Accounting with Special Journals Appendix E Copyright © 2016 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. Wild, Shaw, and Chiappetta Financial & Managerial Accounting 6th Edition Wild, Shaw, and Chiappetta Financial & Managerial Accounting 6th Edition

E-C1:Fundamental System Principles 2

7 - 3 Fundamental System Principles C1 Accounting information systems collect and process data from transactions and events, organize them in useful reports, and communicate results to decisions makers. 3

7 - 4 Components of Accounting Systems C1 Keyboards Scanners Modems Bar-Code Reader Keyboards Scanners Modems Bar-Code Reader Hardware Software Professional Judgment Hardware Software Professional Judgment Increasingly, source documents are electronic files creating a “paperless” system. 4

7 - 5 Components of Accounting Systems C1 CD/DVD Hard Drive Tape Paper Document CD/DVD Hard Drive Tape Paper Document Printer Monitor Projectors Web communications Printer Monitor Projectors Web communications 5

NEED-TO-KNOW Match each of the numbered descriptions with the principle, component, or descriptor that it best reflects. Indicate your answer by entering the letter A through J in the blank provided. A.Control principle B.Relevance principle C.Compatibility principle D.Flexibility principle E.Cost-benefit principle F.Source documents G.Input devices H.Information processors I.Information storage J.Output devices 1.Means to take information out of an accounting system and make it available to users. 2.Keeps data in a form accessible to information processors. 3.Systems that interpret, transform, and summarize information for use. 4.Capture information from source documents and enable its transfer to information processing. 5.Information for entries that can be in either paper or electronic form. 6.Prescribes that benefits from an activity in a system outweigh the costs. 7.Prescribes that a system be adaptable to changes in the company, environment, and user needs. 8.Prescribes that a system conform with a company’s activities, personnel, and structure. 9.Prescribes that a system report useful, understandable, timely, and pertinent information. 10. J I H G F E D C B APrescribes that a system have internal controls. C1 6

E-C2:Special Journals in Accounting 7

7 - 8 Special Journals in Accounting C2 8

E-C3:Subsidiary Ledgers 9

Subsidiary Ledgers Subsidiary ledgers are a listing of individual accounts with common characteristics. Characteristic Controlling Account Subsidiary Ledger Amounts due from customers Accounts Receivable Accounts Receivable Ledger Amounts owed to creditors Accounts Payable Accounts Payable Ledger C3 10

Accounts Receivable Ledger equal to After all items are posted, the balance in the accounts receivable controlling account is equal to the sum of the balances in the accounts receivable subsidiary ledger. C3 11

NEED-TO-KNOW Match each of the numbered descriptions with the term, title, or phrase that it best reflects. Indicate your answer by entering the letter A through J in the blank provided. A. General journalD. Accounts receivable ledgerG. Sales journal B. Special journalE. Accounts payable ledgerH. Cash receipts journal C. Subsidiary ledgerF. Controlling accountI. Purchases journal J. Cash disbursements journal 1.Used to record all cash payments. 2.Used to record all credit purchases. 3.Used to record all receipts of cash. 4.Used to record sales of inventory on credit. 5.Account that is said to control a specific subsidiary ledger. 6.Stores transaction data of individual suppliers. 7.Stores transaction data of individual customers. 8.Contains detailed information on a specific account from the general ledger. 9.Used to record and post transactions of similar type. 10. J I H G F E D C B A All-purpose journal in which we can record any transaction. C2/C3 12

E-P1:Sales Journal 13

Sales Journal P1 14

Sales Taxes P1 Governmental agencies often require sellers to collect sales taxes from customers and to periodically send these taxes to the appropriate agency. 15

Sales Returns and Allowances If a company has few sales returns, they may be recorded in the General Journal. A company with many sales returns may use a Sales Returns and Allowances Journal. P1 16

NEED-TO-KNOW Prepare headings for a sales journal and then record the following sales transactions. July 7Sold merchandise costing $400 to J. Dahl for $600, terms 2/10, n/30, invoice no Sold merchandise costing $100 to R. Lim for $150, terms n/30, invoice no The Sales Journal is used to record all sales on account; every transaction results in a Debit to Accounts Receivable and a Credit to Sales. DateAccount debited Invoice Number Terms Jul 7J. Dahl7042/10, n/30 Jul 12R. Lim705n/30 Accounts Receivable Dr. Sales Cr. Cost of Goods Sold Dr. Inventory Cr SALES JOURNAL P1 17

P1 Cash Receipts Types 1.Cash from credit customers 2.Cash from cash sales 3.Cash from other sources 18

Footing, Crossfooting, and Posting P1 19

NEED-TO-KNOW Prepare headings for a cash receipts journal and then record the following cash receipts transactions. July 1The company borrowed $5,000 cash by signing a note payable to the bank. 2C.Ming, the owner, contributed $1,000 cash to the company. 11The company sold merchandise costing $100 to Mulan for $400 cash. 29The company received $950 cash from Chan in payment of a July 7 purchase (where the company sold merchandise costing $700 on credit to Chan for $1,000, subject to a $50 sales discount if paid by end of month). Cash Receipts Journal DateAccount credited ExplanationCash Dr.Sales Discount Dr. Accounts Receivable Cr. Sales Cr.Other Accounts Cof GS Dr. Inventory Cr. July 1Notes payableNote to bank5,000 2Ming, CapitalContribution1,000 11SalesCash sale ChanInvoice, July ,000 The Cash Receipts Journal is used to record all cash receipts; every transaction that includes a debit to Cash. P1 20

P1 21

NEED-TO-KNOW Prepare headings for a purchases journal and then journalize the following purchases transactions. July 1Purchased $1,000 of merchandise on credit from Kim, Inc., terms n/60. 4Purchased $200 of store supplies from Chi Company on credit, terms n/30. 7Purchased $600 of office supplies on credit from Min Company, terms n/30. DateAccountDate of Invoice TermsPRAccounts Payable Cr. Inventory Dr. Office Supplies Dr. Other Accounts Dr. July 1Kim, Inc.7/1n/601,000 4Store Supplies/Chi. Co.7/4n/ Min Company7/7n/30600 Purchases Journal The Purchases Journal is used to record all purchases on account; every transaction that includes a credit to Accounts Payable. P1 22

P1 23

General Journal Transactions Purchase of plant assets by Note Payable Purchase Returns & Allowances Receipt of a Note Receivable P1 Sales Returns & Allowances 24

NEED-TO-KNOW Prepare headings for a cash disbursements journal and then journalize the following cash payments transactions. July 5Issued Check No. 910 to Kam Corp. to buy store supplies for $ Issued Check No. 911 for $4,000 to pay off a note payable to China Bank. 24Issued Check No. 912 to Lim to pay the amount due from a July 16 purchase, less the discount (it purchased merchandise for $1,000 on credit from Lim, terms 2/10, n/30). 29Paid salary of $700 to B.Tung by issuing Check No DateCk. No.PayeeAccount DebitedPRCash Cr.Inventory Cr. Other Accounts Dr. Accounts Payable Dr. July 5910Kam Corp.Store Supplies China BankNotes Payable4, Lim , B. TungSalaries Expense700 Cash Disbursements Journal The Cash Disbursements Journal is used to record all cash payments; every transaction that includes a credit to Cash. P1 25

E-P2:Proving the Ledgers 26

Proving the Ledgers P2 The balance of the Accounts Receivable controlling account in the general ledger should equal the accounts in the accounts receivable subsidiary ledger. A schedule of accounts receivable lists each customer and the balance owed. 27

Proving the Ledger P2 The balance of the Accounts Payable controlling account in the general ledger should equal the accounts in the accounts payable subsidiary ledger. A schedule of accounts payable lists each supplier and the balance owed to them. 28

Computer Technology in Accounting Off-the-Shelf Software Familiar accounting programs such as Peachtree® and QuickBooks® are designed to be user friendly and menu driven. Integrated Software Actions taken in one part of the system automatically affect related parts. For instance, when a credit sale is entered, several parts of the system are automatically updated. 29

Data Processing in Accounting  Online processing enters and processes data immediately.  Batch processing accumulates information for a period of time and then processes all the data at one time (daily, weekly, or monthly). 30

Computer Networks in Accounting Computer networks are links among computers giving different users access to common databases and programs. Server Work Stations 31

Enterprise Resource Planning Software (ERP) Programs that manage and integrate a company’s vital operations. 32

Cloud Computing Cloud computing is the delivery of computing as a service rather than a product. Cloud computing uses applications via the Web instead of installing them on one's own computer. Cloud Computing Cell Phone Laptop Computer Tablet 33

Global View Systems Principles and Components Both U.S. GAAP and IFRS aim for high-quality financial reporting. That aim implies that sound information system principles and components are applied worldwide. However, while system principles and components are fundamentally similar across the globe, culture and other realities often mean different emphases are placed on the mix of system controls. Special Journals Accounting systems for recording sales, purchases, cash receipts, and cash disbursements are similar worldwide. Although the exact structure of special journals is unique to each company, the basic structure is identical. Companies desire to apply accounting in an efficient manner. Accordingly, systems that employ special journals are applied worldwide. 34

E-A1: Segment Return on Assets 35

A good AIS collects financial data for a company’s various segments. Segment Return on Assets A segment is a part of a company that is separately identified by its products, services, or geographic market. A1 Companies Reporting Operations by Segments *Total exceeds 100% because companies can report more than one segment. 36

Segment Return on Assets Segment return on assets = Segment operating income Segment average assets A1 Callaway Golf Company reports that it operates in two business segments: (1) golf clubs and (2) golf balls. The golf club segment shows a higher return on assets. 37

End of Appendix E 38