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Transcript of Ch05
Chapter Chapter 55Accounting Systems and Accounting Systems and
Internal ControlsInternal ControlsAccounting, 21st Edition
Warren Reeve Fess
PowerPoint Presentation by Douglas CloudProfessor Emeritus of AccountingPepperdine 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.
Some of the action has been automated, so click the mouse when you see this lightning bolt in the lower right-hand
corner of the screen. You can point and click anywhere on the screen.
Some of the action has been automated, so click the mouse when you see this lightning bolt in the lower right-hand
corner of the screen. You can point and click anywhere on the screen.
1. Define an accounting system and describe its implementation.
2. List the three objectives of internal 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.
ObjectivesObjectivesObjectivesObjectives
After studying this After studying this chapter, you should chapter, you should
be able to:be able to:
After studying this After studying this chapter, you should chapter, you should
be able to:be able to:
4. Describe and give examples of additional subsidiary ledgers and modified special journals.
ObjectivesObjectivesObjectivesObjectives
5. Apply computerized accounting to the revenue and collection cycle.
6. Describe the basic features of e-commerce.
Basic Basic Accounting Accounting
SystemSystem
Basic Basic Accounting Accounting
SystemSystem
ImplementationImplementation
DesignDesign
AnalysisAnalysis
FFEEEEDDBBAACCKK
Objectives of Internal Objectives of Internal ControlControl
Objectives of Internal Objectives of Internal ControlControl
1. assets are safeguarded and used for business purposes.
2. business information is accurate.3. employees comply with laws and
regulations.
To provide reasonable assurance that:
1. Control environment2. Risk assessment3. Control procedures4. Monitoring5. Information and communication
Elements of Internal ControlElements of Internal Control
1. Control environment2. Risk assessment3. Control procedures4. Monitoring5. Information and communication
Elements of Internal ControlElements of Internal Control
Management philosophy and operating style influences the
control environment.
Management philosophy and operating style influences the
control environment.
1. Control environment2. Risk assessment3. Control procedures4. Monitoring5. Information and communication
Elements of Internal ControlElements of Internal ControlElements of Internal ControlElements of Internal Control
Once risks are identified, they can be analyzed to estimate their significance, to assess their likelihood of occurring, and to determine actions that will minimize them.
Once risks are identified, they can be analyzed to estimate their significance, to assess their likelihood of occurring, and to determine actions that will minimize them.
1. Control environment2. Risk assessment3. Control procedures4. Monitoring5. Information and communication
Elements of Internal ControlElements of Internal ControlElements of Internal ControlElements of Internal Control
Control ProceduresControl ProceduresControl ProceduresControl Procedures
Competent Personnel Rotating Duties Mandatory Vacations Separating Responsibilities for
Related Operations Separating Operations, Custody
of Assets, and Accounting Proofs and Security Measures
Control ProceduresControl ProceduresControl ProceduresControl Procedures
Competent Personnel Rotating Duties Mandatory Vacations Separating Responsibilities for
Related Operations Separating Operations,
Custody of Assets, and Accounting
Proofs and Security Measures
Separating Separating Responsibilities for Responsibilities for Related OperationsRelated Operations
Separating Separating Responsibilities for Responsibilities for Related OperationsRelated Operations1. Orders may be placed on the basis of
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.
Otherwise, the following Otherwise, the following abuses are possible:abuses are possible:
Otherwise, the following Otherwise, the following abuses are possible:abuses are possible:
Control ProceduresControl ProceduresControl ProceduresControl Procedures
Competent Personnel Rotating Duties Mandatory Vacations Separating Responsibilities for
Related Operations Separating Operations,
Custody of Assets, and Accounting
Proofs and Security Measures
Independent check
Independent check
Independent check
Custody of Custody of AssetsAssets
AccountingAccountingOperationsOperationsOperationsOperations
1. Control environment2. Risk assessment3. Control procedures4. Monitoring5. Information and communication
Elements of Internal ControlElements of Internal ControlElements of Internal ControlElements of Internal Control
Clues to Potential ProblemsClues to Potential ProblemsClues to Potential ProblemsClues to Potential Problems
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.
Warning signs with regard to people:
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.
Warning signs from the accounting system:
Clues to Potential ProblemsClues to Potential ProblemsClues to Potential ProblemsClues to Potential Problems
Manual Accounting Systems
Cash 11
Accts. Pay. 21
General Ledger
Accts. Rec. 12
Supplies 14
General Ledger and Subsidiary LedgersGeneral Ledger and Subsidiary LedgersGeneral Ledger and Subsidiary LedgersGeneral Ledger and Subsidiary Ledgers
Accounts ReceivableSubsidiary Ledger
A B C D
Customer Accounts
Accounts PayableSubsidiary Ledger
A B C D
Creditor Accounts
BUYING BUYING
SELLING SELLING
Special Journals
Providing services on account
Revenue journalRevenue journalrecorded inrecorded in
Receipt of cash from any source
Cash receipts journalCash receipts journalrecorded inrecorded in
Purchase of items on account
Purchases journalPurchases journalrecorded inrecorded in
Payment of cash for any purpose
Cash payments journalCash payments journalrecorded inrecorded in
The Revenue JournalThe Revenue JournalThe Revenue JournalThe Revenue Journal
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.
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.
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
1
2
3
4
5
6
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
1
2
3
4
5
6
Performed services on credit to Performed services on credit to MyMusic.com, $2,200. MyMusic.com, $2,200.
Performed services on credit to Performed services on credit to MyMusic.com, $2,200. MyMusic.com, $2,200.
2006
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
The Revenue JournalThe Revenue JournalThe Revenue JournalThe Revenue Journal
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
1
2
3
4
5
6
Notice that only one line is Notice that only one line is required to make the entry.required to make the entry.Notice that only one line is Notice that only one line is required to make the entry.required to make the entry.
2006
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
The Revenue JournalThe Revenue JournalThe Revenue JournalThe Revenue Journal
Posting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue Journal
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
1
2
3
4
5
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.
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.
2006
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
1
2
3
4
5
6
2006
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
Accounts Receivable Subsidiary Ledger
Date Item P.R. Debit Credit Balance
MyMusicClub.com
Mar. 2 R35 2,200 2,2002006
Posting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue Journal
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
1
2
3
4
5
6
2006
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
Accounts Receivable Subsidiary Ledger
Date Item P.R. Debit Credit Balance
MyMusicClub.com
Mar. 2 R35 2,200 2,2002006
This procedure is repeated for each posting This procedure is repeated for each posting to the accounts receivable subsidiary ledger.to the accounts receivable subsidiary ledger.
Posting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue Journal
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
20031
2
3
4
5
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.
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.
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
6 616 RapZone.com 1 7 5 0 00
18 617 Web Cantina 2 6 5 0 00
27 618 MyMusicClub.com 3 0 0 0 00
2006
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
Posting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue Journal
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
20061
2
3
4
5
6
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
6 616 RapZone.com 1 7 5 0 00
18 617 Web Cantina 2 6 5 0 00
27 618 MyMusicClub.com 3 0 0 0 00
On March 31, the revenue journal is On March 31, the revenue journal is totaled and ruled.totaled and ruled.
On March 31, the revenue journal is On March 31, the revenue journal is totaled and ruled.totaled and ruled.
31 9 6 0 0 00
Posting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue JournalPosting from the Revenue Journal
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
20061
2
3
4
5
6
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
6 616 RapZone.com 1 7 5 0 00
18 617 Web Cantina 2 6 5 0 00
27 618 MyMusicClub.com 3 0 0 0 00
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.
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.
31 9 6 0 0 00
Posting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal Total
ACCOUNT Accounts Receivable Account No. 12
Balance
Dr. Cr.Date Dr. Cr.Item
Post. Ref.
2006Mar. 1 Balance 3 400 00
GENERAL LEDGER
31 9 600 00 13 000 00 R35
Revenue Journal, page 35
Posting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal Total
By placing the account number here, we indicate that $9,600 has been debited to
Accounts Receivable in the general ledger.
Posting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal Total
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
20061
2
3
4
5
6
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
6 616 RapZone.com 1 7 5 0 00
18 617 Web Cantina 2 6 5 0 00
27 618 MyMusicClub.com 3 0 0 0 00
31 9 6 0 0 00
(12)(41)
ACCOUNT Fees Earned Account No. 41
Balance
Dr. Cr.Date Dr. Cr.Item
Post. Ref.
GENERAL LEDGER
2006Mar. 31 R35 9 600 00 9 600 00
Posting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal Total
Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit
Page 35
1
2
3
4
5
6
20061
2
3
4
5
6
Mar. 2 615 MyMusicClub.com 2 2 0 0 00
6 616 RapZone.com 1 7 5 0 00
18 617 Web Cantina 2 6 5 0 00
27 618 MyMusicClub.com 3 0 0 0 00
31 9 6 0 0 00
(12)(41)
Placing “41” here indicates that $9,600 has been posted to the credit side of Fees
Earned in the general ledger.
Posting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal TotalPosting the Revenue Journal Total
The Cash Receipts JournalThe Cash Receipts Journal
All transactions that involve the receipt of cash
are recorded in the cash receipts journal.
All transactions that involve the receipt of cash
are recorded in the cash receipts journal.
The Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts Journal
Mar. 1 Rent Revenue 400 400
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
Page 14
NetSolutions received $400 cash NetSolutions received $400 cash on March 1 for the month’s rent.on March 1 for the month’s rent.NetSolutions received $400 cash NetSolutions received $400 cash on March 1 for the month’s rent.on March 1 for the month’s rent.
The Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts Journal
2006
Mar. 1 Rent Revenue 400 400
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
During March, NetSolutions collected During March, NetSolutions collected cash from three customers.cash from three customers.
During March, NetSolutions collected During March, NetSolutions collected cash from three customers.cash from three customers.
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 1,750
The Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts Journal
Page 14
2006
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.
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.
Posting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts Journal
Mar. 1 Rent Revenue 400 400
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 1,750
Page 14
2006
Mar. 1 Rent Revenue 400 400
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
Page 14
19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750
Accounts Receivable Subsidiary Ledger
Date Item P.R. Debit Credit Balance
Web Cantina
Mar. 1 Bal. 3,40018 R35 2,650 6,050
2006
3,400 2,650
Posting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts Journal
2006
19
Mar. 1 Rent Revenue 400 400
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
Page 14
19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750
Posting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts Journal
Accounts Receivable Subsidiary Ledger
Date Item P.R. Debit Credit Balance
Web Cantina
Mar. 1 Bal. 3,40018 R35 2,650 6,050
2006
3,40019 CR14 2,650
2006
The Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts Journal
After all journalizing and posting to the accounts
receivable subsidiary ledger for the month is complete, the
columns are totaled.
After all journalizing and posting to the accounts
receivable subsidiary ledger for the month is complete, the
columns are totaled.
The Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts JournalThe Cash Receipts Journal
Mar. 1 Rent Revenue 400 400 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 31 400 7,350 7,750
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
Page 14
2006
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.
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.
Mar. 1 Rent Revenue 400 400 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 31 400 7,350 7,750
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
Page 14
Posting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts Journal
The three circled items are The three circled items are posted to the general ledger. posted to the general ledger.
Let’s post Let’s post Accounts ReceivableAccounts Receivable..
The three circled items are The three circled items are posted to the general ledger. posted to the general ledger.
Let’s post Let’s post Accounts ReceivableAccounts Receivable..
2006
Account: Accounts Receivable No. 12
GENERAL LEDGER
Date Item P.R. Debit Credit Balance
Mar. 1 Bal 3,40031 R35 9,600 13,000
2006
Mar. 1 Rent Revenue 400 400 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 31 400 7,350 7,750
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
Page 14
Posting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts Journal
2006
Account: Accounts Receivable No. 12
GENERAL LEDGER
Date Item P.R. Debit Credit Balance
Mar. 1 Bal 3,40031 R35 9,600 13,000
2006
7,350 5,65031 CR14
Mar. 1 Rent Revenue 400 400 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 31 400 7,350 7,750
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
Page 14
Posting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts Journal
2006
( ) (12)
Posting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts Journal
The $7,750 total in the Cash Debit column is
posted to Cash in a similar manner.
The $7,750 total in the Cash Debit column is
posted to Cash in a similar manner.
Posting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts Journal
The $400 credit to Rent Revenue could have been posted earlier, but posting it at the same time as other general ledger accounts is proper.
The $400 credit to Rent Revenue could have been posted earlier, but posting it at the same time as other general ledger accounts is proper.
Posting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts JournalPosting the Cash Receipts Journal
A completely posted cash receipts journal is shown
in the next slide.
A completely posted cash receipts journal is shown
in the next slide.
Mar. 1 Rent Revenue 400 400 19 Web Cantina 3,4003,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 31 400 7,350 7,750
CASH RECEIPTS JOURNALOther Accounts
Post Accounts Receivable CashDate Account Credited Ref. Cr. Cr. Dr.
Page 14
Posted Cash Receipts JournalPosted Cash Receipts JournalPosted Cash Receipts JournalPosted Cash Receipts Journal
42
( ) (12) (11)
2006
Accounts Accounts Receivable Receivable
Control Control AccountAccount
If the accounts receivable account in the general ledger only shows summary totals,
where are the individual customer balances?
If the accounts receivable account in the general ledger only shows summary totals,
where are the individual customer balances?
ACCOUNT Accounts Receivable No. 12
GENERAL LEDGER
Date Item P.R. Debit Credit BalanceMar. 1 Bal 3,400
31 R35 9,600 13,0007,350 5,65031 CR14
Date Item P.R. Debit Credit Balance
RapZone.com
3/6 R35 1,750 1,7503/30 CR14 1,750 ----
Date Item P.R. Debit Credit Balance
Web CantinaDate Item P.R. Debit Credit Balance
3/2 R35 2,200 2,2003/27 R35 3,000 5,2003/28 CR14 2,200 3,0003,000
3/1 Bal. 3,4003/18 R35 2,650 6,0503/19 CR14 3,400 2,6502,650
Accounts Receivable Subsidiary
Ledger
Accounts Accounts Receivable Receivable
Control Control AccountAccount
MyMusicClub.com
ACCOUNT Accounts Receivable No. 12
GENERAL LEDGER
Date Item P.R. Debit Credit BalanceMar. 1 Bal 3,400
31 R35 9,600 13,0007,350 5,65031 CR14
The purchases journal is designed for recording all
purchases on account.
The purchases journal is designed for recording all
purchases on account.
On March 3, 2003, NetSolutions On March 3, 2003, NetSolutions purchased supplies from Howard purchased supplies from Howard
Supplies, $600.Supplies, $600.
Journalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases Journal
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2006
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
To keep the accounts payable To keep the accounts payable subsidiary ledger current, this entry subsidiary ledger current, this entry
is posted on March 3.is posted on March 3.
Mar. 3 Howard Supplies 600 600 2006
Accounts Payable Subsidiary Ledger
Date Item P.R. Dr. Cr. Balance
Howard Supplies
Mar 3 600 6002006
Posting the Purchases JournalPosting the Purchases JournalPosting the Purchases JournalPosting the Purchases Journal
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Accounts Payable Accounts Payable and and Supplies Supplies will be posted as totals.will be posted as totals.
Mar. 3 Howard Supplies 600 600 2006
Posting the Purchases JournalPosting the Purchases JournalPosting the Purchases JournalPosting the Purchases Journal
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
On March 7, NetSolutions On March 7, NetSolutions purchased supplies from Donnelly purchased supplies from Donnelly
Supplies, $420.Supplies, $420.
Mar. 3 Howard Supplies 600 600 2006
7 Donnelly Supplies 420 420
Journalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases Journal
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2006
7 Donnelly Supplies 420 420
Journalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases Journal
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2006
On March 12, NetSolutions purchased On March 12, NetSolutions purchased office equipment from Jewett Business office equipment from Jewett Business
Systems, $2,800.Systems, $2,800.
7 Donnelly Supplies 420 42012 Jewett Bus. Sys. 2,800 Off. Equip. 2,800
Because there isn’t a special column for Because there isn’t a special column for Office EquipmentOffice Equipment, this purchase was , this purchase was recorded under “Other Accounts Dr.”recorded under “Other Accounts Dr.”
Journalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases Journal
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2006
7 Donnelly Supplies 420 42012 Jewett Bus. Sys. 2,800 Off. Equip. 2,800
Now, let’s look at the rest of March’s entries Now, let’s look at the rest of March’s entries (assume that all postings to the accounts payable (assume that all postings to the accounts payable
subsidiary ledger have been made).subsidiary ledger have been made).
19 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 960
Journalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases JournalJournalizing in the Purchases Journal
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2006
7 Donnelly Supplies 420 42012 Jewett Bus. Sys. 2,800 Off. Equip. 2,800
At the end of March, all columns are totaled At the end of March, all columns are totaled and equality of debits and credits is verified. and equality of debits and credits is verified. At the end of March, all columns are totaled At the end of March, all columns are totaled
and equality of debits and credits is verified. and equality of debits and credits is verified.
Totaling the Purchases JournalTotaling the Purchases JournalTotaling the Purchases JournalTotaling the Purchases Journal
19 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 96031 6,230 3,430 2,800
$6,230 = $3,430 + $ 2,800 $6,230 = $3,430 + $ 2,800 $6,230 = $3,430 + $ 2,800 $6,230 = $3,430 + $ 2,800
The next step is to post to the The next step is to post to the general journal.general journal.
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2006
7 Donnelly Supplies 420 42012 Jewett Bus. Sys. 2,800 Off. Equip. 2,80019 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 96031 6,230 3,430 2,800
Posting the Purchases JournalPosting the Purchases JournalPosting the Purchases JournalPosting the Purchases Journal
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2006
7 Donnelly Supplies 420 42012 Jewett Bus. Sys. 2,800 Off. Equip. 2,80019 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 96031 6,230 3,430 2,800
ACCOUNT Accounts Payable No. 21
GENERAL LEDGER
Date Item P.R. Debit Credit BalanceMar. 1 Bal 1,230
6,230 7,46031 P11
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2003
7 Donnelly Supplies 420 42012 Jewett Bus. Sys. 2,800 Off. Equip. 2,80019 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 96031 6,230 3,430 2,800
ACCOUNT Accounts Payable No. 21
GENERAL LEDGER
Date Item P.R. Debit Credit BalanceMar. 1 Bal 1,230
6,230 7,46031 P11
(21)
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2003
7 Donnelly Supplies 420 42012 Jewett Bus. Sys. 2,800 Off. Equip. 2,80019 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 96031 6,230 3,430 2,800
(21)
SuppliesSupplies is posted as a total of $3,430 is posted as a total of $3,430 to general ledger account 21. to general ledger account 21. Office Office
EquipmentEquipment is posted individually. is posted individually.
(14)
18
PURCHASES JOURNALAccts. Other
Post Payable Supplies Accounts PostDate Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Page 11
Mar. 3 Howard Supplies 600 600 2006
7 Donnelly Supplies 420 42012 Jewett Bus. Sys. 2,800 Off. Equip. 2,80019 Donnelly Supplies 1,450 1,45027 Howard Supplies 960 96031 6,230 3,430 2,800
(21) (14)
18
( )
NetSolutions had only one entry in the NetSolutions had only one entry in the “Other Accounts Dr.” column. If there were “Other Accounts Dr.” column. If there were others, they would be posted individually. others, they would be posted individually. Therefore, the total is not posted. A check Therefore, the total is not posted. A check mark indicates that the total was not posted.mark indicates that the total was not posted.
The Cash Payments Journal
All payments are recorded in the cash payments journal.
NetSolutions makes all payments by check.
All payments are recorded in the cash payments journal.
NetSolutions makes all payments by check.
Let’s make all of the cash payment journal
entries for March.
Let’s make all of the cash payment journal
entries for March.
CASH PAYMENTS JOURNAL
Other AccountsCk. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
On March 2, NetSolutions paid On March 2, NetSolutions paid the rent for March by issuing the rent for March by issuing Check No. 150 for $1,600.Check No. 150 for $1,600.
2006
Mar. 2 150 Rent Expense 1,600 1,600
CASH PAYMENTS JOURNAL
Other AccountsCk. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
On March 15, issued Check No. 151 to On March 15, issued Check No. 151 to Grayco Supplies on account, $1,230.Grayco Supplies on account, $1,230.
2006
Mar. 2 150 Rent Expense 1,600 1,60015 151 Grayco Supplies 1,230 1,230
CASH PAYMENTS JOURNAL
Other AccountsCk. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
Let’s post to the accounts payable Let’s post to the accounts payable subsidiary ledger at this time to keep subsidiary ledger at this time to keep
the creditor’s account current.the creditor’s account current.
2006
Mar. 2 150 Rent Expense 1,600 1,60015 151 Grayco Supplies 1,230 1,230
Accounts Payable Subsidiary LedgerGrayco Supplies
Mar. 3 Bal. 1,230
Date Item P.R. Dr. Cr. Balance
1,230 --- 15 CP7
CASH PAYMENTS JOURNAL
Other AccountsCk. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
On March 21, issued Check No. On March 21, issued Check No. 152 as payment on account to 152 as payment on account to
Jewett Business Systems, $2,800.Jewett Business Systems, $2,800.
2006
Mar. 2 150 Rent Expense 1,600 1,60015 151 Grayco Supplies 1,230 1,23021 152 Jewett Business Sys. 2,800 2,800
CASH PAYMENTS JOURNAL
Other AccountsCk. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
On March 22, issued Check No. On March 22, issued Check No. 153 as payment on account to 153 as payment on account to
Donnelly Supplies, $420.Donnelly Supplies, $420.
2006
Mar. 2 150 Rent Expense 1,600 1,60015 151 Grayco Supplies 1,230 1,23021 152 Jewett Business Sys. 2,800 2,80022 153 Donnelly Supplies. 420 420
CASH PAYMENTS JOURNAL
Other AccountsCk. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
On March 30, issued Check No. 154 as On March 30, issued Check No. 154 as payment for utility bill, $1,050.payment for utility bill, $1,050.
2006
Mar. 2 150 Rent Expense 1,600 1,60015 151 Grayco Supplies 1,230 1,23021 152 Jewett Business Sys. 2,800 2,80022 153 Donnelly Supplies. 420 42030 154 Utilities Expense 1,050 1,050
CASH PAYMENTS JOURNAL
Other AccountsCk. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
On March 31, issued Check On March 31, issued Check No. 155 on account to Howard No. 155 on account to Howard
Supplies, $600Supplies, $600
2006
Mar. 2 150 Rent Expense 1,600 1,60015 151 Grayco Supplies 1,230 1,23021 152 Jewett Business Sys. 2,800 2,80022 153 Donnelly Supplies. 420 42030 154 Utilities Expense 1,050 1,05031 155 Howard Supplies 600 600
CASH PAYMENTS JOURNAL
Other AccountsCk. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
The journal is ruled, summed, and The journal is ruled, summed, and verified for equality of debits and verified for equality of debits and
the “Cash Cr.” column.the “Cash Cr.” column.
2006
Mar. 2 150 Rent Expense 1,600 1,60015 151 Grayco Supplies 1,230 1,23021 152 Jewett Business Sys. 2,800 2,80022 153 Donnelly Supplies. 420 42030 154 Utilities Expense 1,050 1,05031 155 Howard Supplies 600 60031 2,650 5,050 7,700
Individual items in the “Other Accounts Dr.” Individual items in the “Other Accounts Dr.” column are posted. Then the totals for “Accounts column are posted. Then the totals for “Accounts
Payable Dr.” and “Cash Cr.” are posted.Payable Dr.” and “Cash Cr.” are posted.
CASH PAYMENTS JOURNAL
Other AccountsCk. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
PAGE 7
2006
Mar. 2 150 Rent Expense 1,600 1,60015 151 Grayco Supplies 1,230 1,23021 152 Jewett Business Sys. 2,800 2,80022 153 Donnelly Supplies. 420 42030 154 Utilities Expense 1,050 1,05031 155 Howard Supplies 600 60031 2,650 5,050 7,700
(21) (11)
52
54
( )
Accounts PayableAccounts Payable
Accounts Payable Control
Accounts Payable Control
Donnelly SuppliesDate Item P.R. Debit Credit Balance
Grayco SuppliesDate Item P.R. Debit Credit Balance
Howard SuppliesDate Item P.R. Debit Credit Balance
Mar 2 P11 420 42019 P11 1,450 1,87022 CP7 420 1,450Accounts
Payable Subsidiary
Ledger
Accounts Payable Accounts Payable (Controlling)(Controlling)
ACCOUNT Accounts Payable No. 12
GENERAL LEDGER
Date Item P.R. Debit Credit BalanceMar. 1 Bal 1,230
31 P11 6,230 7,46031 CP7 5,050 2,410
Mar 1 Bal. 1,23015 CP7 1,230 0--
Mar 3 P11 600 60027 P11 960 1,56031 CP7 600 960
Jewett Business Jewett Business Systems also has Systems also has a zero balance, so a zero balance, so that account was that account was omitted for space omitted for space
reasons.reasons.
Advantages of a Computerized Accounting System Over a Manual Accounting System
Advantages of a Computerized Accounting System Over a Manual Accounting System
1. Computerized systems simplify the record-keeping process.
2. Computerized systems are generally more accurate.
3. Computerized systems provide management current account balance information to support decision making.
The Revenue and Collection Cycle in QuickBooks
The Revenue and Collection Cycle in QuickBooks
From Exhibit 10, page 203 of textbook
Mail invoice to customer
The Revenue and Collection Cycle in QuickBooks Continued
The Revenue and Collection Cycle in QuickBooks Continued
From Exhibit 10, page 203 of textbook
The Revenue and Collection Cycle in QuickBooks Continued
The Revenue and Collection Cycle in QuickBooks Continued
From Exhibit 10, page 203 of textbook
Advanced Areas Where the Advanced Areas Where the Internet is Being Used for Internet is Being Used for
Business PurposesBusiness Purposes
Advanced Areas Where the Advanced Areas Where the Internet is Being Used for Internet is Being Used for
Business PurposesBusiness PurposesSupply chain management (SCM)
Customer relationship management (CRM)
Product life-cycle management (PLM)
The EndThe End
Chapter 5Chapter 5