Chapter 5

Accounting Systems and Internal Controls
Accounting, 21st Edition
Warren Reeve Fess
© 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.

PowerPoint Presentation by Douglas Cloud
Professor Emeritus of Accounting Pepperdine University

Some of the action has been automated, Some of the action has been automated, so click the mouse when you see this so click the mouse when you see this lightning bolt in the lower right-hand lightning bolt in the lower right-hand corner of the screen. You can point and corner of the screen. You can point and click anywhere on the screen. click anywhere on the screen.

Objectives Objectives
1. Define an accounting system and After studying this describe its After studying this implementation. chapter, you should chapter, you should 2. List the three objectives of internal be able to: be able to: 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.

Objectives Objectives
4. Describe and give examples of additional subsidiary ledgers and modified special journals.
5. Apply computerized accounting to the revenue and collection cycle. 6. Describe the basic features of e-commerce.

Basic Basic Accounting Accounting System System

Analysis
F E E D B A C K

Design

Implementation

Objectives of Internal Objectives of Internal Control Control
To provide reasonable assurance that:
1. assets are safeguarded and used for business purposes. 2. business information is accurate. 3. employees comply with laws and regulations.

Elements of Internal Control
1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication

Elements of Internal Control
1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication

Management philosophy and Management philosophy and operating style influences the operating style influences the control environment. control environment.

Elements of Internal Control Elements of Internal Control
1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication

Once risks are identified, they can be Once risks are identified, they can be analyzed to estimate their significance, to analyzed to estimate their significance, to assess their likelihood of occurring, and to assess their likelihood of occurring, and to determine actions that will minimize them. determine actions that will minimize them.

Elements of Internal Control Elements of Internal Control
1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication

Control Procedures Control Procedures
Competent Personnel Rotating Duties Mandatory Vacations Separating Responsibilities for Related Operations  Separating Operations, Custody of Assets, and Accounting  Proofs and Security Measures    

Control Procedures Control Procedures
    Competent Personnel Rotating Duties Mandatory Vacations Separating Responsibilities for Related Operations  Separating Operations, Custody of Assets, and Accounting  Proofs and Security Measures

Separating Otherwise, the following Separating Otherwise, the following Responsibilities for abuses are possible: Responsibilities for abuses are possible: Related Operations 1. Orders may be placed on the basis of Related Operations

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.

Control Procedures Control Procedures
    Competent Personnel Rotating Duties Mandatory Vacations Separating Responsibilities for Related Operations  Separating Operations, Custody of Assets, and Accounting  Proofs and Security Measures

Custody of Assets
Independent check

Independent check

Operations

Accounting

Independent check

Elements of Internal Control Elements of Internal Control
1. 2. 3. 4. 5. Control environment Risk assessment Control procedures Monitoring Information and communication

Clues to Potential Problems Clues to Potential Problems
Warning signs with regard to people:
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.

Clues to Potential Problems Clues to Potential Problems
Warning signs from the accounting system:
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.

Manual Accounting Systems

General Ledger and Subsidiary Ledgers General Ledger and Subsidiary Ledgers
General Ledger

Cash

11

Accounts Receivable Subsidiary Ledger Customer Accounts

Accts. Rec.

12 A

B

C

D

Supplies

14

Accounts Payable Subsidiary Ledger Creditor Accounts

Accts. Pay.

21 A

B

C

D

Special Journals
SELLING Providing services on account recorded in Revenue journal recorded in Receipt of cash from any source recorded in recorded in

Cash receipts journal

BUYING Purchase of items on account recorded in Purchases journal recorded in Payment of cash for any purpose recorded in recorded in

Cash payments journal

The Revenue Journal The Revenue Journal
Revenue Journal
Date Invoice No. Account Debited Post Ref.

Page 35
Accts. Rec. – Debit Fees Earned – Credit

1 2 3 4 5 6

1 2 3 4 5 6

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.

The Revenue Journal The Revenue Journal
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 1 Mar. 2 615 2

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com

2 2 0 0 00

1 2 3 4 5 6

3 4 5 6

Performed services on credit to Performed services on credit to MyMusic.com, $2,200. MyMusic.com, $2,200.

The Revenue Journal The Revenue Journal
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 1 Mar. 2 615 2

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com

2 2 0 0 00

1 2 3 4 5 6

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.

Posting from the Revenue Journal Posting from the Revenue Journal
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 1 Mar. 2 615 2

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com

2 2 0 0 00

1 2 3 4 5 6

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.

Posting from the Revenue Journal Posting from the Revenue Journal
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 1 Mar. 2 615 2

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com

2 2 0 0 00

1 2 3 4 5 6

3 4 5 6

Accounts Receivable Subsidiary Ledger
MyMusicClub.com
Date Item P.R. Debit Credit Balance

Mar. 2

2006

R35

2,200

2,200

Posting from the Revenue Journal Posting from the Revenue Journal
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 1 Mar. 2 615 2

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com

2 2 0 0 00

1 2 3 4 5 6

3 4 5 6

Accounts Receivable Subsidiary Ledger
MyMusicClub.com
Date Item P.R. Debit Credit Balance

Mar. 2

2006

R35

2,200

2,200

This procedure is repeated for each posting to the accounts receivable subsidiary ledger.

Posting from the Revenue Journal Posting from the Revenue Journal
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 2003 1 Mar. 2 615 2 6 616 3 18 617

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com RapZone.com Web Cantina MyMusicClub.com

2 2 0 0 00 1 7 5 0 00 2 6 5 0 00 3 0 0 0 00

1 2 3 4 5 6

4 5 6

27 618

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.

Posting from the Revenue Journal Posting from the Revenue Journal
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 1 Mar. 2 615 2 6 616 3 18 617

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com RapZone.com Web Cantina MyMusicClub.com

2 2 0 0 00 1 7 5 0 00 2 6 5 0 00 3 0 0 0 00 9 6 0 0 00

1 2 3 4 5 6

4 5 6

27 618 31

On March 31, the revenue journal is On March 31, the revenue journal is totaled and ruled. totaled and ruled.

Posting the Revenue Journal Total Posting the Revenue Journal Total
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 1 Mar. 2 615 2 6 616 3 18 617

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com RapZone.com Web Cantina MyMusicClub.com

2 2 0 0 00 1 7 5 0 00 2 6 5 0 00 3 0 0 0 00 9 6 0 0 00

1 2 3 4 5 6

4 5 6

27 618 31

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.

Posting the Revenue Journal Total Posting the Revenue Journal Total
GENERAL LEDGER
ACCOUNT Date

Accounts Receivable
Item Post. Ref. Dr. Cr. Dr.

Account No. 12
Balance Cr.

Mar. 1 31

2006

Balance R359 600 00

3 400 00 13 000 00

Revenue Journal, page 35

Posting the Revenue Journal Total Posting the Revenue Journal Total
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 1 Mar. 2 615 2 6 616 3 18 617

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com RapZone.com Web Cantina MyMusicClub.com

2 2 0 0 00 1 7 5 0 00 2 6 5 0 00 3 0 0 0 00 9 6 0 0 00

1 2 3 4 5 6

4 5 6

27 618 31

(12)(41)

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 Total Posting the Revenue Journal Total
GENERAL LEDGER
ACCOUNT Date

Fees Earned
Item Post. Ref. Dr. Cr.

Account No. 41
Balance Dr. Cr.

Mar. 31

2006

R35

9 600 00

9 600 00

Posting the Revenue Journal Total Posting the Revenue Journal Total
Revenue Journal
Date Invoice No. Account Debited Post Ref.
2006 1 Mar. 2 615 2 6 616 3 18 617

Page 35
Accts. Rec. – Debit Fees Earned – Credit

MyMusicClub.com RapZone.com Web Cantina MyMusicClub.com

2 2 0 0 00 1 7 5 0 00 2 6 5 0 00 3 0 0 0 00 9 6 0 0 00

1 2 3 4 5 6

4 5 6

27 618 31

(12)(41)

Placing “41” here indicates that $9,600 has been posted to the credit side of Fees Earned in the general ledger.

The Cash Receipts Journal The Cash Receipts Journal

The Cash Receipts Journal The Cash Receipts Journal
All transactions that All transactions that involve the receipt of cash involve the receipt of cash are recorded in the cash are recorded in the cash receipts journal. receipts journal.

The Cash Receipts Journal The Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. Other Accounts Cr. 400 Accounts Receivable Cr. Page 14 Cash Dr. 400

Date
2006

Account Credited

Mar. 1 Rent Revenue

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 Journal The Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. Other Accounts Cr. 400 3,400 2,200 1,750 Accounts Receivable Cr. Page 14 Cash Dr. 400 3,400 2,200 1,750

Date Mar. 1 19 28 30
2006

Account Credited Rent Revenue Web Cantina MyMusicClub.com RapZone.com

During March, NetSolutions collected During March, NetSolutions collected cash from three customers. cash from three customers.

Posting the Cash Receipts Journal Posting the Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. Other Accounts Cr. 400 3,400 2,200 1,750 Accounts Receivable Cr. Page 14 Cash Dr. 400 3,400 2,200 1,750

Date Mar. 1 19 28 30
2006

Account Credited Rent Revenue Web Cantina MyMusicClub.com RapZone.com

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 Journal Posting the Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. Other Accounts Cr. 400 3,400 2,200 1,750 Accounts Receivable Cr. Page 14 Cash Dr. 400 3,400 2,200 1,750

Date Mar. 1 19 28 30
2006

Account Credited Rent Revenue Web Cantina MyMusicClub.com RapZone.com

Accounts Receivable Subsidiary Ledger
Web Cantina
Date
2006

Item

P.R.

Debit

Credit

Balance

Mar. 1 Bal. 18 R35 19

2,650 3,400

3,400 6,050 2,650

Posting the Cash Receipts Journal Posting the Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. Other Accounts Cr. 400 3,400 2,200 1,750 Accounts Receivable Cr. Page 14 Cash Dr. 400 3,400 2,200 1,750

Date Mar. 1 19 28 30
2006

Account Credited Rent Revenue Web Cantina MyMusicClub.com RapZone.com

Accounts Receivable Subsidiary Ledger
Web Cantina
Date
2006

Item

P.R.

Debit

Credit

Balance

Mar. 1 Bal. 18 R35 19 CR14

2,650 3,400

3,400 6,050 2,650

The Cash Receipts Journal The Cash Receipts Journal
After all journalizing and After all journalizing and posting to the accounts posting to the accounts receivable subsidiary ledger for receivable subsidiary ledger for the month is complete, the the month is complete, the columns are totaled. columns are totaled.

The Cash Receipts Journal The Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. √ √ √ 400 Other Accounts Cr. 400 3,400 2,200 1,750 7,350 Accounts Receivable Cr. Page 14 Cash Dr. 400 3,400 2,200 1,750 7,750

Date Mar. 1 19 28 30 31
2006

Account Credited Rent Revenue Web Cantina MyMusicClub.com RapZone.com

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.

Posting the Cash Receipts Journal Posting the Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. √ √ √ 400 Other Accounts Cr. 400 3,400 2,200 1,750 7,350 Accounts Receivable Cr. Page 14 Cash Dr. 400 3,400 2,200 1,750 7,750

Date Mar. 1 19 28 30 31
2006

Account Credited Rent Revenue Web Cantina MyMusicClub.com RapZone.com

GENERAL LEDGER

The three Item P.R. items Credit Balance The three circled items are Date circled Debit are Mar. Bal √ posted to1the general ledger. 3,400 posted to the general ledger. 31 R35 9,600 13,000 Let’s post Accounts Receivable.. Let’s post Accounts Receivable
2006

Account: Accounts Receivable

No. 12

Posting the Cash Receipts Journal Posting the Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. √ √ √ 400 Other Accounts Cr. 400 3,400 2,200 1,750 7,350 Accounts Receivable Cr. Page 14 Cash Dr. 400 3,400 2,200 1,750 7,750

Date Mar. 1 19 28 30 31
2006

Account Credited Rent Revenue Web Cantina MyMusicClub.com RapZone.com

GENERAL LEDGER Account: Accounts Receivable Mar. 1 Bal √ 31 R35 9,600 31 CR14
2006

No. 12
Balance

Date Item P.R.

Debit Credit

7,350

3,400 13,000 5,650

Posting the Cash Receipts Journal Posting the Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. √ √ √ 400 Other Accounts Cr. 400 3,400 2,200 1,750 7,350 Accounts Receivable Cr. Page 14 Cash Dr. 400 3,400 2,200 1,750 7,750

Date Mar. 1 19 28 30 31
2006

Account Credited Rent Revenue Web Cantina MyMusicClub.com RapZone.com

( √)

(12)

Posting the Cash Receipts Journal Posting the Cash Receipts Journal
The $7,750 total in the The $7,750 total in the Cash Debit column is Cash Debit column is posted to Cash in a similar posted to Cash in a similar manner. manner.

Posting the Cash Receipts Journal Posting the Cash Receipts Journal
The $400 credit to Rent Revenue The $400 credit to Rent Revenue could have been posted earlier, but could have been posted earlier, but posting it at the same time as other posting it at the same time as other general ledger accounts is proper. general ledger accounts is proper.

Posting the Cash Receipts Journal Posting the Cash Receipts Journal
A completely posted cash A completely posted cash receipts journal is shown receipts journal is shown in the next slide. in the next slide.

Posted Cash Receipts Journal Posted Cash Receipts Journal
CASH RECEIPTS JOURNAL Post Ref. Other Accounts Cr. 400 Accounts Receivable Cr. Page 14 Cash Dr. 400 3,400 2,200 1,750 (12) 7,350 2,200 1,750 (11) 7,750

Date Mar. 1 19 3,400 28 30 31
2006

Account Credited Rent Revenue Web Cantina MyMusicClub.com RapZone.com

42
√ √ √

(400 ) √

Accounts Receivable Control Account

GENERAL LEDGER ACCOUNT Accounts Receivable Mar. 1 Bal √ 31 R35 9,600 31 CR14
Date Item P.R. Debit Credit

No. 12
Balance

7,350

3,400 13,000 5,650

If the accounts receivable If the accounts receivable account in the general ledger account in the general ledger only shows summary totals, only shows summary totals, where are the individual where are the individual customer balances? customer balances?

Accounts Receivable Control Account

GENERAL LEDGER ACCOUNT Accounts Receivable Mar. 1 Bal √ 31 R35 9,600 31 CR14
MyMusicClub.com
Date Item P.R. Debit Credit Balance

No. 12
Balance

Date Item P.R.

Debit Credit

7,350

3,400 13,000 5,650

Accounts Receivable Subsidiary Ledger

3/2 3/27 3/28
Date Item

R35 2,200 R35 3,000 CR14
P.R. Debit

2,200

2,200 5,200 3,000

RapZone.com
Credit Balance

3/6 3/30
Date Item

R35 1,750 CR14
P.R. Debit

1,750

1,750 --

Web Cantina
Credit Balance

3/1 Bal.  3/18 R35 2,650 3/19 CR14

3,400

3,400 6,050 2,650

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

Journalizing in the Purchases Journal Journalizing in the Purchases Journal
Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount 600 600

Date
2006

Mar. 3 Howard Supplies

On March 3, 2003, NetSolutions purchased supplies from Howard Supplies, $600.

Posting the Purchases Journal Posting the Purchases Journal
Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount 600 600

Date
2006

Mar. 3 Howard Supplies

Accounts Payable Subsidiary Ledger
Howard Supplies
Date
2006

Item

P.R.

Dr.

Cr.

Balance

Mar 3 600 To keep the accounts payable600 subsidiary ledger current, this entry is posted on March 3.

Posting the Purchases Journal Posting the Purchases Journal
Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount 600 600

Date
2006

Mar. 3 Howard Supplies

Accounts Payable and Supplies will be posted as totals.

Journalizing in the Purchases Journal Journalizing in the Purchases Journal
Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount 600 420 600 420

Date
2006

Mar. 3 Howard Supplies 7 Donnelly Supplies

On March 7, NetSolutions purchased supplies from Donnelly Supplies, $420.

Journalizing in the Purchases Journal Journalizing in the Purchases Journal
Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount 600 420 600 420

Date
2006

Mar. 3 Howard Supplies 7 Donnelly Supplies

Journalizing in the Purchases Journal Journalizing in the Purchases Journal
Page 11 PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Account Credited Ref. Cr. Dr. Dr. Ref. Amount 600 420 2,800 600 420 Off. Equip. 2,800

Date
2006

Mar. 3 Howard Supplies 7 Donnelly Supplies 12 Jewett Bus. Sys.

Because there isn’t a special purchased On March 12, NetSolutions column for office equipment from Jewett Business Office Equipment, this purchase was recorded under “Other Accounts Dr.” Systems, $2,800.

Journalizing in the Purchases Journal Journalizing in the Purchases Journal
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. 1,450 960 2,800

Date Mar. 3 7 12 19 27
2006

Now, let’s look at the rest of March’s entries (assume that all postings to the accounts payable subsidiary ledger have been made).

Totaling the Purchases Journal Totaling the Purchases Journal
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 6,230 600 420 Off. Equip. 1,450 960 3,430 2,800

Date Mar. 3 7 12 19 27 31
2006

2,800

At the end of March, all columns are totaled At the end of March, all columns are totaled $6,230 debits and credits is verified. $6,230 = $3,430 + $ 2,800 = $3,430 + $ 2,800 and equality of debits and credits is verified. and equality of

Posting the Purchases Journal Posting the Purchases Journal
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 6,230 600 420 Off. Equip. 1,450 960 3,430 2,800

Date Mar. 3 7 12 19 27 31
2006

2,800

The next step is to post to the general journal.

Date Mar. 3 7 12 19 27 31
2006

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 6,230 600 420 Off. Equip. 1,450 960 3,430 2,800

2,800

GENERAL LEDGER ACCOUNT Accounts Payable Mar. 1 Bal 31 P11
Date Item P.R. Debit Credit

No. 21
Balance

6,230

1,230 7,460

Date Mar. 3 7 12 19 27 31
2003

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 6,230 (21) 600 420 Off. Equip. 1,450 960 3,430 2,800

2,800

GENERAL LEDGER ACCOUNT Accounts Payable Mar. 1 Bal 31 P11
Date Item P.R. Debit Credit

No. 21
Balance

6,230

1,230 7,460

Date Mar. 3 7 12 19 27 31
2003

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 6,230 (21) 600 420 Off. Equip. 18 1,450 960 3,430 (14) 2,800

2,800

Supplies is posted as a total of $3,430 to general ledger account 21. Office Equipment is posted individually.

Date Mar. 3 7 12 19 27 31
2006

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 6,230 (21) 600 420 Off. Equip. 18 1,450 960 3,430 (14) 2,800

2,800 ( )

NetSolutions had only one entry in the “Other Accounts Dr.” column. If there were others, they would be posted individually. Therefore, the total is not posted. A check mark indicates that the total was not posted.

The Cash Payments Journal

All payments are All payments are recorded in the cash recorded in the cash payments journal. payments journal. NetSolutions makes all NetSolutions makes all payments by check. payments by check.

Let’s make all of the Let’s make all of the cash payment journal cash payment journal entries for March. entries for March.

CASH PAYMENTS JOURNAL
Ck. No. Other Accounts Post Accounts Payable Ref. Dr. Dr.

PAGE 7

Date

Account Debited

Cash Cr

Mar. 2

2006

150

Rent Expense

1,600

1,600

On March 2, NetSolutions paid the rent for March by issuing Check No. 150 for $1,600.

CASH PAYMENTS JOURNAL
Ck. No. Other Accounts Post Accounts Payable Ref. Dr. Dr.

PAGE 7

Date

Account Debited

Cash Cr

Mar. 2 15

2006

150 151

Rent Expense Grayco Supplies

1,600 1,230

1,600 1,230

On March 15, issued Check No. 151 to Grayco Supplies on account, $1,230.

CASH PAYMENTS JOURNAL
Ck. No. Other Accounts Post Accounts Payable Ref. Dr. Dr.

PAGE 7

Date

Account Debited

Cash Cr

Mar. 2 15

2006

150 151

Rent Expense Grayco Supplies

1,600 √ 1,230

1,600 1,230

Accounts Payable Subsidiary Ledger
Grayco Supplies Let’s post to the accounts payable Date Item P.R. Dr. Cr. Balance subsidiary Mar. 3 Bal. this time to keep ledger at 1,230 15 CP7 the creditor’s account1,230 current. ---

CASH PAYMENTS JOURNAL
Ck. No. Other Accounts Post Accounts Payable Ref. Dr. Dr.

PAGE 7

Date

Account Debited

Cash Cr

Mar. 2 15 21

2006

150 151 152

Rent Expense Grayco Supplies √ Jewett Business Sys.

1,600 1,230 2,800

1,600 1,230 2,800

On March 21, issued Check No. 152 as payment on account to Jewett Business Systems, $2,800.

CASH PAYMENTS JOURNAL
Ck. No. Other Accounts Post Accounts Payable Ref. Dr. Dr.

PAGE 7

Date

Account Debited

Cash Cr

Mar. 2 15 21 22

2006

150 151 152 153

Rent Expense Grayco Supplies √ Jewett Business Sys. √ Donnelly Supplies.

1,600 1,230 2,800 420

1,600 1,230 2,800 420

On March 22, issued Check No. 153 as payment on account to Donnelly Supplies, $420.

CASH PAYMENTS JOURNAL
Ck. No. Other Accounts Post Accounts Payable Ref. Dr. Dr.

PAGE 7

Date

Account Debited

Cash Cr

Mar. 2 15 21 22 30

2006

150 151 152 153 154

Rent Expense Grayco Supplies √ Jewett Business Sys. √ Donnelly Supplies. √ Utilities Expense

1,600 1,230 2,800 420 1,050

1,600 1,230 2,800 420 1,050

On March 30, issued Check No. 154 as payment for utility bill, $1,050.

CASH PAYMENTS JOURNAL
Ck. No. Other Accounts Post Accounts Payable Ref. Dr. Dr.

PAGE 7

Date

Account Debited

Cash Cr

Mar. 2 15 21 22 30 31

2006

150 151 152 153 154 155

Rent Expense Grayco Supplies √ Jewett Business Sys. √ Donnelly Supplies. √ Utilities Expense Howard Supplies

1,600 1,230 2,800 420 1,050 600

1,600 1,230 2,800 420 1,050 600

On March 31, issued Check No. 155 on account to Howard Supplies, $600

CASH PAYMENTS JOURNAL
Ck. No. Other Accounts Post Accounts Payable Ref. Dr. Dr.

PAGE 7

Date

Account Debited

Cash Cr

Mar. 2 15 21 22 30 31 31

2006

150 151 152 153 154 155

Rent Expense Grayco Supplies Jewett Business Sys. Donnelly Supplies. Utilities Expense Howard Supplies

1,600 √ √ √ √ 1,050 2,650 600 5,050 1,230 2,800 420

1,600 1,230 2,800 420 1,050 600 7,700

The journal is ruled, summed, and verified for equality of debits and the “Cash Cr.” column.

CASH PAYMENTS JOURNAL
Ck. No. Other Accounts Post Accounts Payable Ref. Dr. Dr.

PAGE 7

Date

Account Debited

Cash Cr

Mar. 2 15 21 22 30 31 31

2006

150 151 152 153 154 155

Rent Expense Grayco Supplies Jewett Business Sys. Donnelly Supplies. Utilities Expense Howard Supplies

52 √ √ √ 54 √

1,600 1,230 2,800 420 1,050 2,650 (√ ) 600 5,050 (21)

1,600 1,230 2,800 420 1,050 600 7,700 (11)

Individual items in the “Other Accounts Dr.” column are posted. Then the totals for “Accounts Payable Dr.” and “Cash Cr.” are posted.

Accounts Payable Accounts Payable Control Control
Accounts Payable Accounts Payable

GENERAL LEDGER

Accounts Payable (Controlling)

ACCOUNT Accounts Payable Mar. 1 Bal 31 31
Date

No. 12
Balance

Date Item P.R.

Debit Credit

P11 CP7 5,050
Item P.R. Debit

6,230

1,230 7,460 2,410

Donnelly Supplies
Credit Balance

Accounts Jewett Business Payable Systems also has Subsidiary a zero balance, so Ledger that account was omitted for space reasons.

Mar 2 19 22
Date Item

P11 P11 CP7
P.R.

420 1,450 420
Debit Credit

420 1,870 1,450
Balance

Grayco Supplies Mar 1 Bal. 15 CP7 -Howard Supplies
Date Item P.R.

1,230

1,230 0

Debit

Credit

Balance

Mar 3 27 31

P11 P11 CP7

600 960 600

600 1,560 960

Advantages of a Computerized Advantages of a Computerized Accounting System Over a Accounting System Over a Manual Accounting System Manual Accounting System
1. Computerized systems simplify the recordkeeping 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 The Revenue and Collection Cycle in QuickBooks Cycle in QuickBooks
From Exhibit 10, page 203 of textbook

Mail invoice to customer

The Revenue and Collection The Revenue and Collection Cycle in QuickBooks Continued Cycle in QuickBooks Continued
From Exhibit 10, page 203 of textbook

The Revenue and Collection The Revenue and Collection Cycle in QuickBooks Continued 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 Purposes Business Purposes
Supply chain management (SCM) Customer relationship management (CRM) Product life-cycle management (PLM)

Chapter 5 The End The End

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