© The McGraw-Hill Companies, Inc., 2007 Accounting for Special Journals Appendix E

© The McGraw-Hill Companies, Inc., 2007 Conceptual Chapter Objectives C1: Identify fundamental principles of accounting information systems C2: Identify components of accounting information systems C3: Explain the goals and uses of special journals C4: Describe the use of controlling accounts and subsidiary ledgers C5: Explain how technology-based information systems impact accounting

© The McGraw-Hill Companies, Inc., 2007 Analytical Chapter Objectives A1: Compute segment return on assets and use it to evaluate segment performance

© The McGraw-Hill Companies, Inc., 2007 Procedural Chapter Objectives P1: Journalize and post transactions using special journals P2: Prepare and prove the accuracy of subsidiary ledgers P3: Appendix 7-A: Journalize and post transactions using special journals in a periodic inventory system.

© The McGraw-Hill Companies, Inc., 2007 Fundamental System Principles Control Principle Control Principle Internal controls for management to monitor the business. Relevance Principle. Relevance Principle Provide relevant, timely and pertinent information. Compatibility Principle Compatibility Principle System must be compatible with aims of the company. Flexibility Principle Flexibility Principle System needs to meet the changing needs of company. Cost-Benefit Principle Cost-Benefit Principle Benefits of the system must outweigh the costs incurred. C1

© The McGraw-Hill Companies, Inc., 2007 Components of Accounting Systems Increasingly, source documents are electronic files creating a “paperless” system. Source Documents Invoice from supplier Billings to customers Employee earnings records C2

© The McGraw-Hill Companies, Inc., 2007 Components of Accounting Systems KeyboardsScannersModems Bar-Code Reader KeyboardsScannersModems Input Source Documents C2

© The McGraw-Hill Companies, Inc., 2007 Processor Components of Accounting Systems HardwareSoftware Professional Judgment HardwareSoftware Input Source Documents C2

© The McGraw-Hill Companies, Inc., 2007 Storage Components of Accounting Systems CD Hard Drive Tape Paper Document CD Hard Drive Tape Paper Document Processor Input Source Documents C2

© The McGraw-Hill Companies, Inc., 2007 PrinterMonitorTelephoneCDTapeDisk Electronic File PrinterMonitorTelephoneCDTapeDisk Output Components of Accounting Systems Storage Processor Input Source Documents C2

© The McGraw-Hill Companies, Inc., 2007 Now, let’s look at how we use special journals in accounting. C3

© The McGraw-Hill Companies, Inc., 2007 Special Journals in Accounting General Journal For transactions not in special journals Cash Disbursements Journal For recording cash payments Purchases Journal For recording credit purchases Cash Receipts Journal For recording cash receipts Sales Journal For recording credit sales C3

© The McGraw-Hill Companies, Inc., 2007 Subsidiary Ledgers Subsidiary ledgers are a listing of individual accounts with common characteristics. C4

© The McGraw-Hill Companies, Inc., 2007 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. C4

© The McGraw-Hill Companies, Inc., 2007 Each transaction yields a debit to Accounts Receivable and a credit to Sales. Also, we need to record the cost of the sale for the transaction. This column total is posted monthly. Sales Journal P1

© The McGraw-Hill Companies, Inc., 2007 Sales Journal On January 1, Jim Carson purchased $600 of merchandise on account from Barry’s Bikes. The cost of the bikes was $400. Record the entry in the Sales Journal. (Assume the use of a perpetual inventory system.) P1

© The McGraw-Hill Companies, Inc., 2007 Daily, each transaction is posted to the appropriate accounts receivable subsidiary account. Sales Journal P1

© The McGraw-Hill Companies, Inc., 2007 A in the posting reference column indicates the transaction was posted to the subsidiary account. Sales Journal P1

© The McGraw-Hill Companies, Inc., 2007 Sales Journal Post the total to the General Ledger accounts. P1

© The McGraw-Hill Companies, Inc., 2007 Here is the Sales Journal after recording some additional sales. Sales Journal P1

© The McGraw-Hill Companies, Inc., 2007 Sales Journal P1

© The McGraw-Hill Companies, Inc., 2007 Sales Journal P1

© The McGraw-Hill Companies, Inc., 2007 Proving the Ledgers The Accounts Receivable controlling account and the subsidiary ledger are in balance. P2

© The McGraw-Hill Companies, Inc., 2007 Sales Taxes On January 4, Jeri’s Jewelry sold a necklace for $450 plus 8% sales tax on credit to Joan Oakes. $450 .08 = $36 The cost of the merchandise was 302. On January 4, Jeri’s Jewelry sold a necklace for $450 plus 8% sales tax on credit to Joan Oakes. $450 .08 = $36 The cost of the merchandise was 302. P2

© The McGraw-Hill Companies, Inc., 2007 Sales Tax Each transaction is posted daily to the appropriate Accounts Receivable Ledger account. Column totals are posted monthly. P2

© The McGraw-Hill Companies, Inc., 2007 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. P2

© The McGraw-Hill Companies, Inc., 2007 Cash Receipts Journal Categories of Cash Receipts Cash from cash sales Cash from cash sales Cash from credit customers Cash from credit customers Cash from other sources Cash from other sources Categories of Cash Receipts Cash from cash sales Cash from cash sales Cash from credit customers Cash from credit customers Cash from other sources Cash from other sources P2

© The McGraw-Hill Companies, Inc., 2007 CASH RECEIPTS JOURNAL Page 1 Date Accounts CreditedExplanationPR Cash Dr. Sales Disc. Dr. Accts. Rec. Cr.Sales Cr. Other Accts. Cr. May7SalesCash Sales300 16Jane WatersInvoice Interest RevenueBank Acct Total (101)(415)(106)(413)( ) Amount is not posted individually to an account. Amount is posted individually to subsidiary ledger. Acct. No.Amount is posted to specified account. Cash Receipts Journal P2

© The McGraw-Hill Companies, Inc., 2007 Purchases Journal The Purchases Journal is used to record all purchases on credit. P2

© The McGraw-Hill Companies, Inc., 2007 Purchases Journal P2

© The McGraw-Hill Companies, Inc., 2007 Cash Disbursements Journal The Cash Disbursements Journal is used to record all payments of cash. P2

© The McGraw-Hill Companies, Inc., 2007 Cash Disbursements Journal ( ) P2

© The McGraw-Hill Companies, Inc., 2007 General Journal Transactions Adjusting Entries Closing Entries Reversing Entries Other transactions not recorded in Special Journals P2

© The McGraw-Hill Companies, Inc., 2007 Technology-Based Accounting Systems Hardware Processing units Hard Drives RAMModems CD-ROM Drives SpeakersMonitorsServersPrintersHardware Processing units Hard Drives RAMModems CD-ROM Drives SpeakersMonitorsServersPrintersSoftware Programs with a series of commands directing operations of computer hardware such as data input, storage, processing, or output Software C5

© The McGraw-Hill Companies, Inc., 2007 Computer Technology in Accounting Integrated accounting programs automatically update related accounts, journals, and ledgers for a single transaction. Integrated accounting programs automatically update related accounts, journals, and ledgers for a single transaction. C5

© The McGraw-Hill Companies, Inc., 2007 Data Processing in Accounting  On-line 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).  On-line 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). C5

© The McGraw-Hill Companies, Inc., 2007 Computer Networks in Accounting Computer networks are links among computers giving different users access to common databases and programs. Server Work Stations C5

© The McGraw-Hill Companies, Inc., 2007 Enterprise Resource Planning Software Enterprise resource planning software, such as SAP or Oracle, links ordering, inventory, production, purchasing, planning, tracking and human resources for many of the world’s largest companies. C5

© The McGraw-Hill Companies, Inc., 2007 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

© The McGraw-Hill Companies, Inc., 2007 This ratio reflects the profitability of the segment. Segment Return on Assets Segment return on assets = Segment operating income Segment average assets A1

© The McGraw-Hill Companies, Inc., 2007 End of Appendix E