Your SlideShare is downloading. ×
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Principal accounting - Ch05 accounting system and internal control
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Principal accounting - Ch05 accounting system and internal control

603

Published on

Warren Reeve Fess …

Warren Reeve Fess
Principal accounting
Chapter 05
accounting system and internal control

Published in: Economy & Finance, Business
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
603
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
59
Comments
0
Likes
2
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide

Transcript

  • 1. Chapter 5 Accounting Systems and Internal Controls Accounting, 21st Edition Warren Reeve Fess PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University © Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc.
  • 2. Some of the action has been automated, so click the mouse when you see this lightning bolt in the lower right-hand corner of the screen. You can point and click anywhere on the screen.
  • 3. 1. Define an accounting system and describe its implementation. 2. List the three objectives of internal control, and define and give examples of the five elements of internal control. 3. Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals. Objectives After studying this chapter, you should be able to:
  • 4. 4. Describe and give examples of additional subsidiary ledgers and modified special journals. Objectives 5. Apply computerized accounting to the revenue and collection cycle. 6. Describe the basic features of e- commerce.
  • 5. Basic Accounting System
  • 6. Implementation Design Analysis
  • 7. Objectives of Internal Control 1. assets are safeguarded and used for business purposes. 2. business information is accurate. 3. employees comply with laws and regulations. To provide reasonable assurance that:
  • 8. 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication Elements of Internal Control
  • 9. 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication Elements of Internal Control
  • 10. Management philosophy and operating style influences the control environment.
  • 11. 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication Elements of Internal Control
  • 12. Once risks are identified, they can be analyzed to estimate their significance, to assess their likelihood of occurring, and to determine actions that will minimize them.
  • 13. 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication Elements of Internal Control
  • 14. Control Procedures  Competent Personnel  Rotating Duties  Mandatory Vacations  Separating Responsibilities for Related Operations  Separating Operations, Custody of Assets, and Accounting  Proofs and Security Measures
  • 15. Control Procedures  Competent Personnel  Rotating Duties  Mandatory Vacations  Separating Responsibilities for Related Operations  Separating Operations, Custody of Assets, and Accounting  Proofs and Security Measures
  • 16. Separating Responsibilities for Related Operations1. Orders may be placed on the basis of friendship with a supplier, rather than on price, quality, and other objective factors. 2. The quantity and quality of supplies received may not be verified, thus causing payment for supplies not received or poor-quality supplies. 3. Supplies may be stolen by the employee. 4. The validity and accuracy of invoices may be verified carelessly. Otherwise, the following abuses are possible:
  • 17. Control Procedures  Competent Personnel  Rotating Duties  Mandatory Vacations  Separating Responsibilities for Related Operations  Separating Operations, Custody of Assets, and Accounting  Proofs and Security Measures
  • 18. Independent check Independent check Independent check Custody of Assets AccountingOperations
  • 19. 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication Elements of Internal Control
  • 20. Clues to Potential Problems 1. Abrupt changes in lifestyle. 2. Close social relationships with suppliers. 3. Refusing to take a vacation. 4. Frequent borrowing from other employees. 5. Excessive use of alcohol or drugs. Warning signs with regard to people:
  • 21. 1. Missing documents or gaps in transaction numbers. 2. An unusual increase in customer refunds. 3. Differences between daily cash receipts and bank deposits. 4. Sudden increase in slow payments. 5. Backlog in recording transactions. Warning signs from the accounting system: Clues to Potential Problems
  • 22. Manual Accounting Systems
  • 23. Cash 11 Accts. Pay. 21 General Ledger Accts. Rec. 12 Supplies 14 General Ledger and Subsidiary Ledgers Accounts Receivable Subsidiary Ledger A B C D Customer Accounts Accounts Payable Subsidiary Ledger A B C D Creditor Accounts
  • 24. BUYING SELLING Special Journals Providing services on account Revenue journalrecorded in Receipt of cash from any source Cash receipts journalrecorded in Purchase of items on account Purchases journalrecorded in Payment of cash for any purpose Cash payments journalrecorded in
  • 25. The Revenue Journal All sales on account are recorded in this journal. Each sales invoice is listed in numerical order. 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
  • 26. 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 Performed services on credit to MyMusic.com, $2,200. 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 The Revenue Journal
  • 27. 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 Notice that only one line is required to make the entry. 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 The Revenue Journal
  • 28. Posting from the Revenue Journal 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 To update the MyMusicClub.com account, the $2,200 debit is posted to the accounts receivable subsidiary ledger. 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00
  • 29. 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 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 Accounts Receivable Subsidiary Ledger Date Item P.R. Debit Credit Balance MyMusicClub.com Mar. 2 R35 2,200 2,200 2006 Posting from the Revenue Journal
  • 30. 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 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 Accounts Receivable Subsidiary Ledger Date Item P.R. Debit Credit Balance MyMusicClub.com Mar. 2 R35 2,200 2,200 2006 This procedure is repeated for each posting to the accounts receivable subsidiary ledger. Posting from the Revenue Journal
  • 31. Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2003 1 2 3 4 5 6 Assume that similar entries were journalized and posted during the month of March. Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 Posting from the Revenue Journal
  • 32. Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2006 1 2 3 4 5 6 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 On March 31, the revenue journal is totaled and ruled. 31 9 6 0 0 00 Posting from the Revenue Journal
  • 33. Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2006 1 2 3 4 5 6 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 Next, the revenue journal’s total ($9,600) is posted to the general ledger. 31 9 6 0 0 00 Posting the Revenue Journal Total
  • 34. ACCOUNT Accounts Receivable Account No. 12 Balance Dr. Cr. Date Dr. Cr.Item Post. Ref. 2006 Mar. 1 Balance 3 400 00 GENERAL LEDGER 31 9 600 00 13 000 00R35 Revenue Journal, page 35 Posting the Revenue Journal Total
  • 35. By placing the account number here, we indicate that $9,600 has been debited to Accounts Receivable in the general ledger. Posting the Revenue Journal Total Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2006 1 2 3 4 5 6 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 31 9 6 0 0 00 (12)(41)
  • 36. ACCOUNT Fees Earned Account No. 41 Balance Dr. Cr. Date Dr. Cr.Item Post. Ref. GENERAL LEDGER 2006 Mar. 31 R35 9 600 00 9 600 00 Posting the Revenue Journal Total
  • 37. Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2006 1 2 3 4 5 6 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 31 9 6 0 0 00 (12)(41) Placing “41” here indicates that $9,600 has been posted to the credit side of Fees Earned in the general ledger. Posting the Revenue Journal Total
  • 38. The Cash Receipts Journal
  • 39. All transactions that involve the receipt of cash are recorded in the cash receipts journal. The Cash Receipts Journal
  • 40. Mar. 1 Rent Revenue 400 400 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 NetSolutions received $400 cash on March 1 for the month’s rent. The Cash Receipts Journal 2006
  • 41. Mar. 1 Rent Revenue 400 400 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. During March, NetSolutions collected cash from three customers. 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 The Cash Receipts Journal Page 14 2006
  • 42. Each account under “Accounts Receivable Cr.” is posted to the accounts receivable subsidiary ledger. Posting the Cash Receipts Journal Mar. 1 Rent Revenue 400 400 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 Page 14 2006
  • 43. Mar. 1 Rent Revenue 400 400 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 Accounts Receivable Subsidiary Ledger Date Item P.R. Debit Credit Balance Web Cantina Mar. 1 Bal. 3,400 18 R35 2,650 6,050 2006 3,400 2,650 Posting the Cash Receipts Journal 2006 19
  • 44. Mar. 1 Rent Revenue 400 400 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 Posting the Cash Receipts Journal Accounts Receivable Subsidiary Ledger Date Item P.R. Debit Credit Balance Web Cantina Mar. 1 Bal. 3,400 18 R35 2,650 6,050 2006 3,40019 CR14 2,650 2006 
  • 45. The Cash Receipts Journal After all journalizing and posting to the accounts receivable subsidiary ledger for the month is complete, the columns are totaled.
  • 46. The Cash Receipts Journal Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 2006 The total “Cash Dr.” column equals the total of the two credit columns.
  • 47. Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 Posting the Cash Receipts Journal The three circled items are posted to the general ledger. Let’s post Accounts Receivable. 2006 Account: Accounts Receivable No. 12 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal  3,400 31 R35 9,600 13,000 2006
  • 48. Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 Posting the Cash Receipts Journal 2006 Account: Accounts Receivable No. 12 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal  3,400 31 R35 9,600 13,000 2006 7,350 5,65031 CR14
  • 49. Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 Posting the Cash Receipts Journal 2006 ( ) (12)
  • 50. Posting the Cash Receipts Journal The $7,750 total in the Cash Debit column is posted to Cash in a similar manner.
  • 51. Posting the Cash Receipts Journal The $400 credit to Rent Revenue could have been posted earlier, but posting it at the same time as other general ledger accounts is proper.
  • 52. Posting the Cash Receipts Journal A completely posted cash receipts journal is shown in the next slide.
  • 53. Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 Posted Cash Receipts Journal 42 ( ) (12) (11) 2006 
  • 54. Accounts Receivable Control Account If the accounts receivable account in the general ledger only shows summary totals, where are the individual customer balances? ACCOUNT Accounts Receivable No. 12 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal 3,400 31 R35 9,600 13,000 7,350 5,65031 CR14 
  • 55. Date Item P.R. Debit Credit Balance RapZone.com 3/6 R35 1,750 1,750 3/30 CR14 1,750 -- Date Item P.R. Debit Credit Balance Web Cantina 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 3/1 Bal. 3,400 3/18 R35 2,650 6,050 3/19 CR14 3,400 2,650  Accounts Receivable Subsidiary Ledger Accounts Receivable Control Account MyMusicClub.com ACCOUNT Accounts Receivable No. 12 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal 3,400 31 R35 9,600 13,000 7,350 5,65031 CR14 
  • 56. The purchases journal is designed for recording all purchases on account.
  • 57. On March 3, 2003, NetSolutions purchased supplies from Howard Supplies, $600. Journalizing in the Purchases Journal PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006
  • 58. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 To keep the accounts payable subsidiary ledger current, this entry is posted on March 3. Mar. 3 Howard Supplies 600 600 2006 Accounts Payable Subsidiary Ledger Date Item P.R. Dr. Cr. Balance Howard Supplies Mar 3 600 600 2006 Posting the Purchases Journal
  • 59. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Accounts Payable and Supplies will be posted as totals. Mar. 3 Howard Supplies 600 600 2006 Posting the Purchases Journal
  • 60. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 On March 7, NetSolutions purchased supplies from Donnelly Supplies, $420. Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 Journalizing in the Purchases Journal
  • 61. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 Journalizing in the Purchases Journal
  • 62. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006 On March 12, NetSolutions purchased office equipment from Jewett Business Systems, $2,800. 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 Because there isn’t a special column for Office Equipment, this purchase was recorded under “Other Accounts Dr.” Journalizing in the Purchases Journal
  • 63. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 Now, let’s look at the rest of March’s entries (assume that all postings to the accounts payable subsidiary ledger have been made). 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 Journalizing in the Purchases Journal
  • 64. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 At the end of March, all columns are totaled and equality of debits and credits is verified. Totaling the Purchases Journal 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 31 6,230 3,430 2,800 $6,230 = $3,430 + $ 2,800
  • 65. The next step is to post to the general journal. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006 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 31 6,230 3,430 2,800 Posting the Purchases Journal
  • 66. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006 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 31 6,230 3,430 2,800 ACCOUNT Accounts Payable No. 21 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal 1,230 6,230 7,46031 P11
  • 67. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2003 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 31 6,230 3,430 2,800 ACCOUNT Accounts Payable No. 21 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal 1,230 6,230 7,46031 P11 (21)
  • 68. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2003 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 31 6,230 3,430 2,800 (21) Supplies is posted as a total of $3,430 to general ledger account 21. Office Equipment is posted individually. (14) 18
  • 69. PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006 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 31 6,230 3,430 2,800 (21) (14) 18 ( ) NetSolutions had only one entry in the “Other Accounts Dr.” column. If there were others, they would be posted individually. Therefore, the total is not posted. A check mark indicates that the total was not posted.
  • 70. The Cash Payments Journal
  • 71. All payments are recorded in the cash payments journal. NetSolutions makes all payments by check.
  • 72. Let’s make all of the cash payment journal entries for March.
  • 73. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 On March 2, NetSolutions paid the rent for March by issuing Check No. 150 for $1,600. 2006 Mar. 2 150 Rent Expense 1,600 1,600
  • 74. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 On March 15, issued Check No. 151 to Grayco Supplies on account, $1,230. 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230
  • 75. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 Let’s post to the accounts payable subsidiary ledger at this time to keep the creditor’s account current. 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230 Accounts Payable Subsidiary Ledger Grayco Supplies Mar. 3 Bal. 1,230 Date Item P.R. Dr. Cr. Balance 1,230 ---15 CP7 
  • 76. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 On March 21, issued Check No. 152 as payment on account to Jewett Business Systems, $2,800. 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230 21 152 Jewett Business Sys. 2,800 2,800 
  • 77. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 On March 22, issued Check No. 153 as payment on account to Donnelly Supplies, $420. 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230 21 152 Jewett Business Sys. 2,800 2,800 22 153 Donnelly Supplies. 420 420  
  • 78. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 On March 30, issued Check No. 154 as payment for utility bill, $1,050. 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230 21 152 Jewett Business Sys. 2,800 2,800 22 153 Donnelly Supplies. 420 420 30 154 Utilities Expense 1,050 1,050   
  • 79. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 On March 31, issued Check No. 155 on account to Howard Supplies, $600 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230 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   
  • 80. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 The journal is ruled, summed, and verified for equality of debits and the “Cash Cr.” column. 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230 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 31 2,650 5,050 7,700    
  • 81. Individual items in the “Other Accounts Dr.” column are posted. Then the totals for “Accounts Payable Dr.” and “Cash Cr.” are posted. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230 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 31 2,650 5,050 7,700 (21) (11) 52 54     ( )
  • 82. Accounts Payable Accounts Payable Control
  • 83. Donnelly Supplies Date Item P.R. Debit Credit Balance Grayco Supplies Date Item P.R. Debit Credit Balance Howard Supplies Date Item P.R. Debit Credit Balance Mar 2 P11 420 420 19 P11 1,450 1,870 22 CP7 420 1,450 Accounts Payable Subsidiary Ledger Accounts Payable (Controlling) ACCOUNT Accounts Payable No. 12 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal 1,230 31 P11 6,230 7,460 31 CP7 5,050 2,410 Mar 1 Bal. 1,230 15 CP7 1,230 0 --  Mar 3 P11 600 600 27 P11 960 1,560 31 CP7 600 960 Jewett Business Systems also has a zero balance, so that account was omitted for space reasons.
  • 84. Advantages of a Computerized Accounting System Over a Manual Accounting System 1. Computerized systems simplify the record- keeping process. 2. Computerized systems are generally more accurate. 3. Computerized systems provide management current account balance information to support decision making.
  • 85. The Revenue and Collection Cycle in QuickBooks From Exhibit 10, page 203 of textbook Mail invoice to customer
  • 86. The Revenue and Collection Cycle in QuickBooks Continued From Exhibit 10, page 203 of textbook
  • 87. The Revenue and Collection Cycle in QuickBooks Continued From Exhibit 10, page 203 of textbook
  • 88. Advanced Areas Where the Internet is Being Used for Business Purposes Supply chain management (SCM) Customer relationship management (CRM) Product life-cycle management (PLM)
  • 89. The End Chapter 5

×