice 35. Amount posted from page 12 of the revenue journal. July 31 Cash of $122 was collected from Sweet Tooth Confections (invoice 31). Amount posted from page 4 of the cash receipts journal. For Practice: PE 5-2A, PE 5-2B 41

  42. 0 5-2 The purchases journal is designed for recording all purchases on account.

  43. 2008 Mar. 3 Howard Supplies 600 600 0 5-2 Journalizing in the Purchases Journal Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount 7 Donnelly Supplies 420 420 12 Jewett Business Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 43

  44. 0 5-2 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.

  45. 2008 Mar. 3 Howard Supplies 600 600 0 5-2 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount 7 Donnelly Supplies 420 420 12 Jewett Business Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 45

  46. 2008 Mar. 3 Howard Supplies 600 600 7 Donnelly Supplies 420 420 12 Jewett Business Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 2008 Mar 3 600 600 0 5-2 Posting the Purchases Journal Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Accounts Payable Subsidiary Ledger Howard Supplies Date Item P.R. Dr. Cr. Balance P11 46

  47. 2008 Mar. 3 Howard Supplies 600 600 7 Donnelly Supplies 420 420 12 Jewett Business Sys. 2,800 Off. Equip. 18 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 0 5-2 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Office Equipment (Account 18 in the general ledger) is debited for $2,800. 47

  48. 0 5-2 At the end of March, all columns are totaled and equality of debits and credits is verified. Then the total amount in the “Accounts PayableCr.” and “SuppliesDr.” columns are posted. Because Office Equipment was posted earlier, the $2,800 total is not posted.

  49. Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount 2008 Mar. 3 Howard Supplies 600 600 0 5-2 7 Donnelly Supplies 420 420 12 Jewett Business Sys. 2,800 Off. Equip. 18 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 31 6,230 3,430 2,800 ( ) ( ) ( ) 21 GENERAL LEDGER ACCOUNT Accounts Payable No. 21 Date Item P.R. Debit Credit Balance 49 2008 Mar. 1 Bal 1,230 31 P11 6,230 7,460

  50. Page 11 PURCHASES JOURNAL 2008 Mar. 3 Howard Supplies 600 600 0 5-2 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount 7 Donnelly Supplies 420 420 12 Jewett Business Sys. 2,800 Off. Equip. 18 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 31 6,230 3,430 2,800 ( ) ( ) ( ) 21 14 GENERAL LEDGER ACCOUNT Supplies No. 14 Date Item P.R. Debit Credit Balance 50 2008 Mar. 1 Bal 2,500 31 P11 3,430 5,930

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