3. Accounting Information System
● An accounting information system (AIS)
involves collecting and processing data and
disseminating financial information to
interested parties.
● An AIS may either be manual or
computerized.
4. PRINCIPLES OF AN
EFFICIENT AND EFFECTIVE
ACCOUNTING INFORMATION SYSTEM
Costs Benefits
The accounting
system must be
cost effective.
Benefits of
information
must outweigh
the cost of
providing it.
5. PRINCIPLES OF AN
EFFICIENT AND EFFECTIVE
ACCOUNTING INFORMATION SYSTEM
It must be
relevant!
It must be
reliable!
It must be
accurate!
It must be
timely!
Balance
Sheet
Income
Statement
Other
Financial
Reports
6. PRINCIPLES OF AN
EFFICIENT AND EFFECTIVE
ACCOUNTING INFORMATION SYSTEM
Government
Regulation and
Deregulation
Organizational
Growth
Increased
Competition
Changing
Accounting
Principles
Technological
Advances
7. ILLUSTRATION 7-2
PHASES IN THE DEVELOPMENT
OF AN ACCOUNTING SYSTEM
Analysis
Follow up Design
Implementation
Planning and
identifying
information needs
and sources
Evaluating and
monitoring effectiveness
and efficiency and
correcting any
weaknesses
Creating forms,
documents, procedures,
job descriptions, and
reports
Installing the system,
training personnel, and
making the system
operational
8. ● A subsidiary ledger is a group of accounts with a
common characteristic, such as customer
accounts.
● The subsidiary ledger is assembled to facilitate
the recording process by freeing the general
ledger from details concerning individual
balances.
● Two common subsidiary ledgers are the
Accounts Receivable Ledger and the Accounts
Payable Ledger.
SUBSIDIARY LEDGERS
9. ● The general ledger account that
summarizes subsidiary ledger data is called
a control account.
● Each general ledger control account
balance must equal the composite balance
of the individual accounts in the subsidiary
ledger.
CONTROL ACCOUNT
10. ILLUSTRATION 7-3
RELATIONSHIP OF GENERAL LEDGERS
AND SUBSIDIARY LEDGERS
Accounts receivable controls
a subsidiary ledger of many
different customers.
General
Ledger
Subsidiary
Ledgers
Cash
Owner’s
Capital
Accounts
Receivable
Accounts
Payable
Custome
r
A
Custome
r
B
Custome
r
C
Accounts payable controls a
subsidiary ledger of many
different creditors.
Creditor
X
Creditor
Y
Creditor
Z
11. Advantages of using subsidiary ledgers are that
they:
1. Show transactions affecting one customer or one
creditor in a single account.
2. Free the general ledger of excessive details.
3. Help locate errors in individual accounts by
reducing the number of accounts combined
in one ledger and by using controlling
accounts.
4. Create a division of labour in posting by allowing
one employee to post to the general ledger and a
SUBSIDIARY LEDGERS
12. ● Special journals are used to group similar
types of transactions.
● If a transaction cannot be recorded in a
special journal, it is recorded in the
general journal.
● Special journals permit greater division of
labour and reduce time necessary to
complete the posting process.
SPECIAL JOURNALS
13. ILLUSTRATION 7-5
USE OF SPECIAL JOURNALS AND
THE GENERAL JOURNAL
Sales
Journal
Cash
Receipts
Journal
Purchases
Journal
Cash
Payments
Journal
General
Journal
Used for:
All sales
of
merchan-
dise on
account
Used for:
All cash
received
(including
cash
sales)
Used for:
All
purchases
of
merchan-d
ise on
account
Used for:
All cash
paid
(including
cash
purchases)
Used for:
Transactions
that cannot
be entered
in a special
journal,
including
correcting,
adjusting, and
closing entries
The types of special journals used depend largely on the
types of transactions that occur frequently in a
business enterprise.
14. ● Under a perpetual inventory system, one entry at selling price in the Sales
Journal results in a debit to Accounts Receivable and a credit to Sales. Another
entry at cost results in a debit to Cost of Goods Sold and a credit to
Merchandise Inventory.
● Postings are made monthly to the general ledger and daily to the accounts
receivable subsidiary ledger.
JOURNALIZING THE SALES JOURNAL –
PERPETUAL INVENTORY SYSTEM
Karns Wholesale Supply
Sales Journal S1
15. ILLUSTRATION 7-8
PROVING THE ACCURACY OF THE
ACCOUNTS RECEIVABLE
SUBSIDIARY LEDGER
To prove the accuracy of the ledgers it is necessary to determine
whether the sum of the accounts receivable subsidiary ledger
balances equals the balance in the general ledger’s Accounts
Receivable control account.
General Ledger
Accounts Receivable $90,230
Accounts Receivable
Subsidiary Ledger
Abbot Sisters $26,000
Babson Co. 25,920
Carson Bros. 7,800
Deli Co. 30,510
$90,230
16. CASH RECEIPTS JOURNAL
PERPETUAL SYSTEM
● The debit columns for cash and cost of goods sold must be
equal to the total of the credit columns for accounts
receivable, sales, inventory, and other accounts.
Karns Wholesale Supply
Cash Receipts Journal
54,550
17. ● Column totals are posted at the end of each
month.
● The total of the Other Accounts column is not
posted. The individual amounts comprising the
total are posted separately to the general ledger
accounts specified in the Accounts Credited
column.
● The individual amounts in the Accounts
Receivable column are posted daily to the
subsidiary ledger account specified in the
Accounts Credited column.
CASH RECEIPTS JOURNAL
18. ILLUSTRATION 7-11 P
THE LEDGERS AFTER POSTING THE SALES
AND THE CASH RECEIPTS JOURNALS
Accounts Receivable
Subsidiary Ledger
Abbot Sisters $15,400
Babson Co. 14,570
Deli Co. 21,210
$51,180
After the posting of the cash
receipts journal is
completed, it is necessary
to prove the ledgers. The
general ledger totals are in
agreement and the sum of
the subsidiary ledger
balances equals the control
account balance.
General Ledger
Debits
Cash $54,550
Accounts Receivable 51,180
Cost of Goods Sold 65,120
$170,850
Credits
Merchandise Inventory $ 65,120
Notes Payable 6,000
D. A. Karns, Capital 5,000
Sales 94,730
$170,850
19. PURCHASES JOURNAL
PERPETUAL SYSTEM
● In a perpetual system, each entry results in a debit to
Merchandise Inventory and a credit to Accounts Payable.
● Postings are made daily to the accounts payable subsidiary
journal and monthly to the general ledger.
√
√
√
√
√
√
Karns Wholesale Supply
Purchases Journal
20. ILLUSTRATION 7-13
PROVING THE ACCURACY OF THE
ACCOUNTS PAYABLE SUBSIDIARY
LEDGER
To prove the ledgers it is necessary to determine that
the sum of the subsidiary ledger balances equals
the balance in the control account.
Accounts Payable
Subsidiary Ledger
Eaton and Howe, Inc. $19,800
Fabor and Son 15,600
Jasper Manufacturing Inc. 28,500
$63,900
General Ledger
Merchandise Inventory $63,900
Accounts Payable $63,900
21. CASH PAYMENTS JOURNAL
PERPETUAL SYSTEM
● Journalizing procedures are similar to cash receipts journal
● Posting procedures are also like the cash receipts journal
Karns Wholesale Supply
Cash Payments Journal
22. ILLUSTRATION 7-16
PROVING THE ACCURACY OF THE
ACCOUNTS PAYABLE SUBLEDGER
To prove the ledgers it is necessary to determine that
the sum of the subsidiary ledger balances equals
the balance in the control account.
Accounts Payable
Subsidiary Ledger
Eaton and Howe, Inc. $12,600
Fabor and Son 8,700
$21,300
General Ledger
Debits
Cash $ 9,750
Accounts Receivable 51,180
Prepaid Insurance 1,200
D. A. Karns, Drawings 500
Purchases 64,300
Freight In 100
$127,030
Credits
Accounts Payable $ 21,300
Notes Payable 6,000
D. A. Karns, Capital 5,000
Sales 94,730
$127,030
23. ● Only transactions that cannot be recorded
in a special journal are recorded in the
general journal.
● When the entry involves both control and
subsidiary accounts:
1. In journalizing, control and subsidiary
accounts must be identified, and
2. In posting there must be a dual posting
(to the control account and subsidiary
ledger).
EFFECTS ON
GENERAL JOURNAL
