19-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College.
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Transcript of 7-1 Prepared by Coby Harmon University of California, Santa Barbara Westmont College.
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7-1
Prepared byCoby Harmon
University of California, Santa BarbaraWestmont College
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7-2
7Learning Objectives
After studying this chapter, you should be able to:
[1] Identify the basic concepts of an accounting information system.
[2] Describe the nature and purpose of a subsidiary ledger.
[3] Explain how companies use special journals in journalizing.
Accounting Information Systems
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7-3
Preview of Chapter 7
Accounting PrinciplesEleventh Edition
Weygandt Kimmel Kieso
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7-4
Accounting information system (AIS) collects and
processes transaction data and communicates financial
information to decision makers.
Includes:
All steps in the accounting cycle.
Documents that provide evidence of transactions.
Manual or computerized accounting system.
LO 1 Identify the basic concepts of an accounting information system.
Basic Concepts of AIS
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7-5 LO 1 Identify the basic concepts of an accounting information system.
Cost Effectiveness - Benefits must outweigh the costs.
Flexibility - The system should be sufficiently flexible to meet the resulting changes in the
demands made upon it.
Useful Output
Illustration 7-1 Principles of an efficient and effective AIS.
Basic Concepts of AIS
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7-6
Software programs (functions include sales, purchases,
receivables, payables, cash receipts and disbursements,
and payroll).
Generate financial statements.
Advantages:
► Typically enter data only once.
► Many human errors are eliminated.
► More timely information.
Computerized Accounting Systems
LO 1 Identify the basic concepts of an accounting information system.
Basic Concepts of AIS
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7-7
Choosing a software package.
Entry-Level Software.
► Easy data access and report preparation
► Audit trail
► Internal control
► Customization
► Network Compatibility
Enterprise Resource Planning Systems.
LO 1 Identify the basic concepts of an accounting information system.
Basic Concepts of AIS
Computerized Accounting Systems
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7-8
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7-9
Perform each step in the accounting cycle by hand.
Satisfactory with a low volume of transactions.
Must understand manual accounting systems to
understand computerized accounting systems.
Manual Accounting Systems
LO 1 Identify the basic concepts of an accounting information system.
Basic Concepts of AIS
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7-10
Used to keep track of individual balances.
Two common subsidiary ledgers are:
1. Accounts receivable (customers’)
2. Accounts payable (creditors’)
LO 2 Describe the nature and purpose of a subsidiary ledger.
Subsidiary Ledgers
Illustration 7-2 Relationship of general ledger and subsidiary ledgers
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7-11 LO 2
Subsidiary LedgersIllustration 7-2 Relationship of general and subsidiary ledgers
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7-12
1. Show in a single account transactions affecting one
customer or one creditor.
2. Free the general ledger of excessive details.
3. Help locate errors in individual accounts.
4. Make possible a division of labor.
LO 2 Describe the nature and purpose of a subsidiary ledger.
Advantages of Subsidiary Ledgers
Subsidiary Ledgers
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7-13
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7-14 LO 3 Explain how companies use special journals in journalizing.
Used to record similar types of transactions.
If a transaction cannot be recorded in a special journal, the company records it in the general journal.
Illustration 7-5
Special Journals
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7-15
Each of the following is a subsidiary ledger except the:
Question
Special Journals
LO 3 Explain how companies use special journals in journalizing.
a. accounts receivable ledger.
b. accounts payable ledger.
c. customer’s ledger.
d. general ledger.
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7-16 LO 3 Explain how companies use special journals in journalizing.
Sales JournalIllustration 7-6
Perpetual inventory system, one entry at selling price in 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 Inventory.
Special Journals
2014
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7-17 LO 3 Explain how companies use special journals in journalizing.
Illustration 7-7
Companies make daily postings from
the sales journal to the individual
accounts receivable in the
subsidiary ledger.
Posting the Sales Journal
Special Journals
20142014
2014
2014
2014
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7-18 LO 3 Explain how companies use special journals in journalizing.
Posting to the general ledger is done
monthly.
Special Journals
Posting the Sales JournalIllustration 7-7
20142014
2014
2014
2014
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7-19
Proving the Ledgers
LO 3 Explain how companies use special journals in journalizing.
Special Journals
Illustration 7-8
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7-20
One-line entry for each sales transaction saves time.
Only totals, rather than individual entries, are posted to
the general ledger.
A division of labor results.
Advantages of Sales Journal
LO 3 Explain how companies use special journals in journalizing.
Special Journals
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7-21 LO 3 Explain how companies use special journals in journalizing.
In the cash receipts journal, companies record all receipts of cash.
Illustration 7-9Cash Receipts Journal
Special Journals
2014
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7-22
Not all of the subsidiary or general ledger accounts are shown on the illustration to the right. See Illustration 7-9 for the complete illustration.
Illustration 7-9Posting the Cash Receipts Journal
Special Journals
Illustration 7-9
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7-23 LO 3 Explain how companies use special journals in journalizing.
Special Journals
Illustration 7-11Proving the Ledgers
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7-24
Cash sales of merchandise are recorded in the
LO 3 Explain how companies use special journals in journalizing.
Special Journals
Question
a. cash payments journal.
b. cash receipts journal.
c. general journal.
d. sales journal.
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7-25
Which of the following is not one of the credit columns in the
cash receipts journal:
Special Journals
Question
a. Other accounts
b. Accounts payable
c. Accounts receivable
d. Sales
LO 3 Explain how companies use special journals in journalizing.
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7-26
Illustration 7-13
Daily postings are made from the purchases journal to the accounts
payable subsidiary ledger.
Purchases Journal
Special Journals
2014
2014
2014
2014
LO 3 Explain how companies use special journals in journalizing.
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7-27
At the end of the accounting period, the company posts totals to
the general ledger.
Special Journals
Purchases Journal
Illustration 7-13
2014
2014
2014
LO 3 Explain how companies use special journals in journalizing.
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7-28
Special Journals
Illustration 7-14
Proving the Ledgers
LO 3 Explain how companies use special journals in journalizing.
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7-29
All of the following are advantages of using subsidiary
ledgers except they:
Special Journals
Question
a. show transactions affecting one customer or one
creditor in a single account.
b. free the general ledger of excessive details.
c. eliminate errors in individual accounts.
d. make possible a division of labor.
LO 3 Explain how companies use special journals in journalizing.
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7-30
In a cash payments (cash disbursements) journal, companies
record all disbursements of cash.
Illustration 7-16Cash Payments Journal
Special Journals
2014
LO 3 Explain how companies use special journals in journalizing.
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7-31
Illustration 7-16
Cash Payments Journal
Special Journals
2014
2014
2014
2014
LO 3 Explain how companies use special journals in journalizing.
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7-32
Illustration 7-16
Cash Payments Journal
Special Journals
2014
2014
2014
2014
2014
2014
2014
LO 3 Explain how companies use special journals in journalizing.
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7-33
Proving the Ledgers
Special Journals
Illustration 7-17
LO 3 Explain how companies use special journals in journalizing.
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7-34
Credit purchases of equipment or supplies other than
merchandise are recorded in the:
Special Journals
Question
a. cash payments journal.
b. cash receipts journal.
c. general journal.
d. purchases journal.
LO 3 Explain how companies use special journals in journalizing.
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7-35
Cash payments of merchandise are recorded in the:
Special Journals
Question
a. cash payments journal.
b. cash receipts journal.
c. general journal.
d. purchases journal.
LO 3 Explain how companies use special journals in journalizing.
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7-36
Special journals substantially reduce the number of
entries that companies make in the general journal.
Only transactions that cannot be entered in a special
journal are recorded in the general journal.
Also, correcting, adjusting, and closing entries are
made in the general journal.
Effects of Special Journals on General Journal
Special Journals
LO 3 Explain how companies use special journals in journalizing.
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7-37
Special Journals
Illustration 7-18Journalizing and posting thegeneral journal
LO 3 Explain how companies use special journals in journalizing.
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7-38
The basic concepts related to an accounting information system are the same under GAAP and IFRS.
The use of subsidiary ledgers and control accounts, as well as the system used for recording transactions, are the same under GAAP and IFRS.
The overriding principle in converting to IFRS is full retrospective application of IFRS. Retrospective application—recasting prior financial statements on the basis of IFRS—provides financial statement users with comparable information.
Key Points
A Look at IFRS
LO 4 Compare the procedures for accounting information systems under GAAP and IFRS.
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7-39
Key Points
A Look at IFRS
As indicated, the objective of the conversion process is to present a set of IFRS statements as if the company always reported under IFRS. To achieve this objective, a company follows these steps.
1. Identify the timing of its first IFRS statements.
2. Prepare an opening balance sheet at the date of transition to IFRS.
3. Select accounting principles that comply with IFRS, and apply these principles retrospectively.
4. Make extensive disclosures to explain the transition to IFRS.
LO 4 Compare the procedures for accounting information systems under GAAP and IFRS.
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7-40
Key Points
A Look at IFRS
Once a company decides to convert to IFRS, it must decide on the transition date and the reporting date. The transition date is the beginning of the earliest period for which full comparative IFRS information is presented. The reporting date is the closing balance sheet date for the first IFRS financial statements.
Upon first-time adoption of IFRS, a company must present at least one year of comparative information under IFRS.
LO 4 Compare the procedures for accounting information systems under GAAP and IFRS.
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7-41
Looking to the Future
A Look at IFRS
The definitional structure of assets, liabilities, equity, revenues, andexpenses may change over time as the IASB and FASB evaluate their overall conceptual framework for establishing accounting standards. In addition, high-quality international accounting requires bothhigh-quality accounting standards and high-quality auditing. Similar to the convergence of U.S. GAAP and IFRS, there is a movement to improve international auditing standards. The International Auditingand Assurance Standards Board (IAASB) functions as an independent standard-setting body. It works to establish high-quality auditing and assurance and quality-control standards throughout the world. Whether the IAASB adopts internal control provisions similar to those in SOX remains to be seen. You can follow developments in the international audit arena at http://www.ifac.org/laasb/.
LO 4
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7-42
IFRS Self-Test Questions
A Look at IFRS
Information in a company’s first IFRS statements must:
a. have a cost that does not exceed the benefits.
b. be transparent.
c. provide a suitable starting point.
d. All the above.
LO 4 Compare the procedures for accounting information systems under GAAP and IFRS.
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7-43
IFRS Self-Test Questions
A Look at IFRS
Indicate which of these is false.
a. The use of subsidiary ledgers is the same under IFRS
and GAAP.
b. GAAP and IFRS use the same accounting principles.
c. The use of special journals is the same under IFRS
and GAAP.
d. At conversion, companies should retrospectively adjust
the financial statements presented following IFRS.
LO 4 Compare the procedures for accounting information systems under GAAP and IFRS.
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7-44
IFRS Self-Test Questions
A Look at IFRS
The transition date is the date:
a. when a company no longer reports under its national
standards.
b. when the company issues its most recent financial
statement under IFRS.
c. three years prior to the reporting date.
d. None of the above.
LO 4 Compare the procedures for accounting information systems under GAAP and IFRS.
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7-45
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