1. Chapter 3: Introduction to Tally ERP9
(Account Executive)
Chapter 3: Introduction to Tally ERP9
Prof. Sachin K. Jadhav

2. ACCOUNTING INFORMATION SYSTEMS
CHAPTER 3
ACCOUNTING INFORMATION SYSTEMS

3. Accounting Information System
An accounting information system (AIS) involves collecting and processing data and disseminating financial information to interested parties.
An AIS may either be manual or computerized.

4. PRINCIPLES OF AN EFFICIENT AND EFFECTIVE ACCOUNTING INFORMATION SYSTEM
The accounting system must be cost effective.
Benefits of information must outweigh the cost of providing it.
Costs
Benefits

5. PRINCIPLES OF AN EFFICIENT AND EFFECTIVE ACCOUNTING INFORMATION SYSTEM
It must be relevant!
It must be reliable!
It must be accurate!
It must be timely!
Balance Sheet
Income Statement
Other Financial Reports

6. PRINCIPLES OF AN EFFICIENT AND EFFECTIVE ACCOUNTING INFORMATION SYSTEM
Government Regulation and Deregulation
Organizational Growth
Increased Competition
Changing Accounting Principles
Technological Advances

7. ILLUSTRATION 7-2 PHASES IN THE DEVELOPMENT OF AN ACCOUNTING SYSTEM
Analysis
Planning and identifying information needs and sources
Follow up
Design
Evaluating and monitoring effectiveness and efficiency and correcting any weaknesses
Creating forms, documents, procedures, job descriptions, and reports
Implementation
Installing the system, training personnel, and making the system operational

8. SUBSIDIARY LEDGERS
A subsidiary ledger is a group of accounts with a common characteristic, such as customer accounts.
The subsidiary ledger is assembled to facilitate the recording process by freeing the general ledger from details concerning individual balances.
Two common subsidiary ledgers are the Accounts Receivable Ledger and the Accounts Payable Ledger.

9. CONTROL ACCOUNT
The general ledger account that summarizes subsidiary ledger data is called a control account.
Each general ledger control account balance must equal the composite balance of the individual accounts in the subsidiary ledger.

10. ILLUSTRATION 7-3 RELATIONSHIP OF GENERAL LEDGERS AND SUBSIDIARY LEDGERS
Accounts receivable controls a subsidiary ledger of many different customers.
Accounts payable controls a subsidiary ledger of many different creditors.
General
Ledger
Accounts
Receivable
Accounts
Payable
Owner’s
Capital
Cash
Customer A B C
Creditor X Y Z
Subsidiary
Ledgers

11. SUBSIDIARY LEDGERS
Advantages of using subsidiary ledgers are that they:
1. Show transactions affecting one customer or one creditor in a single account.
2. Free the general ledger of excessive details.
3. Help locate errors in individual accounts by reducing the number of accounts combined in one ledger and by using controlling accounts.
4. Create a division of labour in posting by allowing one employee to post to the general ledger and a different employee to post to the subsidiary ledger.

12. SPECIAL JOURNALS
Special journals are used to group similar types of transactions.
If a transaction cannot be recorded in a special journal, it is recorded in the general journal.
Special journals permit greater division of labour and reduce time necessary to complete the posting process.

13. ILLUSTRATION 7-5 USE OF SPECIAL JOURNALS AND THE GENERAL JOURNAL
Cash Receipts
Journal
Cash Payments
Journal
Sales
Journal
Purchases Journal
General
Journal
Used for:
All purchases
of merchan-dise on account
Used for:
All cash paid
(including
cash
purchases)
Used for:
Transactions
that cannot
be entered
in a special
journal, including
correcting, adjusting, and closing entries
Used for:
All sales of
merchan-dise on account
Used for:
All cash
received
(including
cash sales)
The types of special journals used depend largely on the types of transactions that occur frequently in a business enterprise.

14. JOURNALIZING THE SALES JOURNAL – PERPETUAL INVENTORY SYSTEM
Karns Wholesale Supply
Sales Journal S1
Under a perpetual inventory system, one entry at selling price in the 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.
Postings are made monthly to the general ledger and daily to the accounts receivable subsidiary ledger.

15. Accounts Receivable Subsidiary Ledger
ILLUSTRATION PROVING THE ACCURACY OF THE ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
General Ledger
Accounts Receivable $90,230
Accounts Receivable Subsidiary Ledger
Abbot Sisters $26,000
Babson Co ,920
Carson Bros ,800
Deli Co ,510
$90,230
To prove the accuracy of the ledgers it is necessary to determine whether the sum of the accounts receivable subsidiary ledger balances equals the balance in the general ledger’s Accounts Receivable control account.

16. CASH RECEIPTS JOURNAL PERPETUAL SYSTEM
Karns Wholesale Supply
Cash Receipts Journal
54,550
The debit columns for cash and cost of goods sold must be equal to the total of the credit columns for accounts receivable, sales, inventory, and other accounts.

17. CASH RECEIPTS JOURNAL
Column totals are posted at the end of each month.
The total of the Other Accounts column is not posted. The individual amounts comprising the total are posted separately to the general ledger accounts specified in the Accounts Credited column.
The individual amounts in the Accounts Receivable column are posted daily to the subsidiary ledger account specified in the Accounts Credited column.

18. ILLUSTRATION 7-11 PROVING THE LEDGERS AFTER POSTING THE SALES AND THE CASH RECEIPTS JOURNALS
Accounts Receivable
Subsidiary Ledger
Abbot Sisters $15,400
Babson Co ,570
Deli Co ,210
$51,180
General Ledger
Debits
Cash $54,550
Accounts Receivable ,180
Cost of Goods Sold ,120
$170,850
Credits
Merchandise Inventory $ 65,120
Notes Payable ,000
D. A. Karns, Capital ,000
Sales ,730
After the posting of the cash receipts journal is completed, it is necessary to prove the ledgers. The general ledger totals are in agreement and the sum of the subsidiary ledger balances equals the control account balance.

19. PURCHASES JOURNAL PERPETUAL SYSTEM
Karns Wholesale Supply
Purchases Journal 
In a perpetual system, each entry results in a debit to Merchandise Inventory and a credit to Accounts Payable.
Postings are made daily to the accounts payable subsidiary journal and monthly to the general ledger.

20. ILLUSTRATION 7-13 PROVING THE ACCURACY OF THE ACCOUNTS PAYABLE SUBSIDIARY LEDGER
General Ledger
Merchandise Inventory $63,900
Accounts Payable $63,900
Accounts Payable Subsidiary Ledger
Eaton and Howe, Inc. $19,800
Fabor and Son ,600
Jasper Manufacturing Inc ,500
$63,900
To prove the ledgers it is necessary to determine that the sum of the subsidiary ledger balances equals the balance in the control account.

21. CASH PAYMENTS JOURNAL PERPETUAL SYSTEM
Karns Wholesale Supply
Cash Payments Journal
Journalizing procedures are similar to cash receipts journal
Posting procedures are also like the cash receipts journal

22. ILLUSTRATION 7-16 PROVING THE ACCURACY OF THE ACCOUNTS PAYABLE SUBLEDGER
General Ledger
Debits
Cash $ 9,750
Accounts Receivable ,180
Prepaid Insurance ,200
D. A. Karns, Drawings
Purchases ,300
Freight In
$127,030
Credits
Accounts Payable $ 21,300
Notes Payable ,000
D. A. Karns, Capital ,000
Sales ,730
Accounts Payable Subsidiary Ledger
Eaton and Howe, Inc $12,600
Fabor and Son ,700
$21,300
To prove the ledgers it is necessary to determine that the sum of the subsidiary ledger balances equals the balance in the control account.

23. EFFECTS ON GENERAL JOURNAL
Only transactions that cannot be recorded in a special journal are recorded in the general journal.
When the entry involves both control and subsidiary accounts:
1. In journalizing, control and subsidiary accounts must be identified, and
2. In posting there must be a dual posting (to the control account and subsidiary ledger).

24. ILLUSTRATION 7-17 JOURNALIZING AND POSTING THE GENERAL JOURNAL

25. Thank You