Ch05 Fill ins

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Accounting Accounting

SystemsSystems

Chapter 5Chapter 5Chapter 5Chapter 5

Learning ObjectivesLearning Objectives

1.1. Define and describe an accounting system.Define and describe an accounting system.

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

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

4.4. Describe the basic features of e-commerce.Describe the basic features of e-commerce.

5.5. Use segment analysis in evaluating the Use segment analysis in evaluating the operating performance of a company.operating performance of a company.


Learning Learning Objective

ObjectiveDefine and describe an

Define and describe an accounting system.

accounting system.

11

Basic Accounting SystemsBasic Accounting Systems

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

BASIC ACCOUNTING SYSTEMSBASIC ACCOUNTING SYSTEMS

As a business grows As a business grows and changes, and changes, accounting systems accounting systems also change in the also change in the following three-step following three-step process.process.

Analyze user Analyze user information needs.information needs.

Design the system Design the system to meet the user to meet the user needs.needs.

Implement the Implement the system.system.

BASIC BASIC ACCOUNTING ACCOUNTING

SYSTEMSSYSTEMS

Basic Accounting SystemsBasic Accounting Systems

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

Processing MethodsProcessing Methods

o Processing methodsProcessing methods are the means by are the means by which the accounting system collects, which the accounting system collects, summarizes, and reports accounting summarizes, and reports accounting information. These methods may be either information. These methods may be either manualmanual or or computerizedcomputerized..



ObjectiveJournalize and post transactions

Journalize and post transactions

in a manual accounting system

in a manual accounting system

that uses subsidiary ledgers and

that uses subsidiary ledgers and special journals.

special journals.

22

Manual Accounting SystemsManual Accounting Systems

o Understanding a manual accounting Understanding a manual accounting system is useful in identifying system is useful in identifying relationships between accounting data relationships between accounting data and reports.and reports.

Subsidiary LedgersSubsidiary Ledgers

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


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


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


o The individual customer accounts are The individual customer accounts are arranged in alphabetical order in a arranged in alphabetical order in a subsidiary ledger called the subsidiary ledger called the accounts accounts receivable subsidiary ledgerreceivable subsidiary ledger,, oror customers customers ledgerledger..


o The individual creditor accounts are The individual creditor accounts are arranged in alphabetical order in a arranged in alphabetical order in a subsidiary ledger called the subsidiary ledger called the accounts accounts payable subsidiary ledgerpayable subsidiary ledger,, or or creditorscreditors ledgerledger..

SUBSIDIARY SUBSIDIARY LEDGERSLEDGERS

Special JournalSpecial Journal

o One method of processing transactions One method of processing transactions more efficiently in a manual system is to more efficiently in a manual system is to use special journals. use special journals. Special journals Special journals are are designed to be used for recording a single designed to be used for recording a single kind of transaction that occurs frequently.kind of transaction that occurs frequently.

SPECIAL SPECIAL JOURNALSJOURNALS

BUYING

SELLING

Special JournalsSpecial Journals

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


o The The revenue journalrevenue journal is used for recording is used for recording fees earned on account. fees earned on account.


o Cash fees earned would be recorded in the Cash fees earned would be recorded in the cash receipts journalcash receipts journal..


o Purchases made on account (on credit) are Purchases made on account (on credit) are recorded in the recorded in the purchases journalpurchases journal..


o All cash payments are recorded in the All cash payments are recorded in the cash payments journalcash payments journal..


o NetSolutions had the following selected NetSolutions had the following selected general ledger balances as of March 1, general ledger balances as of March 1, 2014:2014:

Account Number Account Balance

11 Cash $6,20012 Accounts Receivable 3,40014 Supplies 2,50018 Office Equipment 2,50021 Accounts Payable 1,230

Revenue JournalRevenue Journal

o If NetSolutions recorded its revenue If NetSolutions recorded its revenue transactions in the general journal, the transactions in the general journal, the following entries would have to be made:following entries would have to be made:


o Revenues are normally recorded to the Revenues are normally recorded to the revenue journal when the company sends revenue journal when the company sends a bill, referred to as ana bill, referred to as an invoiceinvoice, to the , to the customer.customer.

o Each invoice is normally numbered in Each invoice is normally numbered in sequence for future reference.sequence for future reference.

REVENUE REVENUE JOURNALJOURNAL

If NetSolutions journalized these same fees earned on account entries in the revenue journal, the process is simplified, as you can see in Exhibit 2.


o Let’s take a step-by-step look at the Let’s take a step-by-step look at the process used to post the first entry. This process used to post the first entry. This entry was made on March 2, 2014, when entry was made on March 2, 2014, when NetSolutions issued Invoice No. 615 to NetSolutions issued Invoice No. 615 to Accessories By Claire for fees earned of Accessories By Claire for fees earned of $2,200.$2,200.

EXHIBIT 3 EXHIBIT 3 (IN STEPS)(IN STEPS)

Click here to skip “Exhibit 3 (in Steps)”

(continued)

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

Page 35

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2014

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

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


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6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00


(continued)

Date Item P.R. Debit Credit Balance

Mar. 2 R35 2,200 2,200

2014

Accounts Receivable Subsidiary Ledger

Accessories By Claire

Revenue Journal Page 35

2014


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



Page 35

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(continued)

2014

6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00



Mar. 2 R35 2,200 2,200

2014


Accessories By Claire



Page 35

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2014


(continued)

6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00


The same procedure would be used to post the other transactions to the individual accounts in the accounts receivable subsidiary ledger.


Revenue Journal Page 35

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2014


(continued)

6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00


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

Next, the amount column would be totaled.

9 6 0 0 0031


ACCOUNT Accounts Receivable Account No. 12

Balance

Dr. Cr.Date Dr. Cr.Item

Post. Ref.

2014Mar. 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

(continued)



Page 35

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6 (12)

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

2014


6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00


31 9 6 0 0 00

(continued)


ACCOUNT Fees Earned Account No. 41

Balance

Date Dr. Cr.ItemPost.

Ref.

9 600 00 R35

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

9 600 00

Dr. Cr.

(continued)

Revenue Journal, page 35

Mar. 312014


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


Page 35

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2014


6 616 RapZone 1 7 5 0 00

18 617 Web Cantina 2 6 5 0 00


31 9 6 0 0 00

(41)

Cash Receipts JournalCash Receipts Journal

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


Mar. 1 Rent Revenue 400 400

CASH RECEIPTS JOURNAL

Other Accounts Post Accounts Receivable Cash

Date Account Credited Ref. Cr. Cr. Dr.

Page 14

2014

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

CR14Click the button to skip “Exhibit 4 (in Steps)”

Mar. 12014

400

(continued)

400



Web Cantina

Mar. 1 Bal. 3,400

18 R35 2,650 6,050

2014

3,400 2,650

19





Page 14

2014

19 Web Cantina 3,400 3,400


30 RapZone 1,750 1,750


CR14

(continued)

42

Cash Receipts JournalCash Receipts Journal

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






Page 14

2014

19 Web Cantina 3,400 3,400


30 RapZone 1,750 1,750

42

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

A check mark indicates that items in this column are posted individually.

12 11

(continued)

31

Accounts Receivable AccountAccounts Receivable Account

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

Purchases JournalPurchases Journal

o The The purchases journalpurchases journal is designed for is designed for recording all recording all purchases on accountpurchases on account..


Accts. OtherPost Payable Supplies Accounts Post

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

PURCHASES JOURNAL Page 11

2014

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)” (continued)



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

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.

(continued)



PURCHASES JOURNAL

2014

Mar. 3 Howard Supplies 600 600






PURCHASES JOURNAL

2014


Date Item P.R. Dr. Cr. Balance

2014

P11

(continued)

Accounts Payable Subsidiary Ledger

Howard Supplies

600Mar. 3 600






PURCHASES JOURNAL

2014


(continued)

The other entries to the accounts payable subsidiary ledger are recorded using the same procedure.



2014

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

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



18

Purchases JournalPurchases Journal

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


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

( ) ( ) ( )




2014


21

ACCOUNT Accounts Payable No. 21

GENERAL LEDGER


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

2014

Supplies would be debited for $3,430

and 14 written in the parentheses.

Cash Payments JournalCash Payments Journal

o All transactions involving a credit to All transactions involving a credit to CashCash are recorded in the are recorded in the cash payments journalcash payments journal. .


CASH PAYMENTS JOURNAL

Other AccountsCk. Post Accounts Payable Cash

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

PAGE 7

2014Mar. 2 150 Rent Expense 1,600 1,600

On March 2, 2014, issued Check 150 for

rent of $1,600.

Click button to skip “Exhibit 6 (in steps)”

(continued)


o The amounts listed in the “Other Accounts The amounts listed in the “Other Accounts Dr.” column are posted on a regular basis. Dr.” column are posted on a regular basis. The $1,600 for Rent Expense is posted to The $1,600 for Rent Expense is posted to Account No. 52. Account No. 52.





PAGE 7

2014Mar. 2 150 Rent Expense 1,600 1,600

General Ledger

Account Rent Expense

1,600 1,600


Account No. 52

52

(continued)

2014Mar. 2 CP7


15 151 Grayco Supplies 1,230 1,230

CASH PAYMENTS JOURNAL PAGE 7



2014Mar. 2 150 Rent Expense 1,600 1,600

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

52

(continued)


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





PAGE 7

2014Mar. 2 150 Rent Expense 1,600 1,600

15 151 Grayco Supplies 1,230 1,23052

Accounts Payable Subsidiary Ledger

Grayco Supplies

Mar. 1 Bal. 1,230


1,230 --- 15 CP7

2014

(continued)


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





PAGE 7

2014Mar. 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

52

(continued)


PAGE 7

2014Mar. 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

(continued)





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




PAGE 7

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





PAGE 7

2014Mar. 2 150 Rent Expense 1,600 1,600

15 151 Grayco Supplies 1,230 1,230

31 2,650 5,050 7,700

52

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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

(continued)

CASH CASH PAYMENTS PAYMENTS JOURNALJOURNAL

CASH CASH PAYMENTS PAYMENTS JOURNALJOURNAL




PAGE 7

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





PAGE 7

2014Mar. 2 150 Rent Expense 1,600 1,600


31 2,650 5,050 7,700

52

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(21) (11)( )

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

(continued)

Accounts Payable AccountAccounts Payable Account

o After all posting has been completed, the After all posting has been completed, the balances in the accounts payable balances in the accounts payable subsidiary ledger should equal the balance subsidiary ledger should equal the balance of the accounts payable controlling of the accounts payable controlling account in the general ledger.account in the general ledger.



ObjectiveDescribe and illustrate the use of

Describe and illustrate the use of

a computerized accounting

a computerized accounting system.system.

33

Computerized Accounting SystemComputerized Accounting System

o Computerized accounting systems have Computerized accounting systems have the following three main advantages over the following three main advantages over manual systems:manual systems: Computerized systems simplify the record-Computerized systems simplify the record-

keeping process by recording transactions in keeping process by recording transactions in electronic forms and, at the same time, posting electronic forms and, at the same time, posting them electronically to general and subsidiary them electronically to general and subsidiary ledger accounts.ledger accounts.

Computerized Accounting SystemComputerized Accounting System

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

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

COMPUTERIZED COMPUTERIZED ACCOUNTING ACCOUNTING

SYSTEMSSYSTEMS

(continued)


SYSTEMSSYSTEMS

(continued)


SYSTEMSSYSTEMS

(concluded)



ObjectiveDescribe the basic features of e-

Describe the basic features of e-commerce.commerce.

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E-CommerceE-Commerce

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

E-CommerceE-Commerce

o When transactions are between a When transactions are between a company and a consumer, it is termedcompany and a consumer, it is termed B2CB2C (business-to-consumer) (business-to-consumer) e-commercee-commerce..

E-COMMERCEE-COMMERCE

Three more advanced Three more advanced areas where the areas where the Internet is being used Internet is being used for business purposes for business purposes are:are:

Supply chain Supply chain management (SCM)management (SCM)

Customer Customer relationship relationship management (CRM)management (CRM)

Product life-cycle Product life-cycle management (PLM)management (PLM)



ObjectiveUse segment analysis in

Use segment analysis in

evaluating the operating

evaluating the operating

performance of a company.

performance of a company.

55

Segment AnalysisSegment Analysis

o One way to report revenue is by different One way to report revenue is by different segments. Businesses may be segmented segments. Businesses may be segmented by region, by product or service, or by by region, by product or service, or by type of customer.type of customer.

SEGMENT SEGMENT ANALYSISANALYSIS

USING SEGMENT INFORMATION USING SEGMENT INFORMATION TO PERFORM TO PERFORM

HORIZONTAL ANALYSISHORIZONTAL ANALYSIS

USING SEGMENT USING SEGMENT INFORMATION TO PERFORM INFORMATION TO PERFORM

VERTICAL ANALYSISVERTICAL ANALYSIS


Accounting Accounting

SystemsSystems

The EndThe EndThe EndThe End

Education

Ch05 Fill ins