Accounting principles 8th weygars kieso kimmel chapter 07

Chapter
7-1


CHAPTER 7

ACCOUNTING
INFORMATION
SYSTEMS
Accounting Principles, Eighth Edition
Chapter
7-2


Study
Study Objectives
Objectives
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.

4.

Indicate how companies post a multi-column
journal.

Chapter
7-3


Accounting
Accounting Information
Information Systems
Systems
Basic
Basic Concepts
Concepts
of
of Accounting
Accounting
Information
Information
Systems
Systems
Computerized
accounting
systems
Manual
accounting
systems

Chapter
7-4

Subsidiary
Subsidiary
Ledgers
Ledgers

Example
Advantages

Special
Special
Journals
Journals

Sales journal
Cash receipts
journal
Purchases
journal
Cash payments
journal
Effects of special
journals on
general journal


Basic

Basic Concepts
Concepts of
of AIS
AIS
The 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.

Chapter
7-5

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


Basic
Basic Concepts
Concepts of
of AIS
AIS
Cost Effectiveness - Benefits
must outweigh the costs.
Illustration 7-1
Principles of an
efficient and
effective AIS.

Useful
Output

Flexibility - The system should
be sufficiently flexible to meet
the resulting changes in the
demands made upon it.
Chapter
7-6

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


Basic
Basic Concepts
Concepts of
of AIS
AIS

Computerized Accounting Systems
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.
Chapter
7-7

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


Basic
Basic Concepts
Concepts of
of AIS
AIS

Computerized Accounting Systems
Choosing a software package
Entry-Level Software


Common features and benefits:
 Easy data access and report preparation
 Audit trail

Enterprise Resource Planning Systems

Chapter
7-8

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


Basic
Basic Concepts
Concepts of

of AIS
AIS

Manual Accounting Systems
Perform each step in the accounting cycle by
hand.
Satisfactory in a company with a low volume of
transactions.
Must understand manual accounting systems to
understand computerized accounting systems.

Chapter
7-9

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


Subsidiary
Subsidiary Ledgers
Ledgers
Used to keep track of individual balances.
Two common subsidiary ledgers are:
1. Accounts receivable (customers’)
2. Accounts payable (creditors’)
Each general ledger control account balance must
equal the composite balance of the individual accounts
in the related subsidiary ledger.

Chapter
7-10

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


Subsidiary
Subsidiary Ledgers
Ledgers
Relationship of general ledger and subsidiary ledgers
Illustration 7-3

Chapter
7-11

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


Subsidiary
Subsidiary Ledgers
Ledgers

Advantages of Subsidiary Ledgers
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.

Chapter
7-12

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


Special
Special Journals
Journals
Used to record similar types of transactions.
Illustration 7-5

If a transaction cannot be recorded in a special journal,
the company records it in the general journal.
Chapter
7-13

LO 3 Explain how companies use special journals in journalizing.


Special
Special Journals
Journals

Review Question
Each of the following is a subsidiary ledger
except the:
a. accounts receivable ledger.
b. accounts payable ledger.
c. customer’s ledger.
d. general ledger.

Chapter

7-14

LO 3 Explain how companies use special journals in journalizing.


Special
Special Journals
Journals
Sales Journal

Illustration 7-6

Under a 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 Merchandise Inventory.
Chapter
7-15

LO 3 Explain how companies use special journals in journalizing.


Special
Special Journals
Journals

Illustration 7-7

POSTING THE SALES JOURNAL

Companies make daily postings
from the sales journal to the
individual accounts receivable
in the subsidiary ledger.
Chapter
7-16

LO 3 Explain how companies use special journals in journalizing.


Special
Special Journals
Journals

Illustration 7-7

POSTING THE SALES JOURNAL

Posting to the general ledger is
done monthly.
Chapter
7-17

LO 3 Explain how companies use special journals in journalizing.


Special
Special Journals
Journals

Advantages of Sales Journal
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.

Chapter
7-18

LO 3 Explain how companies use special journals in journalizing.


Special
Special Journals
Journals
Cash Receipts Journal

Illustration 7-9

In the cash receipts journal, companies record all receipts of cash.
The posting of the cash receipts journal is similar to the posting of
the sale journal. See complete Illustration 7-9 in the text.
Chapter
7-19

LO 3 Explain how companies use special journals in journalizing.


Special

Special Journals
Journals

Review Question
Cash sales of merchandise are recorded in the:
a. cash payments journal.
b. cash receipts journal.
c. general journal.
d. sales journal.

Chapter
7-20

LO 3 Explain how companies use special journals in journalizing.


Special
Special Journals
Journals

Review Question
Which of the following is not one of the credit
columns in the cash receipts journal:
a. Other accounts.
b. Accounts payable.
c. Accounts receivable.
d. Sales.

Chapter
7-21

LO 3 Explain how companies use special journals in journalizing.


Special
Special Journals
Journals

Illustration 7-13

Purchases Journal

Daily postings are made from the
purchases journal to the accounts
payable subsidiary ledger.
Chapter
7-22

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


Special
Special Journals
Journals

Illustration 7-13

Purchases Journal

At the end of the accounting

period, the company posts totals to
the general ledger.
Chapter
7-23

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


Special
Special Journals
Journals

Review Question
All of the following are advantages of using
subsidiary ledgers except they:
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.
Chapter
7-24

LO 3 Explain how companies use special journals in journalizing.


Special
Special Journals
Journals
Cash Payments Journal

Illustration 7-16

In a cash payments (cash disbursements) journal, companies
record all disbursements of cash.
The procedures for posting the cash payments journal are similar to
those for other journals.
Chapter
7-25

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