Ch05 Fill ins

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Accounting
Accounting
Systems
Systems
Chapter 5
Chapter 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 manualJournalize and post transactions in a manual
accounting system that uses subsidiaryaccounting system that uses subsidiary
ledgers and special journals.ledgers and special journals.
3.3. Describe and illustrate the use of aDescribe 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 theUse segment analysis in evaluating the
operating performance of a company.operating performance of a company.

Learning Objective
Learning ObjectiveDefine and describe an accounting
Define and describe an accountingsystem.
system.
11

Basic Accounting SystemsBasic Accounting Systems
o AnAn accounting systemaccounting system is the methods andis the methods and
procedures for collecting, classifying,procedures for collecting, classifying,
summarizing, and reporting a business’ssummarizing, and reporting a business’s
financial and operating information.financial and operating information.

BASIC ACCOUNTING SYSTEMSBASIC ACCOUNTING SYSTEMS
As a business growsAs a business grows
and changes,and changes,
accounting systemsaccounting systems
also change in thealso change in the
following three-stepfollowing three-step
process.process.
 Analyze userAnalyze user
information needs.information needs.
 Design the system toDesign the system to
meet the user needs.meet the user needs.
 Implement theImplement the
system.system.

BASICBASIC
ACCOUNTINGACCOUNTING
SYSTEMSSYSTEMS

Basic Accounting SystemsBasic Accounting Systems
o Internal controlsInternal controls are the policies andare the policies and
procedures that protect assets from misuse,procedures that protect assets from misuse,
ensure that business information is accurate,ensure that business information is accurate,
and ensure that laws and regulations are beingand ensure that laws and regulations are being
followed.followed.

Processing MethodsProcessing Methods
o Processing methodsProcessing methods are the means by whichare the means by which
the accounting system collects, summarizes,the accounting system collects, summarizes,
and reports accounting information.Theseand reports accounting information.These
methods may be eithermethods may be either manualmanual oror
computerizedcomputerized..

Learning Objective
Learning Objective
Journalize and post transactions in a
Journalize and post transactions in a
manual accounting system that uses
manual accounting system that uses
subsidiary ledgers and special
subsidiary ledgers and specialjournals.
journals.
22

Manual Accounting SystemsManual Accounting Systems
o Understanding a manual accounting system isUnderstanding a manual accounting system is
useful in identifying relationships betweenuseful in identifying relationships between
accounting data and reports.accounting data and reports.

Subsidiary LedgersSubsidiary Ledgers
o A large number of individual accounts with aA large number of individual accounts with a
common characteristic can be groupedcommon characteristic can be grouped
together in a separate ledger called atogether in a separate ledger called a
subsidiary ledgersubsidiary ledger..

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

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

o The individual customer accounts areThe individual customer accounts are
arranged in alphabetical order in a subsidiaryarranged in alphabetical order in a subsidiary
ledger called theledger called the accounts receivableaccounts receivable
subsidiary ledgersubsidiary ledger,, oror customers ledgercustomers ledger..

o The individual creditor accounts are arrangedThe individual creditor accounts are arranged
in alphabetical order in a subsidiary ledgerin alphabetical order in a subsidiary ledger
called thecalled the accounts payable subsidiary ledgeraccounts payable subsidiary ledger,,
oror creditorscreditors ledgerledger..

SUBSIDIARYSUBSIDIARY
LEDGERSLEDGERS

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

SPECIALSPECIAL
JOURNALSJOURNALS
BUYING
SELLING

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

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

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

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

o All cash payments are recorded in theAll cash payments are recorded in the cashcash
payments journalpayments journal..

o NetSolutions had the following selectedNetSolutions had the following selected
general ledger balances as of March 1, 2014:general ledger balances as of March 1, 2014:
Account
Number Account Balance
11 Cash $6,200
12 Accounts Receivable 3,400
14 Supplies 2,500
18 Office Equipment 2,500
21 Accounts Payable 1,230

Revenue JournalRevenue Journal
o If NetSolutions recorded its revenueIf NetSolutions recorded its revenue
transactions in the general journal, thetransactions 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 theRevenues are normally recorded to the
revenue journal when the company sends arevenue journal when the company sends a
bill, referred to as anbill, referred to as an invoiceinvoice, to the customer., to the customer.
o Each invoice is normally numbered inEach invoice is normally numbered in
sequence for future reference.sequence for future reference.

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

EXHIBIT 3EXHIBIT 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
1
2
3
4
5
6
1
2
3
4
5
6
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

EXHIBIT 3EXHIBIT 3
1
2
3
4
5
6
1
2
3
4
5
6
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

EXHIBIT 3EXHIBIT 3
Revenue Journal
Page 35
1
2
3
4
5
6
1
2
3
4
5
6
(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

EXHIBIT 3EXHIBIT 3
Revenue Journal
Page 35
1
2
3
4
5
6
1
2
3
4
5
6
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.

EXHIBIT 3EXHIBIT 3
Revenue Journal Page 35
1
2
3
4
5
6
1
2
3
4
5
6
2014
(continued)
6 616 RapZone 1 7 5 0 00
18 617 Web Cantina 2 6 5 0 00
Next, the amount column would be totaled.
9 6 0 0 0031

EXHIBIT 3EXHIBIT 3
ACCOUNT Accounts Receivable Account No. 12
Balance
Dr. Cr.
Date Dr. Cr.Item
Post.
Ref.
2014
Mar. 1 Balance 3 400 00
31 9 600 00 13 000 00R35
The debit total is posted from the revenue journal to Accounts
Receivable in the general ledger.
Revenue Journal, page 35
(continued)

EXHIBIT 3EXHIBIT 3
Revenue Journal
Page 35
1
2
3
4
5
6
1
2
3
4
5
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)

EXHIBIT 3EXHIBIT 3
ACCOUNT Fees Earned Account No. 41
Balance
Date Dr. Cr.Item
Post.
Ref.
9 600 00R35
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. 31
2014

EXHIBIT 3EXHIBIT 3
Indicates a credit posting of $9,600 to Fees
Earned (General Ledger Account 41)
Revenue Journal
Page 35
1
2
3
4
5
6
1
2
3
4
5
6 (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
(41)

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

EXHIBIT 4EXHIBIT 4
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
CR14
Click the
button to skip
“Exhibit 4 (in
Steps)”
Mar. 1
2014
400
(continued)
400

EXHIBIT 4EXHIBIT 4
Web Cantina
Mar. 1 Bal. 3,400
18 R35 2,650 6,050
2014
3,400 2,650
19
Other Accounts
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 individualAfter all journalizing and posting to individual
accounts for the month is complete, theaccounts for the month is complete, the
columns are totaled.columns are totaled.

EXHIBIT 4EXHIBIT 4
Other Accounts
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 accountsThe total of the accounts in the accounts
receivable subsidiary ledger should match thereceivable subsidiary ledger should match the
balance in the general ledger’s Accountsbalance in the general ledger’s Accounts
Receivable account.Receivable account.

Purchases JournalPurchases Journal
o TheThe purchases journalpurchases journal is designed foris designed for
recording allrecording all purchases on accountpurchases on account..

EXHIBIT 5EXHIBIT 5
Accts. Other
Post 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. 2,800
19 Donnelly Supplies 1,450 1,450
27 Howard Supplies 960 960
Click on button
to skip “Exhibit
5 (in steps)” (continued)

EXHIBIT 5EXHIBIT 5
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)
Accts. Other
PURCHASES JOURNAL
2014

EXHIBIT 5EXHIBIT 5
Accts. Other
PURCHASES JOURNAL
2014
Date Item P.R. Dr. Cr. Balance
2014
P11
(continued)
Accounts Payable Subsidiary Ledger
Howard Supplies
600Mar. 3 600

EXHIBIT 5EXHIBIT 5
Accts. Other
PURCHASES JOURNAL
2014
(continued)
The other entries to the accounts payable subsidiary
ledger are recorded using the same procedure.

EXHIBIT 5EXHIBIT 5
2014
This posting reference indicates
that Office Equipment (Account
18) is debited in the general
ledger for $2,800.
Accts. Other
18

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

EXHIBIT 5EXHIBIT 5
12 Jewett Bus. Sys. 2,800 Off. Equip. 18 2,800
31 6,230 3,430 2,800
( ) ( ) ( )
Accts. Other
2014
21
ACCOUNT Accounts Payable No. 21
GENERAL LEDGER
Mar. 1 Bal 1,230
6,230 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 toAll transactions involving a credit to CashCash areare
recorded in therecorded in the cash payments journalcash payments journal..

EXHIBIT 6EXHIBIT 6
CASH PAYMENTS JOURNAL
Other Accounts
Ck. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
2014
Mar. 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 Dr.”The amounts listed in the “Other Accounts Dr.”
column are posted on a regular basis.Thecolumn are posted on a regular basis.The
$1,600 for Rent Expense is posted to Account$1,600 for Rent Expense is posted to Account
No. 52.No. 52.

EXHIBIT 6EXHIBIT 6
Other Accounts
PAGE 7
2014
General Ledger
Account Rent Expense
1,600 1,600
Account No. 52
52
(continued)
2014
Mar. 2 CP7

EXHIBIT 6EXHIBIT 6
15 151 Grayco Supplies 1,230 1,230
CASH PAYMENTS JOURNAL PAGE 7
Other Accounts
2014
On March 15, issued
Check 151 to Grayco
Supplies for $1,230.
52
(continued)

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

EXHIBIT 6EXHIBIT 6
Other Accounts
PAGE 7
2014
15 151 Grayco Supplies 1,230 1,230√
52
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 March’sNow, let’s journalize the remainder of March’s
cash disbursements. Following that, let’s post tocash disbursements. Following that, let’s post to
the individual creditors’ accounts.the individual creditors’ accounts.

EXHIBIT 6EXHIBIT 6
Other Accounts
PAGE 7
2014
21 152 Jewett Business Sys. 2,800 2,800
22 153 Donnelly Supplies 420 420
30 154 Utilities Expense 1,050 1,050
31 155 Howard Supplies 600 600
52
(continued)

EXHIBIT 6EXHIBIT 6
PAGE 7
2014
52
√
√
√
54
(continued)
Other Accounts

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

Other Accounts
PAGE 7
2008
Other Accounts
PAGE 7
2014
31 2,650 5,050 7,700
52
√
√
√
54
√
(continued)
CASH PAYMENTSCASH PAYMENTS
JOURNALJOURNAL

CASH PAYMENTSCASH PAYMENTS
JOURNALJOURNAL
Other Accounts
PAGE 7
2008
Other Accounts
PAGE 7
2014
31 2,650 5,050 7,700
52
√
√
√
54
√
(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, theAfter all posting has been completed, the
balances in the accounts payable subsidiarybalances in the accounts payable subsidiary
ledger should equal the balance of theledger should equal the balance of the
accounts payable controlling account in theaccounts payable controlling account in the
general ledger.general ledger.

Learning Objective
Learning ObjectiveDescribe and illustrate the use of a
Describe and illustrate the use of a
computerized accounting system.
computerized accounting system.
33

Computerized Accounting SystemComputerized Accounting System
o Computerized accounting systems have theComputerized accounting systems have the
following three main advantages over manualfollowing three main advantages over manual
systems:systems:
 Computerized systems simplify the record-keepingComputerized systems simplify the record-keeping
process by recording transactions in electronicprocess by recording transactions in electronic
forms and, at the same time, posting themforms and, at the same time, posting them
electronically to general and subsidiary ledgerelectronically to general and subsidiary ledger
accounts.accounts.

Computerized Accounting SystemComputerized Accounting System
 Computerized systems are generally more accurateComputerized systems are generally more accurate
than manual systems.than manual systems.
 Computerized systems provide management withComputerized systems provide management with
current account balance information to supportcurrent account balance information to support
decision making, since account balances are posteddecision making, since account balances are posted
as the transactions occur.as the transactions occur.

COMPUTERIZEDCOMPUTERIZED
SYSTEMSSYSTEMS
(continued)

COMPUTERIZEDCOMPUTERIZED
SYSTEMSSYSTEMS
(concluded)

Learning Objective
Learning ObjectiveDescribe the basic features of e-
Describe the basic features of e-commerce.
commerce.
44

E-CommerceE-Commerce
o Using the Internet to perform businessUsing the Internet to perform business
transactions is termedtransactions is termed e-commercee-commerce..

E-CommerceE-Commerce
o When transactions are between a companyWhen transactions are between a company
and a consumer, it is termedand a consumer, it is termed B2CB2C (business-to-(business-to-
consumer)consumer) e-commercee-commerce..

E-COMMERCEE-COMMERCE
Three more advancedThree more advanced
areas where theareas where the
Internet is being usedInternet is being used
for business purposesfor business purposes
are:are:
 Supply chainSupply chain
management (SCM)management (SCM)
 Customer relationshipCustomer relationship
management (CRM)management (CRM)
 Product life-cycleProduct life-cycle
management (PLM)management (PLM)

Learning Objective
Learning ObjectiveUse segment analysis in evaluating
Use segment analysis in evaluating
the operating performance of a
the operating performance of acompany.
company.
55

Segment AnalysisSegment Analysis
o One way to report revenue is by differentOne way to report revenue is by different
segments. Businesses may be segmented bysegments. Businesses may be segmented by
region, by product or service, or by type ofregion, by product or service, or by type of
customer.customer.

SEGMENTSEGMENT
ANALYSISANALYSIS

USING SEGMENT INFORMATIONUSING SEGMENT INFORMATION
TO PERFORMTO PERFORM
HORIZONTAL ANALYSISHORIZONTAL ANALYSIS

USING SEGMENT INFORMATIONUSING SEGMENT INFORMATION
TO PERFORMTO PERFORM
VERTICAL ANALYSISVERTICAL ANALYSIS

Accounting
Accounting
Systems
Systems
The End
The End

Ch05 Fill ins

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