Chapter 5          Power Notes   Accounting Systems and Internal Controls             Learning Objectives   1.   Basic Acc...
Chapter 5              Power Notes   Accounting Systems and Internal Controls Slide # Power Note Topics    3   •   Interna...
Internal Control Framework1. Control Environment     Control Environment                             C5 - 3
Internal Control Framework1. Control Environment2. Risk Assessment      Risk Assessment     Control Environment           ...
Internal Control Framework1. Control Environment2. Risk Assessment3. Control Procedures     Control Procedures      Risk A...
Internal Control Framework1. Control Environment2. Risk Assessment3. Control Procedures4. Monitoring         Monitoring   ...
Internal Control Framework1. Control Environment2. Risk Assessment3. Control Procedures4. Monitoring5. Information and Com...
Internal Control Procedures• Competent Personnel• Rotating Duties• Assigning Responsibility• Separating Responsibilities f...
General Ledger and Subsidiary Ledgers General LedgerCashAccts. ReceivableSuppliesAccts. Payable                           ...
General Ledger and Subsidiary Ledgers General LedgerCash                    Accounts Receivable                         Su...
General Ledger and Subsidiary Ledgers General LedgerCash                    Accounts Receivable                         Su...
Special JournalsSELLINGBUYING                             C5 - 12
Special JournalsSELLINGRendering of services on account       recorded          Revenue Journal       inBUYING            ...
Special JournalsSELLINGRendering of services on account       recorded           Revenue Journal       inReceipt of cash f...
Special JournalsSELLINGRendering of services on account       recorded           Revenue Journal       inReceipt of cash f...
Special JournalsSELLINGRendering of services on account       recorded           Revenue Journal       inReceipt of cash f...
The Revenue Journal Revenue Journal                                   Page 35     Invoice                      Post    Acc...
Posting to the Subsidiary Ledger      Revenue Journal                                      Page 35          Invoice       ...
Posting to the Subsidiary Ledger      Revenue Journal                                     Page 35          Invoice        ...
Posting to the Subsidiary Ledger      Revenue Journal                                      Page 35          Invoice       ...
Posting to the General Ledger    Revenue Journal                                       Page 35        Invoice             ...
Posting to the General Ledger    Revenue Journal                                       Page 35        Invoice             ...
The Cash Receipts Journal Cash Receipts Journal                                 Page 14                                  O...
Posting to the Subsidiary Ledger       Cash Receipts Journal                                   Page 14                    ...
Posting to the Subsidiary Ledger       Cash Receipts Journal                                    Page 14                   ...
Posting to the General Ledger  Cash Receipts Journal                                    Page 14                           ...
Posting to the General Ledger  Cash Receipts Journal                                     Page 14                          ...
Account: Accounts Receivable           No. 12General Ledger     Date   Item    P.R.   Debit   Credit   Balance  Accounts  ...
Account: Accounts Receivable                   No. 12General Ledger    Date     Item     P.R.       Debit    Credit   Bala...
Account: Accounts Receivable                   No. 12General Ledger    Date     Item     P.R.       Debit    Credit   Bala...
The Purchases Journal Purchases Journal                                                  Page 11                          ...
Posting to the Subsidiary Ledger Purchases Journal                                                          Page 11       ...
Posting to the Subsidiary Ledger Purchases Journal                                                           Page 11      ...
Posting to the Subsidiary Ledger Purchases Journal                                                          Page 11       ...
Posting to the General Ledger Purchases Journal                                                         Page 11           ...
Posting to the General Ledger Purchases Journal                                                            Page 11        ...
The Cash Payments Journal Cash Payments Journal                                   Page 7                                  ...
Posting to the Subsidiary Ledger Cash Payments Journal                                          Page 7                    ...
Posting to the Subsidiary Ledger Cash Payments Journal                                          Page 7                    ...
Posting to the General Ledger Cash Payments Journal                                          Page 7                       ...
Posting to the General Ledger Cash Payments Journal                                           Page 7                      ...
Chapter 5             Power Notes   Accounting Systems and Internal Controls  This is the last slide in Chapter 5.     Not...
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05 Accounting System and Internal Controls

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05 Accounting System and Internal Controls

  1. 1. Chapter 5 Power Notes Accounting Systems and Internal Controls Learning Objectives 1. Basic Accounting Systems 2. Internal Control 3. Manual Accounting Systems 4. Adapting Manual Accounting Systems 5. Computerized Accounting Systems C5 C5 - 1
  2. 2. Chapter 5 Power Notes Accounting Systems and Internal Controls Slide # Power Note Topics 3 • Internal Control Framework, Procedures 9 • Special Journals, Ledgers 17 • Revenue Journal and Ledgers 23 • Cash Receipts Journal and Ledgers 31 • Purchases Journal and Ledgers 37 • Cash Payments Journal and Ledgers Note: To select a topic type the slide # and press Enter. C5 - 2
  3. 3. Internal Control Framework1. Control Environment Control Environment C5 - 3
  4. 4. Internal Control Framework1. Control Environment2. Risk Assessment Risk Assessment Control Environment C5 - 4
  5. 5. Internal Control Framework1. Control Environment2. Risk Assessment3. Control Procedures Control Procedures Risk Assessment Control Environment C5 - 5
  6. 6. Internal Control Framework1. Control Environment2. Risk Assessment3. Control Procedures4. Monitoring Monitoring Control Procedures Risk Assessment Control Environment C5 - 6
  7. 7. Internal Control Framework1. Control Environment2. Risk Assessment3. Control Procedures4. Monitoring5. Information and Communication Communication Monitoring Control Procedures Risk Assessment Control Environment C5 - 7
  8. 8. Internal Control Procedures• Competent Personnel• Rotating Duties• Assigning Responsibility• Separating Responsibilities for Related Operations• Separating Accounting and Asset Custody• Proofs and Security Measures C5 - 8
  9. 9. General Ledger and Subsidiary Ledgers General LedgerCashAccts. ReceivableSuppliesAccts. Payable C5 - 9
  10. 10. General Ledger and Subsidiary Ledgers General LedgerCash Accounts Receivable Subsidiary LedgerAccts. Receivable Customer Accounts A B C DSuppliesAccts. Payable C5 - 10
  11. 11. General Ledger and Subsidiary Ledgers General LedgerCash Accounts Receivable Subsidiary LedgerAccts. Receivable Customer Accounts A B C DSupplies Accounts Payable Subsidiary LedgerAccts. Payable Creditor Accounts A B C D C5 - 11
  12. 12. Special JournalsSELLINGBUYING C5 - 12
  13. 13. Special JournalsSELLINGRendering of services on account recorded Revenue Journal inBUYING C5 - 13
  14. 14. Special JournalsSELLINGRendering of services on account recorded Revenue Journal inReceipt of cash from any source recorded Cash Receipts Journal inBUYING C5 - 14
  15. 15. Special JournalsSELLINGRendering of services on account recorded Revenue Journal inReceipt of cash from any source recorded Cash Receipts Journal inBUYINGPurchase of items on account recorded Purchases Journal in C5 - 15
  16. 16. Special JournalsSELLINGRendering of services on account recorded Revenue Journal inReceipt of cash from any source recorded Cash Receipts Journal inBUYINGPurchase of items on account recorded Purchases Journal inPayment of cash for any purpose recorded Cash Payments Journal in C5 - 16
  17. 17. The Revenue Journal Revenue Journal Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit3/2 615 MyMusicClub.com 2,2003/6 616 RapZone.com 1,7503/18 617 Web Cantina 2,6503/27 618 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. C5 - 17
  18. 18. Posting to the Subsidiary Ledger Revenue Journal Page 35 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 9,600Each debit is Accounts Receivable Subsidiary Ledgerposted to the MyMusicClub.comaccountsreceivable Date Item P.R. Debit Credit Balancesubsidiaryledger. C5 - 18
  19. 19. Posting to the Subsidiary Ledger Revenue Journal Page 35 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 9,600Each debit is Accounts Receivable Subsidiary Ledgerposted to the MyMusicClub.comaccountsreceivable Date Item P.R. Debit Credit Balancesubsidiary 3/2 R35 2,200 2,200ledger. C5 - 19
  20. 20. Posting to the Subsidiary Ledger Revenue Journal Page 35 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 9,600Each debit is Accounts Receivable Subsidiary Ledgerposted to the MyMusicClub.comaccountsreceivable Date Item P.R. Debit Credit Balancesubsidiary 3/1 R35 2,200 2,200ledger. 3/27 R35 3,000 5,200 C5 - 20
  21. 21. Posting to the General Ledger Revenue Journal Page 35 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 9,600The total is General Ledgerposted to Account: Accounts Receivable No. 12AccountsReceivable Date Item P.R. Debit Credit BalanceAND to Fees 3/1 Bal  3,400Earned. C5 - 21
  22. 22. Posting to the General Ledger Revenue Journal Page 35 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 General Ledgerposted to Account: Accounts Receivable No. 12AccountsReceivable Date Item P.R. Debit Credit BalanceAND to Fees 3/1 Bal  3,400Earned. 3/31 R35 9,600 13,000 C5 - 22
  23. 23. The Cash Receipts Journal Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable CashDate Account Credited Ref. Credit Credit Debit3/1 Rent Revenue 400 4003/19 Web Cantina 3,400 3,4003/28 MyMusicClub.com 2,200 2,2003/30 RapZone.com 1,750 1,750 Totals 400 7,350 7,750 All cash received from any source is recorded in this journal. The total Cash Debit column equals the total of the two credit columns. C5 - 23
  24. 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 7,750Each Accounts Accounts Receivable Subsidiary LedgerReceivable credit is Web Cantinaposted to the Date Item P.R. Debit Credit Balanceaccounts receivable 3/1 Bal  3,400subsidiary ledger. 3/27 R35 2,650 6,050 C5 - 24
  25. 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 7,750Each Accounts Accounts Receivable Subsidiary LedgerReceivable credit is Web Cantinaposted to the Date Item P.R. Debit Credit Balanceaccounts receivable 3/1 Bal  3,400subsidiary ledger. 3/18 R35 2,650 6,050 3/19 CR14 3,400 2,650 C5 - 25
  26. 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 7,350 7,750 ( )The three General Ledgerhighlighted Account: Accounts Receivable No. 12items are Date Item P.R. Debit Credit Balanceposted to thegeneral ledger. 3/1 Bal  3,400 3/31 R35 9,600 13,000 C5 - 26
  27. 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 7,350 7,750 ( ) (12) (11)The three General Ledgerhighlighted Account: Accounts Receivable No. 12items are Date Item P.R. Debit Credit Balanceposted to thegeneral ledger. 3/1 Bal  3,400 3/31 R35 9,600 13,000 3/31 CR14 7,350 5,650 C5 - 27
  28. 28. Account: Accounts Receivable No. 12General Ledger Date Item P.R. Debit Credit Balance Accounts 3/1 Bal.  3,400 Receivable 3/31 R35 9,600 13,000Control Account 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? C5 - 28
  29. 29. Account: Accounts Receivable No. 12General Ledger Date Item P.R. Debit Credit Balance Accounts 3/1 Bal.  3,400 Receivable 3/31 R35 9,600 13,000Control Account 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 Accounts 3/28 CR14 2,200 3,000 Receivable RapZone.com Subsidiary Date Item P.R. Debit Credit Balance 3/6 R35 1,750 1,750 Ledger 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 C5 - 29
  30. 30. Account: Accounts Receivable No. 12General Ledger Date Item P.R. Debit Credit Balance Accounts 3/1 Bal.  3,400 Receivable 3/31 R35 9,600 13,000Control Account 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 Accounts 3/28 CR14 2,200 3,000 Receivable RapZone.com Subsidiary Date Item P.R. Debit Credit Balance 3/6 R35 1,750 1,750 Ledger 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 C5 - 30
  31. 31. The Purchases Journal Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts PostDate Account Credited Ref. Credit Debit Debit Ref. Amount3/3 Howard Supplies 600 6003/7 Donnelly Supplies 420 4203/12 Jewett Bus. Syst. 2,800 Office Equip. 2,8003/19 Donnelly Supplies 1,450 1,4503/27 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. C5 - 31
  32. 32. Posting to the Subsidiary Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts PostDate Account Credited Ref. Credit Debit Debit Ref. Amount3/3 Howard Supplies 600 6003/7 Donnelly Supplies 420 4203/12 Jewett Bus. Syst. 2,800 Office Equip. 2,8003/19 Donnelly Supplies 1,450 1,4503/27 Howard Supplies 960 960 Totals 6,230 3,430 2,800 Each credit is Accounts Payable Subsidiary Ledger posted to the Howard Supplies accounts payable Date Item P.R. Debit Credit Balance subsidiary ledger. C5 - 32
  33. 33. Posting to the Subsidiary Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts PostDate Account Credited Ref. Credit Debit Debit Ref. Amount3/3 Howard Supplies  600 6003/7 Donnelly Supplies 420 4203/12 Jewett Bus. Syst. 2,800 Office Equip. 2,8003/19 Donnelly Supplies 1,450 1,4503/27 Howard Supplies 960 960 Totals 6,230 3,430 2,800 Each credit is Accounts Payable Subsidiary Ledger posted to the Howard Supplies accounts payable Date Item P.R. Debit Credit Balance subsidiary ledger. 3/3 P11 600 600 C5 - 33
  34. 34. Posting to the Subsidiary Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts PostDate Account Credited Ref. Credit Debit Debit Ref. Amount3/3 Howard Supplies  600 6003/7 Donnelly Supplies  420 4203/12 Jewett Bus. Syst.  2,800 Office Equip. 2,8003/19 Donnelly Supp.  1,450 1,4503/27 Howard Supplies  960 960 Totals 6,230 3,430 2,800 Each credit is Accounts Payable Subsidiary Ledger posted to the Howard Supplies accounts payable Date Item P.R. Debit Credit Balance subsidiary ledger. 3/3 P11 600 600 3/27 P11 960 1,560 C5 - 34
  35. 35. Posting to the General Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts PostDate Account Credited Ref. Credit Debit Debit Ref. Amount3/3 Howard Supplies  600 6003/7 Donnelly Supplies  420 4203/12 Jewett Bus. Syst.  2,800 Office Equip. 2,8003/19 Donnelly Supp.  1,450 1,4503/27 Howard Supplies  960 960 Totals 6,230 3,430 2,800  General Ledger The highlighted Date Item P.R. Debit Credit Balance Account: Accounts Payable No. 21 items are posted Date Item P.R. Debit Credit Balance to the general 3/1 Bal.  1,230 ledger. C5 - 35
  36. 36. Posting to the General Ledger Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts PostDate Account Credited Ref. Credit Debit Debit Ref. Amount3/3 Howard Supplies  600 6003/7 Donnelly Supplies  420 4203/12 Jewett Bus. Syst.  2,800 Office Equip. 18 2,8003/19 Donnelly Supp.  1,450 1,4503/27 Howard Supplies  960 960 Totals 6,230 3,430 2,800 ( 21) (14) ( ) General Ledger The highlighted Date Item P.R. Debit Credit Balance Account: Accounts Payable No. 21 items are posted Date Item P.R. Debit Credit Balance to the general 3/1 Bal.  1,230 ledger. 3/31 P11 6,230 7,460 C5 - 36
  37. 37. The Cash Payments Journal Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable CashDate No. Account Debited Ref. Debit Debit Credit3/2 150 Rent Expense 1,600 1,6003/15 151 Grayco Supplies 1,230 1,2303/21 152 Jewett Bus. Syst. 2,800 2,8003/22 153 Donnelly Supp. 420 4203/30 154 Utilities Expense 1,050 1,0503/31 155 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. C5 - 37
  38. 38. Posting to the Subsidiary Ledger Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable CashDate No. Account Debited Ref. Debit Debit Credit3/2 150 Rent Expense 1,600 1,6003/15 151 Grayco Supplies 1,230 1,2303/21 152 Jewett Bus. Syst. 2,800 2,8003/22 153 Donnelly Supp. 420 4203/30 154 Utilities Expense 1,050 1,0503/31 155 Howard Supplies 600 600 Totals 2,650 5,050 7,700 Accounts Payable Subsidiary LedgerEach AccountsPayable debit is Grayco Suppliesposted to the Date Item P.R. Debit Credit Balanceaccounts payable 3/1 Bal.  1,230subsidiary ledger. C5 - 38
  39. 39. Posting to the Subsidiary Ledger Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable CashDate No. Account Debited Ref. Debit Debit Credit3/2 150 Rent Expense 1,600 1,6003/15 151 Grayco Supplies  1,230 1,2303/21 152 Jewett Bus. Syst. 2,800 2,8003/22 153 Donnelly Supp. 420 4203/30 154 Utilities Expense 1,050 1,0503/31 155 Howard Supplies 600 600 Totals 2,650 5,050 7,700 Accounts Payable Subsidiary LedgerEach AccountsPayable debit is Grayco Suppliesposted to the Date Item P.R. Debit Credit Balanceaccounts payable 3/1 Bal.  1,230subsidiary ledger. 3/15 CP7 1,230 0 C5 - 39
  40. 40. Posting to the General Ledger Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable CashDate No. Account Debited Ref. Debit Debit Credit3/2 150 Rent Expense 1,600 1,6003/15 151 Grayco Supplies  1,230 1,2303/21 152 Jewett Bus. Syst.  2,800 2,8003/22 153 Donnelly Supp.  420 4203/30 154 Utilities Expense 1,050 1,0503/31 155 Howard Supplies  600 600 Totals 2,650 5,050 7,700 ( ) General LedgerThe highlighted Date Item P.R. Debit Credit Balance Account: Accounts Payable No. 21items are postedto the general 3/1 Bal.  1,230ledger. 3/31 P11 6,230 7,460 C5 - 40
  41. 41. Posting to the General Ledger Cash Payments Journal Page 7 Other Accounts Ck. Post Accounts Payable CashDate No. Account Debited Ref. Debit Debit Credit3/2 150 Rent Expense 52 1,600 1,6003/15 151 Grayco Supplies  1,230 1,2303/21 152 Jewett Bus. Syst.  2,800 2,8003/22 153 Donnelly Supp.  420 4203/30 154 Utilities Expense 54 1,050 1,0503/31 155 Howard Supplies  600 600 Totals 2,650 5,050 7,700 ( ) (21) (11) General LedgerThe highlighted Date Item P.R. Debit Credit Balance Account: Accounts Payable No. 21items are postedto the general 3/1 Bal.  1,230ledger. 3/31 P11 6,230 7,460 3/31 CP7 5,050 2,410 C5 - 41
  42. 42. Chapter 5 Power Notes Accounting Systems and Internal Controls This is the last slide in Chapter 5. Note: To see the topic slide, type 2 and press Enter. C5 - 42
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