1. Chapter 7-1

2. Chapter 7-2 CHAPTER 7 ACCOUNTING INFORMATION SYSTEMS Accounting Principles, Eighth Edition

3. Chapter 7-3 Accounting information system (AIS) Collects and processes data. Disseminates financial information to interested parties. Can either be manual or computerized. Includes: All steps in the accounting cycle. Documents that provide evidence of transactions. Basic Concepts of AIS LO 1 Identify the basic concepts of an accounting information system.

4. Chapter 7-4 Basic Concepts of AIS LO 1 Identify the basic concepts of an accounting information system. Cost Effectiveness - Benefits must outweigh the costs. Flexibility - The system should be sufficiently flexible to meet the resulting changes in the demands made upon it. Useful Output Illustration 7-1 Principles of an efficient and effective AIS.

5. Chapter 7-5 Basic Concepts of AIS LO 1 Identify the basic concepts of an accounting information system. Progress… MANUAL VS. COMPUTERIZED SYSTEMS Small businesses- begin operations with manual accounting systems and convert to computerized systems as business grows i.e. Peachtree, Quicken, QuickBooksQuicken Quicken vid http://quicken.intuit.com/content/popups/demos/what_is _quicken_demo.jsp?height=450&width=500&TB_ifra me=true

6. Chapter 7-6 Software programs (functions include sales, purchases, receivables, payables, cash receipts and disbursements, and payroll). Generate financial statements. Advantages:  Typically enter data only once.  Many human errors are eliminated.  More timely information. Computerized Accounting Systems Basic Concepts of AIS LO 1 Identify the basic concepts of an accounting information system.

7. Chapter 7-7 Used to keep track of individual balances. Two common subsidiary ledgers are: 1. Accounts receivable (customers’) 2. Accounts payable (creditors’) Subsidiary Ledgers LO 2 Describe the nature and purpose of a subsidiary ledger. Recall (Chapter 2) that ledgers hold certain types of accounts, from transactions originally recorded in our general journal. With a common characteristic i.e. accounts receivable

8. Chapter 7-8

9. Chapter 7-9 Illustration 7-3 Relationship of general ledger and subsidiary ledgers LO 2 Describe the nature and purpose of a subsidiary ledger.

10. Chapter 7-10 Shows transactions affecting one customer or one creditor in a single account… it SIMPLIFIES! Frees the general ledger of excessive details… it’s CLEANER! Helps locate errors in individual accounts. Reduces the number of accounts in one ledger Division of labor in posting One employee posts to the general ledger Another employee posts to the subsidiary ledger Subsidiary Ledgers Advantages of Subsidiary Ledgers LO 2 Describe the nature and purpose of a subsidiary ledger.

11. Chapter 7-11 Special Journals LO 3 Explain how companies use special journals in journalizing. Used to record similar types of transactions. If a transaction cannot be recorded in a special journal, the company records it in the general journal. Illustration 7-5

12. Chapter 7-12 Each of the following is a subsidiary ledger except the: a.accounts receivable ledger. b.accounts payable ledger. c.customer’s ledger. d.general ledger. Review Question Special Journals LO 3 Explain how companies use special journals in journalizing.

13. Chapter 7-13 Special Journals LO 3 Explain how companies use special journals in journalizing. Sales Journal Illustration 7-6 Under a perpetual inventory system, one entry at selling price in Sales Journal results in a debit to Accounts Receivable and a credit to Sales. Another entry at cost results in a debit to Cost of Goods Sold and a credit to Merchandise Inventory.

14. Chapter 7-14 Special Journals LO 3 Explain how companies use special journals in journalizing. Illustration 7-7 Companies make daily postings from the sales journal to the individual accounts receivable in the subsidiary ledger. POSTING THE SALES JOURNAL

15. Chapter 7-15 Special Journals LO 3 Explain how companies use special journals in journalizing. Illustration 7-7 Posting to the general ledger is done monthly. POSTING THE SALES JOURNAL

16. Chapter 7-16 One-line entry for each sales transaction saves time. Only totals, rather than individual entries, are posted to the general ledger. A division of labor results. Advantages of Sales Journal Special Journals LO 3 Explain how companies use special journals in journalizing.

17. Chapter 7-17 Special Journals LO 3 Explain how companies use special journals in journalizing. In the cash receipts journal, companies record all receipts of cash. The posting of the cash receipts journal is similar to the posting of the sale journal. See complete Illustration 7-9 in the text. Illustration 7-9 Cash Receipts Journal

18. Chapter 7-18 Cash sales of merchandise are recorded in the: a.cash payments journal. b.cash receipts journal. c.general journal. d.sales journal. Review Question Special Journals LO 3 Explain how companies use special journals in journalizing.

19. Chapter 7-19 Which of the following is not one of the credit columns in the cash receipts journal: a.Other accounts. b.Accounts payable. c.Accounts receivable. d.Sales. Review Question Special Journals LO 3 Explain how companies use special journals in journalizing.

20. Chapter 7-20 Special Journals LO 4 Indicate how companies post a multi-column journal. Illustration 7-13 Daily postings are made from the purchases journal to the accounts payable subsidiary ledger. Purchases Journal

21. Chapter 7-21 Special Journals LO 4 Indicate how companies post a multi-column journal. Illustration 7-13 Purchases Journal At the end of the accounting period, the company posts totals to the general ledger.

22. Chapter 7-22 All of the following are advantages of using subsidiary ledgers except they: a.show transactions affecting one customer or one creditor in a single account. b.free the general ledger of excessive details. c.eliminate errors in individual accounts. d.make possible a division of labor. Review Question Special Journals LO 3 Explain how companies use special journals in journalizing.

23. Chapter 7-23 Special Journals In a cash payments (cash disbursements) journal, companies record all disbursements of cash. The procedures for posting the cash payments journal are similar to those for other journals. Illustration 7-16 Cash Payments Journal LO 4 Indicate how companies post a multi-column journal.

24. Chapter 7-24 Credit purchases of equipment or supplies other than merchandise are recorded in the: a.cash payments journal. b.cash receipts journal. c.general journal. d.purchases journal. Review Question Special Journals LO 4 Indicate how companies post a multi-column journal.

25. Chapter 7-25 Cash payments of merchandise are recorded in the: a.cash payments journal. b.cash receipts journal. c.general journal. d.purchases journal. Review Question Special Journals LO 4 Indicate how companies post a multi-column journal.

26. Chapter 7-26 Special journals substantially reduce the number of entries that companies make in the general journal. Only transactions that cannot be entered in a special journal are recorded in the general journal. Also, correcting, adjusting, and closing entries are made in the general journal. Effects of Special Journals on the General Journal Special Journals LO 4 Indicate how companies post a multi-column journal.

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