Student Version o Repetition is an important component, a key part of learning. In memory, the more times patterns of thought are repeated, the more likely you will be able to recall information. o These PowerPoint slides have been modified from the lecture decks by making them fill-in-the-blank. Why? So that you get an opportunity to repeat a visual cue (from the lecture or the book) via completing text here. o In addition, most text book exhibits have been removed as they are available in your text directly.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Accounting Systems Chapter 5

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Define and describe an accounting system. 1

_________ ___________Systems o An accounting ____________is the methods and procedures for __________, __________, __________, and __________a business’s financial and operating information.

B ASIC A CCOUNTING S YSTEMS As a business grows and changes, accounting systems also change in the following three-step process. 1.________________ ________________ ________________ 2.________________ ________________ ________________ 3.________________ ________________ ________________

B ASIC A CCOUNTING S YSTEMS

Basic Accounting Systems o ___________ ___________ are the policies and procedures that ___________ assets from ___________, ensure that business information is ___________, and ensure that laws and ___________ are being ___________.

___________ Methods o ___________ ___________ are the means by which the accounting system collects, summarizes, and reports accounting information. These methods may be either ___________ or ___________.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals. 2

Manual Accounting Systems o Understanding a manual accounting system is useful in identifying relationships between accounting ___________ and ___________.

___________ ___________ o A large number of ___________ accounts with a ___________ characteristic can be grouped together in a separate ___________ called a ___________ ledger.

Subsidiary Ledgers o The primary ___________, which contains all of the balance sheet and ___________ ___________ accounts, is called a ___________ ___________.

___________ Ledgers o Each ___________ ledger is represented in the ___________ ledger by a summarizing account, called a ___________ account.

Subsidiary Ledgers o The individual customer accounts are arranged in ___________ order in a subsidiary ledger called the ___________ ___________ ___________ ___________, or ___________ ledger.

Subsidiary Ledgers o The individual ___________ accounts are arranged in alphabetical order in a subsidiary ledger called the ___________ ___________ ___________ ___________, or ___________ ledger.

___________ Journal o One method of processing transactions more efficiently in a manual system is to use ___________ ___________. ___________ ___________ are designed to be used for recording a single kind of transaction that ___________ ___________.

S PECIAL J OURNALS BUYING SELLING

Special Journals o The ___________ two-column journal, called the ___________ ___________ or simply the ___________, can be used for entries that do not fit into any of the ___________ journals.

Special Journals o The ___________ journal is used for recording fees earned on ___________.

Special Journals o Cash fees earned would be recorded in the ___________ ___________ ___________.

Special Journals o ___________ made on account (on __________ ) are recorded in the purchases ___________.

Special Journals o All cash payments are recorded in the ___________ ___________ ___________.

E XHIBIT 3 ( IN STEPS ) (continued) Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page Mar. 2615Accessories By Claire RapZone Web Cantina Accessories by Claire

E XHIBIT 3 ( IN STEPS ) RapZone Web Cantina Accessories by Claire (continued) Date Item P.R. Debit CreditBalance Mar. 2R352,2002, Accounts Receivable Subsidiary Ledger Accessories By Claire Revenue Journal Page Mar. 2615Accessories By Claire Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit

E XHIBIT 3 ( IN STEPS ) Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page Mar. 2615Accessories By Claire (continued) RapZone Web Cantina Accessories by Claire Date Item P.R. Debit CreditBalance Mar. 2R352,2002, Accounts Receivable Subsidiary Ledger Accessories By Claire

E XHIBIT 3 ( IN STEPS ) Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page Mar. 2615Accessories By Claire (continued) 6616RapZone Web Cantina Accessories by Claire The same procedure would be used to post the other transactions to the individual accounts in the accounts receivable subsidiary ledger.

E XHIBIT 3 ( IN STEPS ) Revenue Journal Page Mar. 2615Accessories By Claire (continued) 6616RapZone Web Cantina Accessories by Claire Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Next, the amount column would be totaled

E XHIBIT 3 ( IN STEPS ) ACCOUNT Accounts Receivable Account No. 12 Balance Dr. Cr. Date Dr.Cr. Item Post. Ref Mar.1Balance R35 The debit total is posted from the revenue journal to Accounts Receivable in the general ledger. Revenue Journal, page 35 (continued)

E XHIBIT 3 ( IN STEPS ) Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page ( 12 ) Indicates a debit posting of $9,600 to Accounts Receivable (General Ledger Account 12) 2014 Mar. 2615Accessories By Claire RapZone Web Cantina Accessories by Claire (continued)

E XHIBIT 3 ( IN STEPS ) ACCOUNT Fees Earned Account No. 41 Balance Date Dr.Cr. Item Post. Ref R35 The credit total is posted from the revenue journal to Fees Earned in the general ledger Dr. Cr. (continued) Revenue Journal, page 35 Mar

E XHIBIT 3 ( IN STEPS ) Indicates a credit posting of $9,600 to Fees Earned (General Ledger Account 41 ) Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page ( 12 ) 2014 Mar. 2615Accessories By Claire RapZone Web Cantina Accessories by Claire ( 41 )

___________ ___________ Journal o All transactions that involve the receipt of cash are recorded in a _____ _____ _____. Every entry recorded in the _____ _____ journal will involve a _____ to the “__________” column.

E XHIBIT 4 ( IN STEPS ) Mar. 1 Rent Revenue CASH RECEIPTS JOURNAL OtherAccounts PostAccounts ReceivableCash DateAccount Credited Ref.Cr.Cr.Dr. Page Web Cantina3,4003,400 28Accessories By Claire2,2002, RapZone 1,7501,750 Date Item P.R. Debit CreditCr. Bal. ACCOUNT Rent Revenue Acct. No. 42 GENERAL LEDGER 42 CR14 Mar (continued) 400

E XHIBIT 4 ( IN STEPS ) Date Item P.R. Debit CreditBalance Web Cantina Mar. 1 Bal.3,400 18R352,6506, ,400 2, Mar. 1 Rent Revenue CASH RECEIPTS JOURNAL OtherAccounts PostAccounts ReceivableCash DateAccount Credited Ref.Cr.Cr.Dr. Page Web Cantina3,4003,400 28Accessories By Claire2,2002, RapZone 1,7501,750 Accounts Receivable Subsidiary Ledger CR14 (continued) 42

Cash Receipts Journal o After all journalizing and posting to individual accounts for the month is complete, the columns are totaled.

E XHIBIT 4 ( IN STEPS ) Mar. 1 Rent Revenue CASH RECEIPTS JOURNAL OtherAccounts PostAccounts ReceivableCash DateAccount Credited Ref.Cr.Cr.Dr. Page Web Cantina3,4003,400 28Accessories By Claire2,2002, RapZone 1,7501, ,3507,750 ( ) A check mark indicates that items in this column are posted individually (continued) 31

_________ _________ Account o The total of the accounts in the accounts receivable _________ ledger should _________ the balance in the _________ _________ _________ _________ account.

_________ Journal o The _________ _________ is designed for recording all purchases on _________.

E XHIBIT 5 ( IN STEPS ) Accts.Other Post Payable SuppliesAccountsPost DateAccount CreditedRef.Cr.Dr.Dr.Ref.Amount PURCHASES JOURNAL Page Mar. 3Howard Supplies Donnelly Supplies Jewett Bus. Sys. 2,800Off. Equip.2,800 19Donnelly Supplies1,4501,450 27Howard Supplies (continued)

E XHIBIT 5 ( IN STEPS ) PURCHASES JOURNAL Page 11 7Donnelly Supplies Jewett Bus. Sys.2,800Off. Equip.2,800 19Donnelly Supplies1,4501,450 27Howard Supplies Note that the March 12 purchase of office equipment for $2,800 is recorded as a debit in the “Other Accounts Dr.” column. Also note that the account title is written in for proper posting. (continued) Accts.Other Post Payable SuppliesAccountsPost DateAccount CreditedRef.Cr.Dr.Dr.Ref.Amount PURCHASES JOURNAL 2014 Mar. 3Howard Supplies600600

E XHIBIT 5 ( IN STEPS ) PURCHASES JOURNAL Page 11 7Donnelly Supplies Jewett Bus. Sys.2,800Off. Equip.2,800 19Donnelly Supplies1,4501,450 27Howard Supplies Accts.Other Post Payable SuppliesAccountsPost DateAccount CreditedRef.Cr.Dr.Dr.Ref.Amount PURCHASES JOURNAL 2014 Mar. 3Howard Supplies DateItemP.R. Dr.Cr.Balance 2014 P11 (continued) Accounts Payable Subsidiary Ledger Howard Supplies 600 Mar

E XHIBIT 5 ( IN STEPS ) PURCHASES JOURNAL Page 11 7Donnelly Supplies Jewett Bus. Sys.2,800Off. Equip.2,800 19Donnelly Supplies1,4501,450 27Howard Supplies Accts.Other Post Payable SuppliesAccountsPost DateAccount CreditedRef.Cr.Dr.Dr.Ref.Amount PURCHASES JOURNAL 2014 Mar. 3Howard Supplies (continued) The other entries to the accounts payable subsidiary ledger are recorded using the same procedure.

E XHIBIT 5 ( IN STEPS ) PURCHASES JOURNAL Page Mar. 3Howard Supplies Donnelly Supplies Jewett Bus. Sys.2,800 Off. Equip.2,800 19Donnelly Supplies1,4501,450 27Howard Supplies This posting reference indicates that Office Equipment (Account 18) is debited in the general ledger for $2,800. Accts.Other Post Payable SuppliesAccountsPost DateAccount CreditedRef.Cr.Dr.Dr.Ref.Amount

Purchases Journal o At the end of March, all columns are totaled and the equality of debits and credits is verified. Then the total amounts in the “Accounts Payable Cr.” and “Supplies Dr.” columns are posted. Because Office Equipment was posted earlier, the $2,800 total is not posted.

E XHIBIT 5 ( IN STEPS ) 7Donnelly Supplies Jewett Bus. Sys.2,800Off. Equip.182,800 19Donnelly Supplies1,4501,450 27Howard Supplies ,2303,4302,800 ( ) ( )( ) Accts.Other PostPayable SuppliesAccountsPost DateAccount CreditedRef.Cr. Dr.Dr.Ref.Amount PURCHASES JOURNAL Page Mar. 3Howard Supplies ACCOUNT Accounts Payable No. 21 GENERAL LEDGER DateItemP.R. DebitCreditBalance Mar. 1Bal1,230 6,2307,460 31P Supplies would be debited for $3,430 and 14 written in the parentheses.

_________ Payments Journal o All transactions involving a credit to _________ are recorded in the _________ _________ _________.

E XHIBIT 6 ( IN STEPS ) CASH PAYMENTS JOURNAL OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr PAGE Mar. 2150Rent Expense1,6001,600 On March 2, 2014, issued Check 150 for rent of $1,600. (continued)

Cash Payments Journal o The amounts listed in the “Other Accounts Dr.” column are posted on a regular basis. The $1,600 for Rent Expense is posted to Account No. 52.

E XHIBIT 6 ( IN STEPS ) CASH PAYMENTS JOURNAL OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr PAGE Mar. 2150Rent Expense1,6001,600 General Ledger Account Rent Expense 1,600 1,600 DateItemP.R. Dr.Cr.Balance Account No (continued) 2014 Mar. 2 CP7

E XHIBIT 6 ( IN STEPS ) 15151Grayco Supplies1,2301,230 CASH PAYMENTS JOURNAL PAGE 7 OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr 2014 Mar. 2150Rent Expense1,6001,600 On March 15, issued Check 151 to Grayco Supplies for $1, (continued)

Cash Payments Journal o Let’s post to the accounts payable subsidiary ledger at this time to keep the creditors’ accounts current.

E XHIBIT 6 ( IN STEPS ) CASH PAYMENTS JOURNAL OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr PAGE Mar. 2150Rent Expense1,6001, Grayco Supplies1,2301,230  52 Accounts Payable Subsidiary Ledger Grayco Supplies Mar. 1Bal. 1,230 DateItemP.R. Dr.Cr.Balance 1, CP (continued)

Cash Payments Journal o Now, let’s journalize the remainder of March’s cash disbursements. Following that, let’s post to the individual creditors’ accounts.

E XHIBIT 6 ( IN STEPS ) CASH PAYMENTS JOURNAL OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr PAGE Mar. 2150Rent Expense1,6001, Grayco Supplies1,2301,230  21152Jewett Business Sys.2,8002, Donnelly Supplies Utilities Expense1,0501, Howard Supplies (continued)

E XHIBIT 6 ( IN STEPS ) PAGE Mar. 2150Rent Expense1,6001, Grayco Supplies1,2301,230  52    Jewett Business Sys.2,8002, Donnelly Supplies Utilities Expense1,0501, Howard Supplies (continued) CASH PAYMENTS JOURNAL OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr

Cash Payments Journal o The journal is ruled, summed, and verified for the _________ of the _________ and the “_________ ” column.

CASH PAYMENTS JOURNAL OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr PAGE Mar. 2150Rent Expense1,6001, Grayco Supplies1,2301, Jewett Business Sys.2,8002, Donnelly Supplies Utilities Expense1,0501, Howard Supplies CASH PAYMENTS JOURNAL OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr PAGE Mar. 2150Rent Expense1,6001, Grayco Supplies1,2301, ,6505,0507,    54  21152Jewett Business Sys.2,8002, Donnelly Supplies Utilities Expense1,0501, Howard Supplies (continued) C ASH P AYMENTS J OURNAL

OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr PAGE Mar. 2150Rent Expense1,6001, Grayco Supplies1,2301, Jewett Business Sys.2,8002, Donnelly Supplies Utilities Expense1,0501, Howard Supplies CASH PAYMENTS JOURNAL OtherAccounts Ck.PostAccounts PayableCash DateNo.Account DebitedRef.Dr.Dr.Cr PAGE Mar. 2150Rent Expense1,6001, Grayco Supplies1,2301, Jewett Business Sys.2,8002, Donnelly Supplies Utilities Expense1,0501, Howard Supplies ,6505,0507,    54  (21) (11)( )   The totals for “Accounts Payable Dr.” and “Cash Cr.” are posted. (continued)

_________ _________ Account o After all posting has been completed, the balances in the _______ payable _______ ledger should _______ the balance of the _______ _______ _______ account in the general ledger.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe and illustrate the use of a computerized accounting system. 3

Computerized Accounting System o Computerized accounting systems have the following three main advantages over manual systems:  Computerized systems _______ the record-keeping _______ by recording transactions in electronic forms and, at the same time, _______ them electronically to _______ and _______ ledger accounts.

Computerized Accounting System  Computerized systems are generally more ______ than _______ systems.  Computerized systems provide management with current _______ _______ information to support decision making, since account balances are _______ as the transactions _______.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Describe the basic features of e- commerce. 4

______________________ o Using the Internet to perform business transactions is termed _______.

E-Commerce o When transactions are between a company and a consumer, it is termed _______ (________________ ) ____________.

E-C OMMERCE Three more advanced areas where the Internet is being used for business purposes are:  ___________________ ___________________

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Learning Objective Use segment analysis in evaluating the operating performance of a company. 5

___________________ Analysis o One way to report revenue is by different ___________________. Businesses may be ___________________ by ___________________, by ___________________ or ___________________, or by type of __________.

c Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part. Accounting Systems The End