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5-1 1 Accounting Systems 5 Student Version Slide 2 5-2 2 Define and describe an accounting system. 1 5-2 Slide 3 5-3 3 An accounting system is the methods and procedures for collecting, classifying, summarizing, and reporting a businesss financial and operating information. 1 Accounting System Slide 4 5-4 4 As a business grows and changes, accounting systems also change in the following three-step process: Step 1. Analyze user information needs. Step 2. Design the system to meet the user needs. Step 3. Implement the system. 1 Slide 5 5-5 5 Once a system has been implemented, feedback, or input from the users of the information can be used to analyze and improve the system. 1 Feedback Slide 6 5-6 6 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. 1 Internal Controls Slide 7 5-7 7 Processing methods are the means by which the system collects, summarizes, and reports accounting information. These methods may be either manual or computerized. 1 Processing Methods Slide 8 5-8 8 Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals. 2 5-8 Slide 9 5-9 9 A large number of individual accounts with a common characteristic can be grouped together in a separate ledger called a subsidiary ledger. 2 Subsidiary Ledger Slide 10 5-10 10 The primary ledger, which contains all of the balance sheet and income statement accounts, is called a general ledger. 2 General Ledger Slide 11 5-11 11 Each subsidiary ledger is represented in the general ledger by a summarizing account, called a controlling account. 2 Controlling Account Slide 12 5-12 12 The individual customers accounts are arranged in alphabetical order in a subsidiary ledger called the accounts receivable subsidiary ledger or customers ledger. 2 Slide 13 5-13 13 The individual creditors accounts are arranged in alphabetical order in a subsidiary ledger called the accounts payable subsidiary ledger, or creditors ledger. 2 Slide 14 5-14 14 Each special journal is designed to be used for recording a single kind of transaction that occurs frequently. 2 Special Journal Slide 15 5-15 15 SELLING Providing services on account Revenue Journal Revenue Journal recorded in Receipt of cash from any source Cash Receipts Journal Cash Receipts Journal recorded in Special Journals 2 Slide 16 5-16 16 Purchase of items on account Purchases Journal recorded in Payment of cash for any purpose Cash Payments Journal recorded in Special Journals 2 BUYING Slide 17 5-17 17 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. 2 General Journal Slide 18 5-18 18 The revenue journal is used for recording fees earned on account. Cash fees earned would be recorded in the cash receipts journal. 2 Other Special Journals Slide 19 5-19 19 2 Revenue Journal Exhibit 2 Slide 20 5-20 20 2 Revenue Journal Postings to Ledger Exhibit 3 Slide 21 5-21 21 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. 2 Cash Receipts Journal Slide 22 5-22 22 2 Cash Receipts Journal and Postings Exhibit 4 Slide 23 5-23 23 Accounts Receivable(Controlling) Balance, March 1, 2010$3,400 Total debits (from revenue journal)9,600 Total credits (from cash receipts journal) (7,350) Balance, March 31, 2010$5,650 NetSolutions Accounts Receivable Subsidiary Ledger Customer Balance Summary Report, March 31, 2010 Accessories By Claire$3,000 RapZone0 Web Cantina 2,650 Total accounts receivable$5,650 2 Slide 24 5-24 24 The purchases journal is designed for recording all purchases on account. 2 Purchases Journal Slide 25 5-25 25 2 Purchases Journal and Postings Exhibit 5 Slide 26 5-26 26 All transactions involving a credit to Cash are recorded in the cash payments journal. 2 Cash Payments Journal Slide 27 5-27 27 2 Cash Payments Journal and Postings Exhibit 6 Slide 28 5-28 28 2 Accounts Payable Control Account and Subsidiary Ledger Accounts Payable (Control) Balance, March 1, 2010$1,230 Total credits (from purchases journal)6,230 Total debits (from cash payments journal) (5,050) Balance, March 31, 2010$2,410 NetSolutions Supplier Balance Summary Report March 31, 2010 Donnelly Supplies$1,450 Grayco Supplies0 Howard Supplies960 Jewett Business Systems 0 Total$2,410 Slide 29 29 Describe and give examples of other subsidiary ledgers and modified special journals. 3 5-29 Slide 30 5-30 30 A business may modify its special journals by adding one or more columns for recording transactions that occur frequently. 3 Slide 31 5-31 31 Nov. 2 NetSolutions issued Invoice No. 842 to Litten Company for $4,770, which included sales taxes of $270. 3Issued Invoice No. 843 to Kauffman Supply Company for $1,166, which included sales taxes of $66. 3 Slide 32 5-32 32 Modified Special Journal 3 Slide 33 5-33 33 Describe and illustrate the use of a computerized accounting system. 4 5-33 Slide 34 5-34 34 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. 4 Slide 35 5-35 35 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. 4 Slide 36 5-36 36 Exhibit 7 Revenue and Cash Receipts in QuickBooks (continued) 4 Slide 37 5-37 37 4 Exhibit 7 Revenue and Cash Receipts in QuickBooks (continued) Slide 38 5-38 38 Describe the basic features of e-commerce. 5 5-38 Slide 39 5-39 39 Using the Internet to perform business transactions is termed e-commerce. 5 e-Commerce Slide 40 5-40 40 When transactions are between a company and a consumer, it is termed B2C (business-to- consumer) e-commerce. 5 Slide 41 5-41 41 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 Slide 42 5-42 42