Accounting Principle Kieso 8e_Ch07

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Chapter7-1

CHAPTER 7

Information Systems

and Accounting:Principles and

Procedures

Accounting Principles, Eighth Edition



Chapter7-2

1. Identify the basic concepts of an accountinginformation system.

2. Describe the nature and purpose of a

subsidiary ledger.3. Explain how companies use special journals in

journalizing.

4. Indicate how companies post a multi-column journal.

Study Objectives



Chapter7-3

Basic Concepts

of Accounting

Information

Systems

Subsidiary

Ledgers

Special

Journals

Computerizedaccountingsystems

Manualaccountingsystems

Example

Advantages

Sales journal

Cash receipts journal

Purchases journal

Cash payments journal

Effects of special journals on

general journal

Accounting Information Systems



Chapter7-4

The accounting information system (AIS) collectsand 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.

Basic Concepts of AIS

LO 1 Identify the basic concepts of an accounting information system.



Chapter7-5



Cost Effectiveness - Benefitsmust outweigh the costs.

Flexibility - The system shouldbe sufficiently flexible to meet

the resulting changes in thedemands made upon it.

UsefulOutput

Illustration 7-1

Principles of anefficient andeffective AIS.



Chapter7-6

Software programs (functions include sales,purchases, receivables, payables, cash receiptsand disbursements, and payroll).

Generate financial statements.

Advantages:

Typically enter data only once.

Many human errors are eliminated.

More timely information.

Computerized Accounting Systems





Chapter7-7

Choosing a software package

Entry-Level Software

Common features and benefits:

Easy data access and report preparation

Audit trail

Enterprise Resource Planning Systems

Computerized Accounting Systems





Chapter7-8

Perform each step in the accounting cycle by

hand.

Satisfactory in a company with a low volume oftransactions.

Must understand manual accounting systems to

understand computerized accounting systems.

Manual Accounting Systems





Chapter7-9

Used to keep track of individual balances.

Two common subsidiary ledgers are:

1. Accounts receivable (customers’)2. Accounts payable (creditors’)

Subsidiary Ledgers

LO 2 Describe the nature and purpose of a subsidiary ledger.

Each general ledger control account balance must

equal the composite balance of the individual accountsin the related subsidiary ledger.



Chapter7-10

Illustration 7-3

Subsidiary Ledgers


Relationship of general ledger and subsidiary ledgers



Chapter7-11

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.

Subsidiary Ledgers


Advantages of Subsidiary Ledgers



Chapter7-12

Special Journals

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



Chapter7-13

Each of the following is a subsidiary ledgerexcept the:

a. accounts receivable ledger.b. accounts payable ledger.

c. customer’s ledger.

d. general ledger.

Review Question

Special Journals




Chapter7-14

Special Journals


Sales JournalIllustration 7-6

Under a perpetual inventory system, one entry at selling price in SalesJournal 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 acredit to Merchandise Inventory.



Chapter7-15

Special Journals


Illustration 7-7

Companies make daily postingsfrom the sales journal to theindividual accounts receivable

in the subsidiary ledger.

POSTING THE SALES JOURNAL



Chapter7-16

Special Journals


Illustration 7-7

Posting to the general ledger isdone monthly.

POSTING THE SALES JOURNAL



Chapter7-17

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

Special Journals




Chapter7-18

Special Journals


In the cash receipts journal, companies record all receipts of cash.

The posting of the cash receipts journal is similar to the posting ofthe sale journal. See complete Illustration 7-9 in the text.

Illustration 7-9Cash Receipts Journal



Chapter7-19

Special Journals


$3,200



Chapter7-20

Special Journals


J. Darby

Lenninger

Farley

Deering & Son

Grinnell Bros.

Merchandise

inventory

June 1



Chapter7-21

Cash sales of merchandise are recorded in the:

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. sales journal.

Review Question

Special Journals




Chapter7-22

Which of the following is not one of the creditcolumns in the cash receipts journal:

a. Other accounts.b. Accounts payable.

c. Accounts receivable.

d. Sales.

Review Question

Special Journals




Chapter7-23

Special Journals

LO 4 Indicate how companies post a multi-column journal.

Illustration 7-13

In the purchases journal,companies record all purchases of

merchandise on account.

Purchases Journal



Chapter7-24

Special Journals


Illustration 7-13

Purchases Journal



Chapter7-25

All of the following are advantages of usingsubsidiary ledgers except they:

a. show transactions affecting one customer orone 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.

Review Question

Special Journals




Chapter7-26

Special Journals

In a cash payments (cash disbursements) journal, companiesrecord all disbursements of cash.

The procedures for posting the cash payments journal are similar tothose for other journals.

Illustration 7-16

Cash Payments Journal




Chapter7-27

Credit purchases of equipment or supplies otherthan merchandise are recorded in the:

a. cash payments journal.b. cash receipts journal.

c. general journal.

d. purchases journal.

Review Question

Special Journals




Chapter7-28

Cash payments of merchandise are recorded inthe:

a. cash payments journal.b. cash receipts journal.

c. general journal.

d. purchases journal.

Review Question

Special Journals




Chapter7-29

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 the General Journal

Special Journals




Chapter7-30

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Accounting Principle Kieso 8e_Ch07

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