Financial accounting 12th warren duchac chapter 05

Accounting Systems

Chapter 5
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Prepared by: C. Douglas
Cloud
Professor Emeritus of
Accounting
Pepperdine University


Learning Objective 1

1. Define and describe an accounting
system.

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2


LO 1

Basic Accounting Systems

An accounting system is the methods and
procedures for collecting, classifying,
summarizing, and reporting a business’s
financial and operating information.

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LO 1

Basic Accounting Systems
As a business grows
and changes, accounting
systems also change in
the following three-step

process.

 Analyze user
information
needs.
 Design the
system to meet
the user needs.
 Implement
the system.

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 1

Basic Accounting Systems

Internal controls are the policies and
procedures that protect assets from misuse,
ensure that business information is
accurate, and ensure that laws and
regulations are being followed.
 Processing methods are the means
by which the accounting system
collects, summarizes, and reports
accounting information. These
methods may be either manual or
computerized.

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5


Learning Objective 2

Define and describe an accounting system.
Journalize and post transactions in a
manual accounting system that uses
subsidiary ledgers and special journals.

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Subsidiary Ledgers
 A large number of individual
accounts with a common
characteristic can be grouped
together in a separate ledger called
a subsidiary
ledger.which contains
 The
primary ledger,
all of the balance sheet and income

statement accounts, is called a
ledger. ledger is
general
Each subsidiary
represented in the general ledger by
a summarizing account, called a
7
controlling account.

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Subsidiary Ledgers
 The individual customer accounts are
arranged in alphabetical order in a
subsidiary ledger called the accounts
receivable subsidiary ledger, or
customers ledger.
 Individual creditor accounts are arranged in
alphabetical order in a subsidiary ledger
called the accounts payable subsidiary
ledger, or creditors ledger.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Special Journal

One method of processing transactions
more efficiently in a manual system is to
use special journals. Special journals are
designed to be used for recording a single
transactiontwo-column
that occurs frequently.
kind
The of
all-purpose
journal,
called the general journal or simply
the journal, can be used for entries
that do not fit into any of the special
journals.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Special Journals

The revenue journal is used for recording
fees earned on account.

 Cash fees earned would be recorded
in the cash receipts journal.

 Purchases made on account (on
credit) are recorded in the purchases
journal.
All cash payments are recorded in
the cash payments journal.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Revenue Journal

Revenues are normally recorded to the
revenue journal when the company sends
a bill, referred to as an invoice, to the
customer.
Each invoice is normally numbered in
sequence for future reference.

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Revenue Journal
Let’s take a step-by-step look at the process used to
post the first entry. This entry was made on March

2, 2012, when NetSolutions issued Invoice No. 615 to
Accessories By Claire for fees earned of $2,200.

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Exhibit 3 (in steps)
Page 35

Revenue Journal
Invoice
No.

Date
2012

Account Debited

Post
Ref.

Accts. Rec. – Debit
Fees Earned – Credit

1 Mar. 2 615

Accessories By Claire

2 2 0 0 00

1

2

6

616

RapZone

1 7 5 0 00

2

3

18

617

Web Cantina

2 6 5 0 00

3

4

27

618

Accessories by Claire

3 0 0 0 00

4

5

5

6

6

(continued)
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Exhibit 3 (in steps)
Page 35

Revenue Journal

Invoice
No.

Date
2012

Post
Ref.

Account Debited

Accts. Rec. – Debit
Fees Earned – Credit

1 Mar. 2 615

Accessories By Claire

2 2 0 0 00

1

2

6

616

RapZone

1 7 5 0 00

2

3

18

617

Web Cantina

2 6 5 0 00

3

4

27

618

3 0 0 0 00

4

5
6

Accessories by Claire

Accounts Receivable Subsidiary Ledger

5

Accessories By Claire

Date

Item

P.R.

Debit

Credit

Balance

6

2012

Mar. 2

R35

2,200

2,200

(continued)
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Exhibit 3 (in steps)
Page 35

Revenue Journal
Invoice
No.

Date
2012

Post
Ref.

Account Debited

Accts. Rec. – Debit
Fees Earned – Credit

1 Mar. 2 615

Accessories By Claire

2 2 0 0 00

1

2

6

616

RapZone

1 7 5 0 00

2

3

18

617

Web Cantina

2 6 5 0 00

3

4

27

618

3 0 0 0 00

4

5
6

Accessories by Claire
Accounts Receivable Subsidiary Ledger

5

Accessories By Claire

Date

Item

P.R.

Debit

Credit

Balance

6

2012

Mar. 2

R35

2,200

2,200

(continued)
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Exhibit 3 (in steps)
Page 35

Revenue Journal
Invoice
No.

Date
2012

Account Debited

Post
Ref.

Accts. Rec. – Debit
Fees Earned – Credit

1 Mar. 2 615

Accessories By Claire

2 2 0 0 00

1

2

6

616

RapZone

1 7 5 0 00

2

3

18

617

Web Cantina

2 6 5 0 00

3

4

27

618

Accessories by Claire

3 0 0 0 00

4

5

5

6

6

The same procedure would be used to post the other
transactions to the individual accounts in the accounts

(continued)
receivable subsidiary ledger.
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Exhibit 3 (in steps)
Page 35

Revenue Journal
Invoice
No.

Date
2012

Account Debited

Post
Ref.

Accts. Rec. – Debit
Fees Earned – Credit

1 Mar. 2 615

Accessories By Claire

2 2 0 0 00

1

2

6

616

RapZone

1 7 5 0 00

2

3

18

617

Web Cantina

2 6 5 0 00

3

4

27

618

Accessories by Claire

3 0 0 0 00

4

5

31

9 6 0 0 00

5

6

6

Next, the amount column would be totaled.
(continued)
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LO 2

Exhibit 3 (in steps)
The debit total is posted from the revenue
journal to Accounts Receivable in the general
ledger.
ACCOUNT
Date
2012

Mar.

Item
1

31

Accounts Receivable
Post.
Ref.

Account No. 12
Balance
Dr.

Balance

Cr.

Dr.

Cr.

3 400 00
R35 9 600 00

13 000 00

Revenue Journal, page 35
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

(continued)


LO 2

Exhibit 3 (in steps)
Page 35

Revenue Journal
Date

Invoice
No.

2012

Account Debited

Post
Ref.

Accts. Rec. – Debit
Fees Earned – Credit

1 Mar. 2 615
2
6 616

Accessories By Claire

2 2 0 0 00

1

RapZone

1 7 5 0 00

2

3

18

617

Web Cantina

2 6 5 0 00

3

4

27

618

Accessories by Claire

3 0 0 0 00

4

5

31

9 6 0 0 00

5

(12)

6

6

Indicates a debit posting of $9,600 to
Accounts Receivable (General Ledger

(continued)
Account 12)
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Exhibit 3 (in steps)
The credit total is posted from the revenue
journal to Fees Earned in the general
ledger.
ACCOUNT
Date

Fees Earned

Item

Account No. 41
Post.
Ref.

Balance
Dr.

Cr.

Dr.

Cr.

2012

Mar.

31

R35

9 600 00

9 600 00

Revenue Journal, page 35
(continued)
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Exhibit 3 (in steps)
Page 35

Revenue Journal
Date

Invoice
No.

2012

Account Debited

Post
Ref.

Accts. Rec. – Debit
Fees Earned – Credit

1 Mar. 2 615
2
6 616

Accessories By Claire

2 2 0 0 00

1

RapZone

1 7 5 0 00

2

3

18

617

Web Cantina

2 6 5 0 00

3

4

27

618

Accessories by Claire

3 0 0 0 00

4

5

31

9 6 0 0 00

5

(12) (41)

6

6

Indicates a credit posting of $9,600 to
Fees Earned (General Ledger
Account 41)
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Cash Receipts Journal

All transactions that involve the receipt of
cash are recorded in a cash receipts
journal. Every entry recorded in the cash
receipts journal will involve a debit to the
“Cash Dr.” column.

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.


LO 2

Exhibit 4 (in steps)
CASH RECEIPTS JOURNAL

Date
2012

Mar.

Page 14
Other
Post Accounts
Ref.
Cr.

Account Credited

42

1 Rent Revenue

Accounts
Receivable
Cr.

400

Cash
Dr.
400

19 Web Cantina

3,400

3,400

28 Accessories By Claire

2,200

2,200

30 RapZone

1,750

1,750

GENERAL LEDGER
ACCOUNT Rent Revenue
Date
2012

Mar. 1

Item

P.R.

CR14

Debit

Acct. No. 42
Credit

400

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Cr. Bal.

400
23

(continued)


LO 2

Exhibit 4 (in steps)
CASH RECEIPTS JOURNAL

Date
2012

Mar.

Account Credited
1 Rent Revenue

Page 14
Other
Post Accounts
Ref.
Cr.

42

Accounts
Receivable
Cr.

400

Cash
Dr.
400

19 Web Cantina

3,400

3,400

28 Accessories By Claire

2,200

2,200

30 RapZone
31

400

1,750
7,350

1,750
7,750

( )

(12 )

( 11)

A check mark indicates
that items in this column
are posted individually.

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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

(continued)


LO 2

Exhibit 5 (in steps)

 The purchases journal is designed for
recording all purchases on account.

Date

2012

Mar. 3
7
12
19
27

Page 11
PURCHASES JOURNAL
Accts.
Other
Post Payable Supplies Accounts Post
Account Credited Ref.
Cr.
Dr.
Dr.
Ref. Amount
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies

600

420
2,800
1,450
960

600
420
Off. Equip.

2,800

1,450
960

(continued)
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permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.