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Financial and Managerial Accounting
Wild/Shaw/Chiappetta
Fourth Edition
Wild/Shaw/Chiappetta
Fourth Edition
McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
Accounting with Special Journals
Appendix E
Conceptual Chapter Objectives
C1: Identify the principles and components of accounting information systems.
C2: Explain the goals and uses of special journals.
C3: Describe the use of controlling accounts and subsidiary ledgers.
APPE-3
Analytical Chapter Objectives
A1: Compute segment return on assets and use it to evaluate segment performance.
APPE-4
Procedural Chapter Objectives
P1: Journalize and post transactions using special journals.
P2: Prepare and prove the accuracy of subsidiary ledgers.
P3: Journalize and post transactions using special journals in a periodic inventory system (see text for details).
APPE-5
Fundamental System Principles
Control PrincipleControl Principle Internal controls for
management to monitor the business.
Control PrincipleControl Principle Internal controls for
management to monitor the business.
Relevance PrincipleRelevance Principle Provide relevant,
timely and pertinent information.
Relevance PrincipleRelevance Principle Provide relevant,
timely and pertinent information.
Compatibility PrincipleCompatibility Principle System must be
compatible with aims of the company.
Compatibility PrincipleCompatibility Principle System must be
compatible with aims of the company.
Flexibility PrincipleFlexibility Principle System needs to
meet the changing needs of company.
Flexibility PrincipleFlexibility Principle System needs to
meet the changing needs of company.
Cost-Benefit PrincipleCost-Benefit Principle Benefits of the system
must outweigh the costs incurred.
Cost-Benefit PrincipleCost-Benefit Principle Benefits of the system
must outweigh the costs incurred.
C1
APPE-6
Components of Accounting Systems
Increasingly, source documents are electronic files
creating a “paperless” system.
Increasingly, source documents are electronic files
creating a “paperless” system.
Source DocumentsInvoice from Invoice from suppliersupplier
Billings to Billings to customerscustomers
Employee Employee earnings earnings recordsrecords
C1
APPE-7
StorageStorage
Components of Accounting Systems
CDCD
Hard DriveHard Drive
TapeTape
Paper Paper DocumentDocument
CDCD
Hard DriveHard Drive
TapeTape
Paper Paper DocumentDocumentProcessorProcessor
InputInput
Source Documents
Source Documents
C1
APPE-8
PrinterPrinterMonitorMonitor
TelephoneTelephoneCDCD
TapeTapeDiskDisk
Electronic Electronic FileFile
PrinterPrinterMonitorMonitor
TelephoneTelephoneCDCD
TapeTapeDiskDisk
Electronic Electronic FileFile
OutputOutput
Components of Accounting Systems
StorageStorageProcessorProcessor
InputInput
Source Documents
Source Documents
C1
APPE-9
Special Journalsin Accounting
GeneralGeneralJournalJournalGeneralGeneralJournalJournal
For transactionsFor transactionsnot in specialnot in special
journalsjournals
For transactionsFor transactionsnot in specialnot in special
journalsjournals
CashCashDisbursementsDisbursements
JournalJournal
CashCashDisbursementsDisbursements
JournalJournal
For recordingFor recordingcash paymentscash paymentsFor recordingFor recording
cash paymentscash payments
PurchasesPurchasesJournalJournal
PurchasesPurchasesJournalJournal
For recordingFor recordingcredit purchasescredit purchases
For recordingFor recordingcredit purchasescredit purchases
Cash ReceiptsCash ReceiptsJournalJournal
Cash ReceiptsCash ReceiptsJournalJournal
For recordingFor recordingcash receiptscash receiptsFor recordingFor recordingcash receiptscash receipts
Sales JournalSales JournalSales JournalSales Journal
For recordingFor recordingcredit salescredit sales
For recordingFor recordingcredit salescredit sales
C2
APPE-10
Subsidiary Ledgers
Subsidiary ledgers are a listing of individual Subsidiary ledgers are a listing of individual accounts with common characteristics.accounts with common characteristics.
Subsidiary ledgers are a listing of individual Subsidiary ledgers are a listing of individual accounts with common characteristics.accounts with common characteristics.
CharacteristicControlling
Account Subsidary LedgerAmounts due
from customersAccounts
ReceivableAccounts
Receivable LedgerAmounts owed to
creditorsAccounts Payable
Accounts Payable Ledger
CharacteristicControlling
Account Subsidary LedgerAmounts due
from customersAccounts
ReceivableAccounts
Receivable LedgerAmounts owed to
creditorsAccounts Payable
Accounts Payable Ledger
C3
APPE-11
Accounts Receivable LedgerAccounts Receivable Subsidiary
Adams Company
Date PR Debit Credit Balance
Jan. 1 S5 500 500Accounts Receivable SubsidiaryBaine Company
Date PR Debit Credit Balance
Jan. 16 S5 1,000 1,000Accounts Receivable SubsidiaryCook Company
Date PR Debit Credit Balance
Jan. 25 S5 415 415
After all items are posted,
the balance in the accounts
receivable controlling account is
equal toequal to the sum of the balances in
the accounts receivable subsidiary
ledger.
After all items are posted,
the balance in the accounts
receivable controlling account is
equal toequal to the sum of the balances in
the accounts receivable subsidiary
ledger.
C3
APPE-12
SALES JOURNAL Page 1
Account DebitedInvoice Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold. Dr
Inventory Cr.
Jim Carson 824 600 400
Each transaction yields a debit to Accounts Receivable and a credit to Sales. Also, we need to record the cost of the sale for the transaction. This
column total is posted monthly.
Each transaction yields a debit to Accounts Receivable and a credit to Sales. Also, we need to record the cost of the sale for the transaction. This
column total is posted monthly.
Sales JournalP1
APPE-13
Sales Journal
On January 1, Jim Carson purchased $600 of merchandise on account from Barry’s Bikes. The cost of the bikes was $400. Record the entry in the Sales Journal.
(Assume the use of a perpetual inventory system.)
P1
APPE-14
ACCOUNTS RECEIVABLE LEDGERJim Carson
Date PR Debit Credit Balance
Jan. 1 600 600
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Dr. Accts. Rec. Cr. Sales
Cost of Goods Sold Dr.
Inventory Cr.
1 Jim Carson 824 600 400
Daily, each transaction is posted
to the appropriate accounts receivable subsidiary account.
Daily, each transaction is posted
to the appropriate accounts receivable subsidiary account.
Sales JournalP1
APPE-15
ACCOUNTS RECEIVABLE LEDGERJim Carson
Date PR Debit Credit Balance
Jan. 1 S1 600 600
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr.
Jan. 1 Jim Carson 824 600 400
A in the posting reference column
indicates the transaction was
posted to the subsidiary account.
Sales JournalP1
APPE-16
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Accts. Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr
Jan. 1 Jim Carson 824 600 400
7 Tom Talley 825 900 600
22 Sue Wright 826 200 134
31 Total 1,700 1,134
Sales Journal
Post the total to the General Ledger
accounts.
P1
APPE-17
Here is the Sales Journal after recording Here is the Sales Journal after recording some additional sales.some additional sales.
Here is the Sales Journal after recording Here is the Sales Journal after recording some additional sales.some additional sales.
Sales JournalP1
Date Account DebitedInvoice Number PR
Accts. Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr
Jan. 1 Jim Carson 824 600 400
7 Tom Talley 825 900 600
22 Sue Wright 826 200 134
31 Total 1,700 1,134
(106/413) (502/119)
APPE-18
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Accts. Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr
Jan. 1 Jim Carson 824 600 400
7 Tom Talley 825 900 600
22 Sue Wright 826 200 134
31 Total 1,700 1,134
Sales JournalP1
APPE-19
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Accts. Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr
Jan. 1 Jim Carson 824 600 400
7 Tom Talley 825 900 600
22 Sue Wright 826 200 134
31 Total 1,700 1,134
(106/413) (502/119)
Sales JournalP1
APPE-20
Proving the Subsidiary Ledgers
Barry's BikesSchedule of Accounts Receivable
January 31Jim Carson 600$ Tom Talley 900 Sue Wright 200 Total accounts receivable 1,700$
Barry's BikesSchedule of Accounts Receivable
January 31Jim Carson 600$ Tom Talley 900 Sue Wright 200 Total accounts receivable 1,700$
The Accounts The Accounts Receivable Receivable controlling controlling
account and account and the subsidiary the subsidiary ledger are in ledger are in
balance.balance.
P2
APPE-21
Sales Taxes
On January 4, Jeri’s Jewelry sold a necklace for $450 On January 4, Jeri’s Jewelry sold a necklace for $450 plus 8% sales tax ($450 x .08 = $36) on credit to Joan plus 8% sales tax ($450 x .08 = $36) on credit to Joan Oakes. The cost of the merchandise was $302.Oakes. The cost of the merchandise was $302.
On January 4, Jeri’s Jewelry sold a necklace for $450 On January 4, Jeri’s Jewelry sold a necklace for $450 plus 8% sales tax ($450 x .08 = $36) on credit to Joan plus 8% sales tax ($450 x .08 = $36) on credit to Joan Oakes. The cost of the merchandise was $302.Oakes. The cost of the merchandise was $302.
SALES JOURNAL Page 1
Date Account DebitedInv. No. PR
Accts. Rec. Debit
Sales Taxes Payable Credit
Sales Credit
Cost of Goods Sold Dr.
Inventory Cr
Jan. 4 Joan Oakes 635 486 36 450 302
P2
APPE-22
Sales Tax
ACCOUNTS RECEIVABLE LEDGER
Joan Oakes
Date PR Debit Credit Balance
Jan. 4 S1 486 486
Each Each transaction is transaction is
posted daily to posted daily to the appropriate the appropriate
Accounts Accounts Receivable Receivable
Ledger account.Ledger account.
Each Each transaction is transaction is
posted daily to posted daily to the appropriate the appropriate
Accounts Accounts Receivable Receivable
Ledger account.Ledger account.
Column totals are Column totals are posted monthly.posted monthly.
Column totals are Column totals are posted monthly.posted monthly.
P2
SALES JOURNAL Page 1
Date Account DebitedInv. No. PR
Accts. Rec. Debit
Sales Taxes Payable Credit
Sales Credit
Cost of Goods Sold Dr.
Inventory Cr
Jan. 4 Joan Oakes 635 486 36 450 302
APPE-23
Sales Returns and Allowances
If a company has few sales returns, they may If a company has few sales returns, they may be recorded in the General Journal.be recorded in the General Journal.
If a company has few sales returns, they may If a company has few sales returns, they may be recorded in the General Journal.be recorded in the General Journal.
A company with A company with manymany sales returns may use sales returns may use a Sales Returns and Allowances Journal.a Sales Returns and Allowances Journal.
A company with A company with manymany sales returns may use sales returns may use a Sales Returns and Allowances Journal.a Sales Returns and Allowances Journal.
P2
APPE-24
CASH RECEIPTS JOURNAL Page 1
Accounts Credited Explanation PR
Cash Dr.
Sales Disc. Dr.
Accts. Rec. Cr. Sales Cr.
Other Accts.
Cr.
Cost of Goods Sold Dr.
Inventory Cr
Cash Receipts Journal
Categories of Cash ReceiptsCategories of Cash Receipts• Cash from cash salesCash from cash sales• Cash from credit customersCash from credit customers• Cash from other sourcesCash from other sources
Categories of Cash ReceiptsCategories of Cash Receipts• Cash from cash salesCash from cash sales• Cash from credit customersCash from credit customers• Cash from other sourcesCash from other sources
P2
APPE-25
CASH RECEIPTS JOURNAL (partial) Page 1
DateAccounts Credited Explanation PR
Cash Dr.
Sales Disc. Dr.
Accts. Rec. Cr. Sales Cr.
Other Accts. Cr.
May 7 Sales Cash Sales 300 300
16 Jane Waters Invoice 656 441 9 450
31 Interest Revenue Bank Acct. 409 15 15
31 Total 756 9 450 300 15
(101) (415) (106) (413) ( )
Amount is not posted individually to an account.Amount is posted individually to subsidiary ledger.
Acct. No. Amount is posted to specified account.
Cash Receipts JournalP2
APPE-26
Purchases Journal
The Purchases Journal is The Purchases Journal is used to record all used to record all
purchases on credit.purchases on credit.
The Purchases Journal is The Purchases Journal is used to record all used to record all
purchases on credit.purchases on credit.
P2
APPE-27
Purchases Journal Page 3
Date AccountInvoice
Date Terms PR
Accts. Pay. Cr.
Inventory Dr.
Offc. Sup. Dr.
Other Accts. Dr.
May 7 Langley Products 5/5 2/10,n/30 300 300
18 Office World 5/18 n/30 125/ 150 125 25
28 Fife Company 5/27 2/10,n/30 200 175 25
31 Total 650 475 150 25
(201) (119) (124) ( )
Amount is not posted individually to an account.Amount is posted individually to subsidiary ledger.
Acct. No. Amount is posted to specified account.
Purchases JournalP2
APPE-28
Cash Disbursements Journal
The Cash The Cash Disbursements Disbursements
Journal is used to Journal is used to record all record all
payments of cash.payments of cash.
P2
APPE-29
Amount is not posted individually to an account.Amount is posted individually to subsidiary ledger.
Acct. No. Amount is posted to specified account.
Cash Disbursements Journal
Cash Disbursements Journal Page 1
DateCh. No. Payee
Account Debited PR
Cash Cr.
Inventory. Cr.
Other Accts.
Dr.Accts.
Pay. Dr.
Jun. 2 101 Fife Company Fife Company 196 4 200
15 102 Jane Hooks Salary Expense 622 300 300
28 103 Langley Products Purchases 505 100 100
30 Total 596 4 400 200
(101) (119) ( )(201)
( )
P2
APPE-30
General Journal Transactions
Adjusting Adjusting EntriesEntries
Adjusting Adjusting EntriesEntries
Closing Closing EntriesEntriesClosing Closing EntriesEntries
Reversing Reversing EntriesEntries
Reversing Reversing EntriesEntries
Other transactions Other transactions not recorded in not recorded in
Special Journals Special Journals
Other transactions Other transactions not recorded in not recorded in
Special Journals Special Journals
P2
APPE-31
Technology-Based Accounting Systems
HardwareHardware
Processing unitsProcessing unitsHard DrivesHard Drives
RAMRAMModemsModems
CD-ROM DrivesCD-ROM DrivesSpeakersSpeakersMonitorsMonitorsServersServersPrintersPrinters
HardwareHardware
Processing unitsProcessing unitsHard DrivesHard Drives
RAMRAMModemsModems
CD-ROM DrivesCD-ROM DrivesSpeakersSpeakersMonitorsMonitorsServersServersPrintersPrinters
SoftwareSoftware
Programs with a Programs with a series of series of
commands commands directing operations directing operations
of computer of computer hardware such as hardware such as
data input, storage, data input, storage, processing, or processing, or
output.output.
SoftwareSoftware
Programs with a Programs with a series of series of
commands commands directing operations directing operations
of computer of computer hardware such as hardware such as
data input, storage, data input, storage, processing, or processing, or
output.output.
C1
APPE-32
Computer Technology in Accounting
Integrated Integrated accounting accounting programs programs
automatically automatically update related update related
accounts, accounts, journals, and journals, and ledgers for a ledgers for a
single single transaction. transaction.
Integrated Integrated accounting accounting programs programs
automatically automatically update related update related
accounts, accounts, journals, and journals, and ledgers for a ledgers for a
single single transaction. transaction.
C1
APPE-33
Data Processing in Accounting
On-lineOn-line processing processing enters and processes enters and processes data immediately.data immediately.
Batch Batch processing processing accumulates information accumulates information for a period of time and for a period of time and then processes all the then processes all the data at one time (daily, data at one time (daily, weekly, or monthly).weekly, or monthly).
On-lineOn-line processing processing enters and processes enters and processes data immediately.data immediately.
Batch Batch processing processing accumulates information accumulates information for a period of time and for a period of time and then processes all the then processes all the data at one time (daily, data at one time (daily, weekly, or monthly).weekly, or monthly).
C1
APPE-34
Enterprise Resource Planning Software
Enterprise resource planning software, such as Enterprise resource planning software, such as SAP or Oracle, links ordering, inventory, SAP or Oracle, links ordering, inventory,
production, purchasing, planning, tracking and production, purchasing, planning, tracking and human resources for many of the world’s largest human resources for many of the world’s largest
companies.companies.
Enterprise resource planning software, such as Enterprise resource planning software, such as SAP or Oracle, links ordering, inventory, SAP or Oracle, links ordering, inventory,
production, purchasing, planning, tracking and production, purchasing, planning, tracking and human resources for many of the world’s largest human resources for many of the world’s largest
companies.companies.
C1
APPE-35
A good AIS collects financial data for a A good AIS collects financial data for a company’s various segments. company’s various segments.
A good AIS collects financial data for a A good AIS collects financial data for a company’s various segments. company’s various segments.
Segment Return on Assets
A A segmentsegment is a part is a part of a company that is of a company that is separately identified separately identified
by its products, by its products, services, or services, or
geographic market. geographic market.
A A segmentsegment is a part is a part of a company that is of a company that is separately identified separately identified
by its products, by its products, services, or services, or
geographic market. geographic market.
A1
APPE-36
This ratio reflects the This ratio reflects the profitability of the profitability of the
segment. segment.
This ratio reflects the This ratio reflects the profitability of the profitability of the
segment. segment.
Segment Return on Assets
Segment return
on assets
= Segment operating incomeSegment average assets
A1
APPE-37
Special Journals Under a Periodic System
•The sales journal and cash receipts journal both The sales journal and cash receipts journal both have one less column as there is no need to have one less column as there is no need to record the cost of goods sold.record the cost of goods sold.•The purchases account replaces the inventory The purchases account replaces the inventory account in the purchases journal.account in the purchases journal.•The purchases discounts account replaces the The purchases discounts account replaces the inventory column in the cash disbursements inventory column in the cash disbursements journal.journal.
Many of the same concepts that we have Many of the same concepts that we have been studying for a perpetual system can been studying for a perpetual system can
also be used with a periodic inventory also be used with a periodic inventory system. Here are some differences:system. Here are some differences:
P3
APPE 38
End of Appendix E
APPE-39