5 Accounting Systems Accounting Using Excel for Success

5 Accounting Systems Accounting Using Excel for Success Student Version 5 - 5 - Power. Point Presentation by: Douglas Cloud, Professor Emeritus Accounting, Pepperdine University © 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 passwordprotected website for classroom use.

1 Define and describe an accounting system. 5 -2 55 -

1 Accounting System An accounting system is the methods and procedures for collecting, classifying, summarizing, and reporting a business’s financial and operating information. 5 -3 3

1 As a business grows and changes, accounting systems also change in the following three-step process: • • • 5 - 5 - Step 1. Analyze user information needs. Step 2. Design the system to meet the user needs. Step 3. Implement the system.

1 Feedback Once a system has been implemented, feedback, or input from the users of the information can be used to analyze and improve the system. 5 - 5 -

1 Internal Controls Internal controls are policies and procedures that protect assets from misuse, ensure that business information is accurate, and ensure that laws and regulations are being followed. 5 - 5 -

1 Processing Methods Processing methods are the means by which the system collects, summarizes, and reports accounting information. These methods may be either manual or computerized. 5 - 5 -

2 Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals. 5 -5 -8 5 -

2 Subsidiary Ledger A large number of individual accounts with a common characteristic can be grouped together in a separate ledger called a subsidiary ledger. 5 - 5 -

2 General Ledger The primary ledger, which contains all of the balance sheet and income statement accounts, is called a general ledger. 5 - 5 -

2 Controlling Account Each subsidiary ledger is represented in the general ledger by a summarizing account, called a controlling account. 5 - 5 -

2 The individual customers’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts receivable subsidiary ledger or customers ledger. 5 - 5 -

2 The individual creditors’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts payable subsidiary ledger, or creditors ledger. 5 - 5 -

2 Special Journal Each special journal is designed to be used for recording a single kind of transaction that occurs frequently. 5 - 5 -

2 Special Journals SELLING Providing services on account recorded in Revenue Journal Receipt of cash from any source recorded in 5 - 5 - Cash Receipts Journal

2 Special Journals BUYING Purchase of items on account recorded in Purchases Journal Payment of cash for any purpose recorded in 5 - 5 - Cash Payments Journal

2 General Journal The all-purpose two-column journal, called the general journal or simply the journal can be used for entries that do not fit into any of the special journals. 5 - 5 -

2 Other Special Journals The revenue journal is used for recording fees earned on account. Cash fees earned would be recorded in the cash receipts journal. 5 - 5 -

2 Exhibit 2 5 - 5 - Revenue Journal

2 Exhibit 3 Revenue Journal Postings to Ledger 5 - 5 -

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. 5 - 5 -

2 Exhibit 4 Cash Receipts Journal and Postings 5 - 5 -

2 Accounts Receivable—(Controlling) Balance, March 1, 2010 Total debits (from revenue journal) $3, 400 9, 600 Total credits (from cash receipts journal) (7, 350) Balance, March 31, 2010 $5, 650 Net. Solutions’ Accounts Receivable Subsidiary Ledger Customer Balance Summary Report, March 31, 2010 Accessories By Claire Rap. Zone Web Cantina Total accounts receivable 5 - 5 - $3, 000 0 2, 650 $5, 650

2 Purchases Journal The purchases journal is designed for recording all purchases on account. 5 - 5 -

2 Exhibit 5 Purchases Journal and Postings 5 - 5 -

2 Cash Payments Journal All transactions involving a credit to Cash are recorded in the cash payments journal. 5 - 5 -

2 Exhibit 6 Cash Payments Journal and Postings 5 - 5 -

2 Accounts Payable Control Account and Subsidiary Ledger Accounts Payable (Control) Balance, March 1, 2010 Total credits (from purchases journal) Total debits (from cash payments journal) Balance, March 31, 2010 $1, 230 6, 230 (5, 050) $2, 410 Net. Solutions Supplier Balance Summary Report March 31, 2010 Donnelly Supplies Grayco Supplies Howard Supplies Jewett Business Systems Total 5 -28 $1, 450 0 960 0 $2, 410 28

3 Describe and give examples of other subsidiary ledgers and modified special journals. 5 -29 29

3 A business may modify its special journals by adding one or more columns for recording transactions that occur frequently. 5 - 5 -

3 Nov. 2 Net. Solutions issued Invoice No. 842 to Litten Company for $4, 770, which included sales taxes of $270. 3 Issued Invoice No. 843 to Kauffman Supply Company for $1, 166, which included sales taxes of $66. 5 - 5 -

3 Modified Special Journal 5 - 5 -

4 Describe and illustrate the use of a computerized accounting system. 5 -5 -33 5 -

4 Computerized Accounting System 1. Computerized systems simplify the record -keeping process in that transactions are recorded in electronic forms and, at the same time, posted electronically to general and subsidiary ledger accounts. 5 - 5 -

4 2. Computerized systems are generally more accurate than manual systems. 3. Computerized systems provide management with current account balance information to support decision making, since account balances are posted as the transactions occur. 5 - 5 -

4 Exhibit 7 5 - Revenue and Cash Receipts in Quick. Books© (continued) 5 -

4 Exhibit 7 5 - 5 - Revenue and Cash Receipts in Quick. Books© (continued)

5 Describe the basic features of e-commerce. 5 -38 38

5 e-Commerce Using the Internet to perform business transactions is termed e-commerce. 5 - 5 -

5 When transactions are between a company and a consumer, it is termed B 2 C (business-toconsumer) e-commerce. 5 - 5 -

5 Three more advanced areas where the Internet is being used for business purposes are: 1. Supply chain management (SCM) 2. Consumer relationship management (CRM) 3. Product life-cycle management (PLM) 5 - 5 -