ACCOUNTING SYSTEMS refining the journalizing process

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 2 Chapter 1 Chapter 2 A = L + OE Accounts Receivable Date Account Title RefDebitCredit 900 Service Revenue 14

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 3 Time Saving Devices Specialized Journals Subsidiary Ledgers

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 4 Problems of Having Only One Journal 1.Only one person can work at a time 2.Book becomes VERY large Solution Specialized Journals

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 5 Specialized Journals Save a little time journalizing Save a LOT of time posting

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 6 Problems of Having Only One Ledger 1.Only one person can work at a time 2.Book becomes VERY large Solution Subsidiary Ledgers

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 7 General Ledger

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 8 General Ledger Dr s. Cr s.

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 9 General Ledger

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 10 General Ledger

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 11 General Ledger Accounts Receivable Subsidiary Ledger

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 12 General Ledger Accounts Receivable Subsidiary Ledger

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 13 General Ledger Accounts Receivable Subsidiary Ledger Control Account

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 14 General Ledger Details Summary Info.

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 15 General Ledger Details Must Post to BOTH!

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 16 General Ledger Accounts Receivable Subsidiary Ledger =

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 17 Subsidiary Ledgers Accounts ReceivableAccounts Payable

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 18 Specialized Journals Purchases (multi-column) ANY purchase on account JournalCharacteristics

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 19 Specialized Journals Purchases (single column) Sales Cash Receipts Cash Payments General Journal Purchase of MERCHANDISE on account Sale of MERCHANDISE on account ANY collection of cash ANY cash disbursement Anything that will not fit someplace else! JournalCharacteristics

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 20

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 21 Think About Design Purchases (single column) Purchase of MERCHANDISE on account JournalCharacteristics Mdse Inv. Dr. Accts. Pay. Cr. XX XX XXX

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 22 Think About Design Purchases (single column) Purchase of MERCHANDISE on account JournalCharacteristics Purchases JournalP1 Mdse Inv Dr. Accts Pay Cr. X XXX XX

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 23 Think About Design Sales Sale of MERCHANDISE on account JournalCharacteristics

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 24 Think About Design Cash Receipts ANY collection of cash JournalCharacteristics

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 25 Specialized Journals Cash Payments ANY cash disbursement JournalCharacteristics

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 26 Caution! Please continue to THINK in “two column” or “General Journal” format. We will ALWAYS record our entries in “General Journal” format. Caution

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 27 Caution! SUGGESTIONS 1.On scratch paper (or at least in your head), decide what entry to make in “General Journal” form … 2.Select the appropriate special journal... THEN 3.Place the entries in the appropriate columns where the entry can be recorded most efficiently.

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 28 On May 14, purchased merchandise from Fabor and Son, 1/10,n/30, $6,900. Sample Transaction Date Account Title RefDebitCredit Merchandise Inventory6,900 Accounts Payable 14 PURCHASES JOURNAL See Text Page 290, May 14

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 29 Purchases JournalP1 Date Account CreditedTermsRef Fabor & Son14 Mdse Inv Dr. Accts Pay Cr. 1/10,n/306,900 PURCHASES JOURNAL See Text Page 306, May 14

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 30 Purchases JournalP1 Date Account CreditedTermsRef Fabor & Son14 Mdse Inv Dr. Accts Pay Cr. 1/10,n/306,900 PURCHASES JOURNAL See Text Page 306, May 14 Note! (Important for HW)

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 31 Purchases JournalP1 Date Account CreditedTermsRef Fabor & Son14 Mdse Inv Dr. Accts Pay Cr. 1/10,n/306,900 On May 14, purchased merchandise from Fabor and Son, 1/10,n/30, $6,900. Comparison Date Account Title RefDebitCredit Merchandise Inventory6,900 Accounts Payable 14

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 32 Sample Transaction Received credit memo from Fabor & Son for merchandise returned, $???. Date Account Title RefDebitCredit Merchandise Inventory ???Accts Payable - Fabor ??? GENERAL JOURNAL Similar to Text Page 311

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 33 GENERAL JOURNAL Similar to Text Page 311 General JournalP1 Date Account CreditedRef Accts Pay - Fabor & Son Debit ??? Merchandise Inventory Credit ???

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 34 Comparison Received credit memo from Fabor & Son for merchandise returned, $???. Date Account Title RefDebitCredit Merchandise Inventory ???Accounts Payable ??? General JournalP1 Date Account CreditedRef Accts Pay - Fabor & Son Debit ??? Merchandise Inventory Credit ???

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 35 On May 23, paid Fabor and Son the amount due on the May 14 invoice. (Note: in the text example, the credit memo related to a different transaction.) Sample Transaction CASH PAYMENTS JOURNAL See Text Page 308, May Date Account Title RefDebitCredit Merchandise Inventory 6,900Accts Pay - Fabor & Son Cash 6,831 23

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 36 CASH PAYMENTS JOURNAL See Text Page 308, May 23 Cash Payments JournalCP1 Date Account DebitedRef Fabor & Son Cash Cr. 6, Ck. No. Other Accounts Dr. Accounts Payable Dr. Mdse Inventory Cr. 696,900

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 37 CASH PAYMENTS JOURNAL See Text Page 308, May 23 Cash Payments JournalCP1 Date Account DebitedRef Fabor & Son Cash Cr. 6, Ck. No. Other Accounts Dr. Accounts Payable Dr. Mdse Inventory Cr. 696,900 Note! (Important for HW)

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 38 Cash Payments JournalCP1 Date Account DebitedRef Fabor & Son Cash Cr. 6, Ck. No. Other Accounts Dr. Accounts Payable Dr. Mdse Inventory Cr. 696,900 On May 23, paid Fabor and Son the amount due on the May 14 invoice. (Note: in the text example, the credit memo related to a different transaction.) Comparison Date Account Title RefDebitCredit Merchandise Inventory 6, Accts Pay - Fabor & Son Cash 6,831 23

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 39 On May 3, sold merchandise to Abbot Sisters, terms 2/10,n/30, $10,600. Sample Transaction SALES JOURNAL See Text Page 299, May 3 Date Account Title RefDebitCredit Accounts Receivable10,600 Sales 5/3 Cost of Goods Sold Merchandise Inventory 6,360 3

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 40 SALES JOURNAL See Text Page 299, May 3 Sales JournalS1 Date Account Debited Ref Abbot Sisters COGS Dr. Mdse Inv Cr. 6,3605/3 Invoice No. Accts Rec Dr. Sales Cr. 10,600

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 41 SALES JOURNAL See Text Page 299, May 3 Sales JournalS1 Date Account Debited Ref Abbot Sisters COGS Dr. Mdse Inv Cr. 6,3605/3 Invoice No. Accts Rec Dr. Sales Cr. 10,600 Note! (important for HW)

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 42 Comparison Sales JournalS1 Date Account Debited Ref Abbot Sisters COGS Dr. Mdse Inv Cr. 6,3605/3 Invoice No. Accts Rec Dr. Sales Cr. 10,600 Accounts Receivable10,600 Sales Date Account Title RefDebitCredit Cost of Goods Sold Merchandise Inventory 6,360 5/3 3 Cost of Goods Sold6,360 Merchandise Inventory 6,360

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 43 On May 10, received balance due from Abbot Sisters. Sample Transaction CASH RECEIPTS JOURNAL See Text Page 303, May 10 Date Account Title RefDebitCredit Sales Discount 10, Cash Accts Rec -- Abbot 10,600

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 44 CASH RECEIPTS JOURNAL See Text Page 303, May 10 Cash Receipts JournalCR1 Date Account CreditedRef Abbot Sisters Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 10,600

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 45 CASH RECEIPTS JOURNAL See Text Page 303, May 10 Cash Receipts JournalCR1 Date Account CreditedRef Abbot Sisters Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 10,600 Note! (Important for HW)

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 46 Cash Receipts JournalCR1 Date Account CreditedRef Abbot Sisters Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 10,600 On May 10, received balance due from Abbot Sisters. Comparison Date Account Title RefDebitCredit Sales Discount 10, Cash Accts Rec -- Abbot 10,600 Sales Discount 212

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved Foot (sum the columns). Posting from Multi-Column Journals

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved Foot (sum the columns). 2.Cross-foot (prove the equality of debits and credits). Posting from Multi-Column Journals

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved Foot (sum the columns). 2.Cross-foot (prove the equality of debits and credits. Posting from Multi-Column Journals 3.Post column TOTALS (to General Ledger). Rule: Post column totals ONLY!

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved Foot (sum the columns). 2.Cross-foot (prove the equality of debits and credits. Posting from Multi-Column Journals 3.Post column TOTALS (to General Ledger). Any exceptions?

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved Foot (sum the columns). 2.Cross-foot (prove the equality of debits and credits. Posting from Multi-Column Journals 3.Post column TOTALS (to General Ledger). Yes. Two.

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved Foot (sum the columns). 2.Cross-foot (prove the equality of debits and credits). 3.Post column TOTALS (to General Ledger). Posting from Multi-Column Journals 4.Post individual entries from “other” column (to General Ledger). 5.Post individual entries from “A/R” and “A/P” columns (to subsidisary ledgers).

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 53 Posting from Multi-Column Journals Cash Receipts JournalCR1 Date Account CreditedRef Abbot Sisters Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 10,600 5/1Karns,Capital5,000 7Cash Sales 1,900 12Cash Sales 2,600 Babson Co ,123 11,350 22Notes Payable6, ,011 21,950 4,50011,000

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 54. Posting from Multi-Column Journals Cash Receipts JournalCR1 Date Account CreditedRef Abbot Sisters Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 10,600 5/1Karns,Capital5,000 7Cash Sales 1,900 12Cash Sales 2,600 Babson Co ,123 11,350 22Notes Payable6, ,011 21,950 4,50011,000 Dr s. Cr s.

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 55 Posting from Multi-Column Journals Cash Receipts JournalCR1 Date Account CreditedRef Abbot Sisters Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 10,600 5/1Karns,Capital5,000 7Cash Sales 1,900 12Cash Sales 2,600 Babson Co ,123 11,350 22Notes Payable6, ,011 21,950 4,50011,000 (1) Rule: Post column totals ONLY!

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 56 Posting from Multi-Column Journals Cash Receipts JournalCR1 Date Account CreditedRef Abbot Sisters Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 10,600 5/1Karns,Capital5,000 7Cash Sales 1,900 12Cash Sales 2,600 Babson Co ,123 11,350 22Notes Payable6, ,011 21,950 4,50011,000 (61) (1) Rule: Post column totals ONLY!

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 57 Abbot Sisters 10,600 Posting from Multi-Column Journals Cash Receipts JournalCR1 Date Account CreditedRef Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 5/1Karns,Capital5,000 7Cash Sales 1,900 12Cash Sales 2,600 Babson Co ,123 11,350 22Notes Payable6, ,011 21,950 4,50011,000 (61) (1) Any exceptions?

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 58 Abbot Sisters 10,600 Posting from Multi-Column Journals Cash Receipts JournalCR1 Date Account CreditedRef Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 5/1Karns,Capital5,000 7Cash Sales 1,900 12Cash Sales 2,600 Babson Co ,123 11,350 22Notes Payable6, ,011 21,950 4,50011,000 (61) (1) To A/R Subsidiary Ledger

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 59 General Ledger Details Must Post to BOTH!

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 60 Abbot Sisters 10,600 Posting from Multi-Column Journals Cash Receipts JournalCR1 Date Account CreditedRef Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 5/1Karns,Capital5,000 7Cash Sales 1,900 12Cash Sales 2,600 Babson Co ,123 11,350 22Notes Payable6, ,011 21,950 4,50011,000 (61) (1) (4) To A/R CONTROL Account in G/L

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 61 Posting from Multi-Column Journals Cash Receipts JournalCR1 Date Account CreditedRef Abbot Sisters Other Accounts Cr Cash Dr. 10,388 Sales Discounts Dr. Sales Cr. Accts Recvble Cr. 10,600 5/1Karns,Capital5,000 7Cash Sales 1,900 12Cash Sales 2,600 Babson Co ,123 11,350 22Notes Payable6, ,011 21,950 4,50011,000 (61) (1) (4) (60)(x)

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 62 Rule: Post column totals ONLY!

Copyright © 1999, 2002, 2008 by M. Ray Gregg. All Rights Reserved. 63 …and have a good week in accounting!