Ch05

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Ch05

  1. 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. 2. Some of the action has been automated, Some of the action has been automated, so click the mouse when you see this so click the mouse when you see this lightning bolt in the lower right-hand lightning bolt in the lower right-hand corner of the screen. You can point and corner of the screen. You can point and click anywhere on the screen. click anywhere on the screen.
  3. 3. Objectives Objectives 1. Define an accounting system and After studying this describe its After studying this implementation. chapter, you should chapter, you should 2. List the three objectives of internal be able to: be able to: 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.
  4. 4. Objectives Objectives 4. Describe and give examples of additional subsidiary ledgers and modified special journals. 5. Apply computerized accounting to the revenue and collection cycle. 6. Describe the basic features of e-commerce.
  5. 5. Basic Basic Accounting Accounting System System
  6. 6. Analysis Design Implementation F E E D B A C K
  7. 7. Objectives of Internal Objectives of Internal Control Control To provide reasonable assurance that: 1. assets are safeguarded and used for business purposes. 2. business information is accurate. 3. employees comply with laws and regulations.
  8. 8. Elements of Internal Control 1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication
  9. 9. Elements of Internal Control 1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication
  10. 10. Management philosophy and Management philosophy and operating style influences the operating style influences the control environment. control environment.
  11. 11. Elements of Internal Control Elements of Internal Control 1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication
  12. 12. Once risks are identified, they can be Once risks are identified, they can be analyzed to estimate their significance, to analyzed to estimate their significance, to assess their likelihood of occurring, and to assess their likelihood of occurring, and to determine actions that will minimize them. determine actions that will minimize them.
  13. 13. Elements of Internal Control Elements of Internal Control 1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication
  14. 14. Control Procedures 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. 15. Control Procedures 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. 16. Separating Otherwise, the following Separating Otherwise, the following Responsibilities for abuses are possible: Responsibilities for abuses are possible: Related Operations 1. Orders may be placed on the basis of Related Operations 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.
  17. 17. Control Procedures 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. 18. Custody of Assets Independent check Independent check Operations Accounting Independent check
  19. 19. Elements of Internal Control Elements of Internal Control 1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication
  20. 20. Clues to Potential Problems Clues to Potential Problems Warning signs with regard to people: 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.
  21. 21. Clues to Potential Problems Clues to Potential Problems Warning signs from the accounting system: 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.
  22. 22. Manual Accounting Systems
  23. 23. General Ledger and Subsidiary Ledgers General Ledger and Subsidiary Ledgers General Ledger Cash 11 Accounts Receivable Subsidiary Ledger Accts. Rec. 12 Customer Accounts A B C Supplies 14 Accounts Payable Subsidiary Ledger Accts. Pay. 21 D Creditor Accounts A B C D
  24. 24. Special Journals SELLING Providing services on account recorded in Revenue journal recorded in Receipt of cash from any source recorded in recorded in Cash receipts journal BUYING Purchase of items on account recorded in Purchases journal recorded in Payment of cash for any purpose recorded in recorded in Cash payments journal
  25. 25. The Revenue Journal The Revenue Journal Page 35 Revenue Journal Date Invoice No. Account Debited Post Ref. Accts. Rec. – Debit Fees Earned – Credit 1 1 2 2 3 3 4 4 5 5 6 6 All sales on account are recorded in All sales on account are recorded in this journal. Each sales invoice is this journal. Each sales invoice is listed in numerical order. listed in numerical order.
  26. 26. The Revenue Journal The Revenue Journal Page 35 Revenue Journal Date Invoice No. 2006 1 Mar. 2 615 2 Account Debited MyMusicClub.com Post Ref. Accts. Rec. – Debit Fees Earned – Credit 2 2 0 0 00 1 2 3 3 4 4 5 5 6 6 Performed services on credit to Performed services on credit to MyMusic.com, $2,200. MyMusic.com, $2,200.
  27. 27. The Revenue Journal The Revenue Journal Page 35 Revenue Journal Date Invoice No. 2006 1 Mar. 2 615 2 Account Debited MyMusicClub.com Post Ref. Accts. Rec. – Debit Fees Earned – Credit 2 2 0 0 00 1 2 3 3 4 4 5 5 6 6 Notice that only one line is Notice that only one line is required to make the entry. required to make the entry.
  28. 28. Posting from the Revenue Journal Posting from the Revenue Journal Page 35 Revenue Journal Date Invoice No. 2006 1 Mar. 2 615 2 Account Debited MyMusicClub.com Post Ref. Accts. Rec. – Debit Fees Earned – Credit 2 2 0 0 00 1 2 3 3 4 4 5 5 6 6 To update the MyMusicClub.com account, To update the MyMusicClub.com account, the $2,200 debit is posted to the accounts the $2,200 debit is posted to the accounts receivable subsidiary ledger. receivable subsidiary ledger.
  29. 29. Posting from the Revenue Journal Posting from the Revenue Journal Page 35 Revenue Journal Date Invoice No. 2006 1 Mar. 2 615 2 Post Ref. Account Debited Accts. Rec. – Debit Fees Earned – Credit MyMusicClub.com 2 2 0 0 00 1 2 3 3 4 4 5 6 Accounts Receivable Subsidiary Ledger MyMusicClub.com Date 2006 Mar. 2 Item P.R. R35 Debit 2,200 Credit Balance 2,200 5 6
  30. 30. Posting from the Revenue Journal Posting from the Revenue Journal Page 35 Revenue Journal Date Invoice No. 2006 1 Mar. 2 615 2 Post Ref. Account Debited Accts. Rec. – Debit Fees Earned – Credit MyMusicClub.com 2 2 0 0 00 1 2 3 3 4 4 5 6 Accounts Receivable Subsidiary Ledger MyMusicClub.com Date 2006 Mar. 2 Item P.R. R35 Debit 2,200 Credit Balance 2,200 This procedure is repeated for each posting to the accounts receivable subsidiary ledger. 5 6
  31. 31. Posting from the Revenue Journal Posting from the Revenue Journal Page 35 Revenue Journal Date Invoice No. 2006 2003 1 Mar. 2 615 2 6 616 3 18 617 4 27 618 Account Debited Post Ref. Accts. Rec. – Debit Fees Earned – Credit MyMusicClub.com 2 2 0 0 00 1 RapZone.com 1 7 5 0 00 2 Web Cantina 2 6 5 0 00 3 MyMusicClub.com 3 0 0 0 00 4 5 5 6 6 Assume that similar entries were Assume that similar entries were journalized and posted during the journalized and posted during the month of March. month of March.
  32. 32. Posting from the Revenue Journal Posting from the Revenue Journal Page 35 Revenue Journal Date Invoice No. 2006 1 Mar. 2 615 2 6 616 3 18 617 4 27 618 5 31 Account Debited Post Ref. Accts. Rec. – Debit Fees Earned – Credit MyMusicClub.com 2 2 0 0 00 1 RapZone.com 1 7 5 0 00 2 Web Cantina 2 6 5 0 00 3 MyMusicClub.com 3 0 0 0 00 4 9 6 0 0 00 5 6 6 On March 31, the revenue journal is On March 31, the revenue journal is totaled and ruled. totaled and ruled.
  33. 33. Posting the Revenue Journal Total Posting the Revenue Journal Total Page 35 Revenue Journal Date Invoice No. 2006 1 Mar. 2 615 2 6 616 3 18 617 4 27 618 5 31 Account Debited Post Ref. Accts. Rec. – Debit Fees Earned – Credit MyMusicClub.com 2 2 0 0 00 1 RapZone.com 1 7 5 0 00 2 Web Cantina 2 6 5 0 00 3 MyMusicClub.com 3 0 0 0 00 4 9 6 0 0 00 5 6 6 Next, the revenue journal’s total Next, the revenue journal’s total ($9,600) is posted to the general ledger. ($9,600) is posted to the general ledger.
  34. 34. Posting the Revenue Journal Total Posting the Revenue Journal Total GENERAL LEDGER ACCOUNT Date 2006 Mar. 1 31 Accounts Receivable Item Post. Ref. Account No. 12 Balance Dr. Balance Cr. Dr. 3 400 00 R359 600 00 Revenue Journal, page 35 13 000 00 Cr.
  35. 35. Posting the Revenue Journal Total Posting the Revenue Journal Total Page 35 Revenue Journal Date Invoice No. 2006 1 Mar. 2 615 2 6 616 3 18 617 Accts. Rec. – Debit Fees Earned – Credit 27 618 5 31 MyMusicClub.com 2 2 0 0 00 1 RapZone.com 1 7 5 0 00 2 Web Cantina 2 6 5 0 00 3 MyMusicClub.com 3 0 0 0 00 4 9 6 0 0 00 5 (12)(41) 4 6 Account Debited Post Ref. 6 By placing the account number here, we indicate that $9,600 has been debited to Accounts Receivable in the general ledger.
  36. 36. Posting the Revenue Journal Total Posting the Revenue Journal Total GENERAL LEDGER ACCOUNT Date 2006 Mar. 31 Fees Earned Item Post. Ref. R35 Account No. 41 Balance Dr. Cr. 9 600 00 Dr. Cr. 9 600 00
  37. 37. Posting the Revenue Journal Total Posting the Revenue Journal Total Page 35 Revenue Journal Date Invoice No. 2006 1 Mar. 2 615 2 6 616 3 18 617 Accts. Rec. – Debit Fees Earned – Credit 27 618 5 31 MyMusicClub.com 2 2 0 0 00 1 RapZone.com 1 7 5 0 00 2 Web Cantina 2 6 5 0 00 3 MyMusicClub.com 3 0 0 0 00 4 9 6 0 0 00 5 (12)(41) 4 6 Account Debited Post Ref. 6 Placing “41” here indicates that $9,600 has been posted to the credit side of Fees Earned in the general ledger.
  38. 38. The Cash Receipts Journal The Cash Receipts Journal
  39. 39. The Cash Receipts Journal The Cash Receipts Journal All transactions that All transactions that involve the receipt of cash involve the receipt of cash are recorded in the cash are recorded in the cash receipts journal. receipts journal.
  40. 40. The Cash Receipts Journal The Cash Receipts Journal CASH RECEIPTS JOURNAL Date 2006 Account Credited Mar. 1 Rent Revenue Post Ref. Page 14 Other Accounts Cr. Accounts Receivable Cr. 400 NetSolutions received $400 cash NetSolutions received $400 cash on March 1 for the month’s rent. on March 1 for the month’s rent. Cash Dr. 400
  41. 41. The Cash Receipts Journal The Cash Receipts Journal CASH RECEIPTS JOURNAL Date Account Credited Mar. 1 19 28 30 Rent Revenue Web Cantina MyMusicClub.com RapZone.com 2006 Post Ref. Page 14 Other Accounts Cr. Accounts Receivable Cr. 400 3,400 2,200 1,750 Cash Dr. 400 3,400 2,200 1,750 During March, NetSolutions collected During March, NetSolutions collected cash from three customers. cash from three customers.
  42. 42. Posting the Cash Receipts Journal Posting the Cash Receipts Journal CASH RECEIPTS JOURNAL Date Account Credited Mar. 1 19 28 30 Rent Revenue Web Cantina MyMusicClub.com RapZone.com 2006 Post Ref. Page 14 Other Accounts Cr. Accounts Receivable Cr. 400 3,400 2,200 1,750 Cash Dr. 400 3,400 2,200 1,750 Each account under “Accounts Each account under “Accounts Receivable Cr.” is posted to the accounts Receivable Cr.” is posted to the accounts receivable subsidiary ledger. receivable subsidiary ledger.
  43. 43. Posting the Cash Receipts Journal Posting the Cash Receipts Journal CASH RECEIPTS JOURNAL Date Account Credited Mar. 1 19 28 30 Page 14 Post Ref. Rent Revenue Web Cantina MyMusicClub.com RapZone.com 2006 Other Accounts Cr. Accounts Receivable Cr. 400 400 3,400 2,200 1,750 3,400 2,200 1,750 Accounts Receivable Subsidiary Ledger Web Cantina Date Item P.R. Debit Credit 2006 Mar. 1 Bal. 18 R35 19 2,650 3,400 Cash Dr. Balance 3,400 6,050 2,650
  44. 44. Posting the Cash Receipts Journal Posting the Cash Receipts Journal CASH RECEIPTS JOURNAL Date Account Credited Mar. 1 19 28 30 Post Ref. Rent Revenue Web Cantina MyMusicClub.com RapZone.com 2006 Page 14 Other Accounts Cr. √ Accounts Receivable Cr. 400 400 3,400 2,200 1,750 3,400 2,200 1,750 Accounts Receivable Subsidiary Ledger Web Cantina Date Item P.R. Debit Credit 2006 Mar. 1 Bal. 18 R35 19 CR14 2,650 3,400 Cash Dr. Balance 3,400 6,050 2,650
  45. 45. The Cash Receipts Journal The Cash Receipts Journal After all journalizing and After all journalizing and posting to the accounts posting to the accounts receivable subsidiary ledger for receivable subsidiary ledger for the month is complete, the the month is complete, the columns are totaled. columns are totaled.
  46. 46. The Cash Receipts Journal The Cash Receipts Journal CASH RECEIPTS JOURNAL Date Account Credited Mar. 1 19 28 30 31 Rent Revenue Web Cantina MyMusicClub.com RapZone.com 2006 Page 14 Post Ref. Other Accounts Cr. Accounts Receivable Cr. 400 √ √ √ 400 3,400 2,200 1,750 7,350 Cash Dr. 400 3,400 2,200 1,750 7,750 The total “Cash Dr.” column The total “Cash Dr.” column equals the total of the two equals the total of the two credit columns. credit columns.
  47. 47. Posting the Cash Receipts Journal Posting the Cash Receipts Journal CASH RECEIPTS JOURNAL Date Account Credited Mar. 1 19 28 30 31 Rent Revenue Web Cantina MyMusicClub.com RapZone.com 2006 Page 14 Post Ref. Other Accounts Cr. Accounts Receivable Cr. 400 √ √ √ 400 3,400 2,200 1,750 7,350 Cash Dr. 400 3,400 2,200 1,750 7,750 GENERAL LEDGER Account: Accounts Receivable No. 12 The three Item P.R. items Credit Balance The three circled items are Date circled Debit are Mar. Bal √ posted to1the general ledger. 3,400 posted to the general ledger. 31 R35 9,600 13,000 Let’s post Accounts Receivable.. Let’s post Accounts Receivable 2006
  48. 48. Posting the Cash Receipts Journal Posting the Cash Receipts Journal CASH RECEIPTS JOURNAL Date Account Credited Mar. 1 19 28 30 31 Rent Revenue Web Cantina MyMusicClub.com RapZone.com 2006 Page 14 Post Ref. Other Accounts Cr. Accounts Receivable Cr. 400 √ √ √ 400 3,400 2,200 1,750 7,350 Cash Dr. 400 3,400 2,200 1,750 7,750 GENERAL LEDGER Account: Accounts Receivable Date Item P.R. 2006 Debit Credit Mar. 1 Bal √ 31 R35 9,600 31 CR14 7,350 No. 12 Balance 3,400 13,000 5,650
  49. 49. Posting the Cash Receipts Journal Posting the Cash Receipts Journal CASH RECEIPTS JOURNAL Date Account Credited Mar. 1 19 28 30 31 Rent Revenue Web Cantina MyMusicClub.com RapZone.com 2006 Page 14 Post Ref. Other Accounts Cr. Accounts Receivable Cr. 400 √ √ √ 400 3,400 2,200 1,750 7,350 ( √) (12) Cash Dr. 400 3,400 2,200 1,750 7,750
  50. 50. Posting the Cash Receipts Journal Posting the Cash Receipts Journal The $7,750 total in the The $7,750 total in the Cash Debit column is Cash Debit column is posted to Cash in a similar posted to Cash in a similar manner. manner.
  51. 51. Posting the Cash Receipts Journal Posting the Cash Receipts Journal The $400 credit to Rent Revenue The $400 credit to Rent Revenue could have been posted earlier, but could have been posted earlier, but posting it at the same time as other posting it at the same time as other general ledger accounts is proper. general ledger accounts is proper.
  52. 52. Posting the Cash Receipts Journal Posting the Cash Receipts Journal A completely posted cash A completely posted cash receipts journal is shown receipts journal is shown in the next slide. in the next slide.
  53. 53. Posted Cash Receipts Journal Posted Cash Receipts Journal CASH RECEIPTS JOURNAL Date Account Credited Mar. 1 19 28 30 31 Rent Revenue Web Cantina MyMusicClub.com RapZone.com 2006 Page 14 Post Ref. 42 Other Accounts Cr. Accounts Receivable Cr. 400 √ √ √ 400 ( ) √ 3,400 2,200 1,750 7,350 (12) Cash Dr. 400 3,400 2,200 1,750 7,750 (11)
  54. 54. Accounts Receivable Control Account GENERAL LEDGER ACCOUNT Accounts Receivable Date Item P.R. Debit Credit Mar. 1 Bal √ 31 R35 9,600 31 CR14 7,350 No. 12 Balance 3,400 13,000 5,650 If the accounts receivable If the accounts receivable account in the general ledger account in the general ledger only shows summary totals, only shows summary totals, where are the individual where are the individual customer balances? customer balances?
  55. 55. Accounts Receivable Control Account GENERAL LEDGER ACCOUNT Accounts Receivable Date Item P.R. Debit Credit Mar. 1 Bal √ 31 R35 9,600 31 CR14 7,350 No. 12 Balance 3,400 13,000 5,650 MyMusicClub.com Date Accounts Receivable Subsidiary Ledger Item Debit Credit Balance R35 2,200 R35 3,000 CR14 3/2 3/27 3/28 P.R. 2,200 5,200 3,000 2,200 RapZone.com Date Item Debit Credit Balance R35 1,750 CR14 3/6 3/30 P.R. 1,750 -- 1,750 Web Cantina Date Item P.R. Debit Credit Balance 3/1 Bal. 3/18 R35 2,650 3/19 CR14 3,400 6,050 2,650 3,400
  56. 56. The purchases journal is The purchases journal is designed for recording all designed for recording all purchases on account. purchases on account.
  57. 57. Journalizing in the Purchases Journal Journalizing in the Purchases Journal Date 2006 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 On March 3, 2003, NetSolutions purchased supplies from Howard Supplies, $600.
  58. 58. Posting the Purchases Journal Posting the Purchases Journal Date Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount 2006 Mar. 3 Howard Supplies 600 600 Accounts Payable Subsidiary Ledger Howard Supplies Date 2006 Item P.R. Dr. Cr. Balance Mar 3 600 To keep the accounts payable600 subsidiary ledger current, this entry is posted on March 3.
  59. 59. Posting the Purchases Journal Posting the Purchases Journal Date 2006 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 Accounts Payable and Supplies will be posted as totals.
  60. 60. Journalizing in the Purchases Journal Journalizing in the Purchases Journal Date 2006 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 7 Donnelly Supplies 600 420 600 420 On March 7, NetSolutions purchased supplies from Donnelly Supplies, $420.
  61. 61. Journalizing in the Purchases Journal Journalizing in the Purchases Journal Date 2006 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 7 Donnelly Supplies 600 420 600 420
  62. 62. Journalizing in the Purchases Journal Journalizing in the Purchases Journal Date 2006 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 7 Donnelly Supplies 12 Jewett Bus. Sys. 600 420 2,800 600 420 Off. Equip. Because there isn’t a special purchased On March 12, NetSolutions column for office equipment from Jewett Business Office Equipment, this purchase was recorded under “Other Accounts Dr.” Systems, $2,800. 2,800
  63. 63. Journalizing in the Purchases Journal Journalizing in the Purchases Journal Date 2006 Mar. 3 7 12 19 27 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Howard Supplies Donnelly Supplies Jewett Bus. Sys. Donnelly Supplies Howard Supplies 600 420 2,800 1,450 960 600 420 Off. Equip. 2,800 1,450 960 Now, let’s look at the rest of March’s entries (assume that all postings to the accounts payable subsidiary ledger have been made).
  64. 64. Totaling the Purchases Journal Totaling the Purchases Journal Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Date 2006 Mar. 3 7 12 19 27 31 Howard Supplies Donnelly Supplies Jewett Bus. Sys. Donnelly Supplies Howard Supplies 600 420 2,800 1,450 960 6,230 600 420 Off. Equip. 1,450 960 3,430 2,800 2,800 At the end of March, all columns are totaled At the end of March, all columns are totaled $6,230 debits and credits is verified. $6,230 = $3,430 + $ 2,800 = $3,430 + $ 2,800 and equality of debits and credits is verified. and equality of
  65. 65. Posting the Purchases Journal Posting the Purchases Journal Date 2006 Mar. 3 7 12 19 27 31 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Howard Supplies Donnelly Supplies Jewett Bus. Sys. Donnelly Supplies Howard Supplies 600 420 2,800 1,450 960 6,230 600 420 Off. Equip. 1,450 960 3,430 The next step is to post to the general journal. 2,800 2,800
  66. 66. Date 2006 Mar. 3 7 12 19 27 31 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Howard Supplies Donnelly Supplies Jewett Bus. Sys. Donnelly Supplies Howard Supplies 600 420 2,800 1,450 960 6,230 600 420 Off. Equip. 1,450 960 3,430 2,800 GENERAL LEDGER ACCOUNT Accounts Payable Date Item P.R. Mar. 1 Bal 31 P11 Debit Credit 6,230 2,800 No. 21 Balance 1,230 7,460
  67. 67. Date 2003 Mar. 3 7 12 19 27 31 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Howard Supplies Donnelly Supplies Jewett Bus. Sys. Donnelly Supplies Howard Supplies 600 420 2,800 1,450 960 6,230 (21) 600 420 Off. Equip. 1,450 960 3,430 2,800 GENERAL LEDGER ACCOUNT Accounts Payable Date Item P.R. Mar. 1 Bal 31 P11 Debit Credit 6,230 2,800 No. 21 Balance 1,230 7,460
  68. 68. Date 2003 Mar. 3 7 12 19 27 31 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Howard Supplies Donnelly Supplies Jewett Bus. Sys. Donnelly Supplies Howard Supplies 600 420 2,800 1,450 960 6,230 (21) 600 420 Off. Equip. 18 1,450 960 3,430 (14) Supplies is posted as a total of $3,430 to general ledger account 21. Office Equipment is posted individually. 2,800 2,800
  69. 69. Date 2006 Mar. 3 7 12 19 27 31 Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount Howard Supplies Donnelly Supplies Jewett Bus. Sys. Donnelly Supplies Howard Supplies 600 420 2,800 1,450 960 6,230 (21) 600 420 Off. Equip. 18 1,450 960 3,430 (14) 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. 2,800 2,800 ( )
  70. 70. The Cash Payments Journal
  71. 71. All payments are All payments are recorded in the cash recorded in the cash payments journal. payments journal. NetSolutions makes all NetSolutions makes all payments by check. payments by check.
  72. 72. Let’s make all of the Let’s make all of the cash payment journal cash payment journal entries for March. entries for March.
  73. 73. CASH PAYMENTS JOURNAL Date 2006 Mar. 2 Ck. No. 150 Account Debited Rent Expense Other Accounts Post Accounts Payable Ref. Dr. Dr. 1,600 On March 2, NetSolutions paid the rent for March by issuing Check No. 150 for $1,600. PAGE 7 Cash Cr 1,600
  74. 74. CASH PAYMENTS JOURNAL Date 2006 Mar. 2 15 Ck. No. 150 151 Account Debited Rent Expense Grayco Supplies PAGE 7 Other Accounts Post Accounts Payable Ref. Dr. Dr. Cash Cr 1,600 1,230 On March 15, issued Check No. 151 to Grayco Supplies on account, $1,230. 1,600 1,230
  75. 75. CASH PAYMENTS JOURNAL Date 2006 Mar. 2 15 Ck. No. 150 151 Account Debited Rent Expense Grayco Supplies PAGE 7 Other Accounts Post Accounts Payable Ref. Dr. Dr. 1,600 √ 1,230 Cash Cr 1,600 1,230 Accounts Payable Subsidiary Ledger Grayco Supplies Let’s post to the accounts payable Date Item P.R. Dr. Cr. Balance subsidiary Mar. 3 Bal. this time to keep1,230 ledger at 15 CP7 the creditor’s account1,230 current. ---
  76. 76. CASH PAYMENTS JOURNAL Date 2006 Mar. 2 15 21 Ck. No. 150 151 152 Account Debited PAGE 7 Other Accounts Post Accounts Payable Ref. Dr. Dr. Rent Expense Grayco Supplies √ Jewett Business Sys. 1,600 1,230 2,800 On March 21, issued Check No. 152 as payment on account to Jewett Business Systems, $2,800. Cash Cr 1,600 1,230 2,800
  77. 77. CASH PAYMENTS JOURNAL Date 2006 Mar. 2 15 21 22 Ck. No. 150 151 152 153 Account Debited PAGE 7 Other Accounts Post Accounts Payable Ref. Dr. Dr. Rent Expense Grayco Supplies √ Jewett Business Sys. √ Donnelly Supplies. 1,600 1,230 2,800 420 On March 22, issued Check No. 153 as payment on account to Donnelly Supplies, $420. Cash Cr 1,600 1,230 2,800 420
  78. 78. CASH PAYMENTS JOURNAL Date 2006 Mar. 2 15 21 22 30 Ck. No. 150 151 152 153 154 Account Debited PAGE 7 Other Accounts Post Accounts Payable Ref. Dr. Dr. Rent Expense Grayco Supplies √ Jewett Business Sys. √ Donnelly Supplies. √ Utilities Expense 1,600 1,230 2,800 420 1,050 Cash Cr 1,600 1,230 2,800 420 1,050 On March 30, issued Check No. 154 as payment for utility bill, $1,050.
  79. 79. CASH PAYMENTS JOURNAL Date 2006 Mar. 2 15 21 22 30 31 Ck. No. 150 151 152 153 154 155 Account Debited PAGE 7 Other Accounts Post Accounts Payable Ref. Dr. Dr. Rent Expense Grayco Supplies √ Jewett Business Sys. √ Donnelly Supplies. √ Utilities Expense Howard Supplies 1,600 1,230 2,800 420 1,050 600 On March 31, issued Check No. 155 on account to Howard Supplies, $600 Cash Cr 1,600 1,230 2,800 420 1,050 600
  80. 80. CASH PAYMENTS JOURNAL Date 2006 Mar. 2 15 21 22 30 31 31 Ck. No. 150 151 152 153 154 155 Account Debited Rent Expense Grayco Supplies Jewett Business Sys. Donnelly Supplies. Utilities Expense Howard Supplies PAGE 7 Other Accounts Post Accounts Payable Ref. Dr. Dr. 1,600 √ √ √ √ 1,230 2,800 420 1,050 2,650 600 5,050 The journal is ruled, summed, and verified for equality of debits and the “Cash Cr.” column. Cash Cr 1,600 1,230 2,800 420 1,050 600 7,700
  81. 81. CASH PAYMENTS JOURNAL Date 2006 Mar. 2 15 21 22 30 31 31 Ck. No. 150 151 152 153 154 155 Account Debited Rent Expense Grayco Supplies Jewett Business Sys. Donnelly Supplies. Utilities Expense Howard Supplies PAGE 7 Other Accounts Post Accounts Payable Ref. Dr. Dr. 52 √ √ √ 54 √ 1,600 600 5,050 1,600 1,230 2,800 420 1,050 600 7,700 (21) (11) 1,230 2,800 420 1,050 2,650 (√ ) Cash Cr Individual items in the “Other Accounts Dr.” column are posted. Then the totals for “Accounts Payable Dr.” and “Cash Cr.” are posted.
  82. 82. Accounts Payable Accounts Payable Control Control Accounts Payable Accounts Payable
  83. 83. GENERAL LEDGER Accounts Payable (Controlling) ACCOUNT Accounts Payable Date Item P.R. Mar. 1 Bal 31 31 No. 12 Debit Credit P11 CP7 5,050 6,230 Balance 1,230 7,460 2,410 Donnelly Supplies Date Accounts Jewett Business Payable Systems also has Subsidiary a zero balance, so Ledger that account was omitted for space reasons. Item Mar 2 19 22 P.R. P11 P11 CP7 Debit Credit 420 1,450 420 Balance 420 1,870 1,450 Grayco Supplies Date Item P.R. Mar 1 Bal. 15 CP7 -Howard Supplies Date Mar 3 27 31 Item P.R. P11 P11 CP7 Debit Credit 1,230 0 1,230 Debit Credit 600 960 600 Balance Balance 600 1,560 960
  84. 84. Advantages of a Computerized Advantages of a Computerized Accounting System Over a Accounting System Over a Manual Accounting System Manual Accounting System 1. Computerized systems simplify the recordkeeping process. 2. Computerized systems are generally more accurate. 3. Computerized systems provide management current account balance information to support decision making.
  85. 85. The Revenue and Collection The Revenue and Collection Cycle in QuickBooks Cycle in QuickBooks From Exhibit 10, page 203 of textbook Mail invoice to customer
  86. 86. The Revenue and Collection The Revenue and Collection Cycle in QuickBooks Continued Cycle in QuickBooks Continued From Exhibit 10, page 203 of textbook
  87. 87. The Revenue and Collection The Revenue and Collection Cycle in QuickBooks Continued Cycle in QuickBooks Continued From Exhibit 10, page 203 of textbook
  88. 88. Advanced Areas Where the Advanced Areas Where the Internet is Being Used for Internet is Being Used for Business Purposes Business Purposes Supply chain management (SCM) Customer relationship management (CRM) Product life-cycle management (PLM)
  89. 89. Chapter 5 The End The End

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