Accounting Systems and Internal Controls Chapter 5 Accounting Systems and Internal Controls Accounting, 21st Edition Warren Reeve Fess © Copyright 2004 South-Western, a division of Thomson Learning. All rights reserved. Task Force Image Gallery clip art included in this electronic presentation is used with the permission of NVTech Inc. PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University

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After studying this chapter, you should be able to: Objectives 1. Define an accounting system and describe its implementation. 2. List the three objectives of internal control, and define and give examples of the five elements of internal control. 3. Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals. After studying this chapter, you should be able to:

Objectives 4. Describe and give examples of additional subsidiary ledgers and modified special journals. 5. Apply computerized accounting to the revenue and collection cycle. 6. Describe the basic features of e-commerce.

Basic Accounting System

Analysis FEEDBACK Design Implementation

Objectives of Internal Control To provide reasonable assurance that: 1. assets are safeguarded and used for business purposes. 2. business information is accurate. 3. employees comply with laws and regulations.

Elements of Internal Control 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication

Elements of Internal Control 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication

Management philosophy and operating style influences the control environment.

Elements of Internal Control 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication

Once risks are identified, they can be analyzed to estimate their significance, to assess their likelihood of occurring, and to determine actions that will minimize them.

Elements of Internal Control 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication

Control Procedures Competent Personnel Rotating Duties Mandatory Vacations Separating Responsibilities for Related Operations Separating Operations, Custody of Assets, and Accounting Proofs and Security Measures

Control Procedures Competent Personnel Rotating Duties Mandatory Vacations Separating Responsibilities for Related Operations Separating Operations, Custody of Assets, and Accounting Proofs and Security Measures

Separating Responsibilities for Related Operations Otherwise, the following abuses are possible: 1. Orders may be placed on the basis of friendship with a supplier, rather than on price, quality, and other objective factors. 2. The quantity and quality of supplies received may not be verified, thus causing payment for supplies not received or poor-quality supplies. 3. Supplies may be stolen by the employee. 4. The validity and accuracy of invoices may be verified carelessly.

Control Procedures Competent Personnel Rotating Duties Mandatory Vacations Separating Responsibilities for Related Operations Separating Operations, Custody of Assets, and Accounting Proofs and Security Measures

Custody of Assets Operations Accounting Independent check Independent check Operations Accounting Independent check

Elements of Internal Control 1. Control environment 2. Risk assessment 3. Control procedures 4. Monitoring 5. Information and communication

Clues to Potential Problems Warning signs with regard to people: 1. Abrupt changes in lifestyle. 2. Close social relationships with suppliers. 3. Refusing to take a vacation. 4. Frequent borrowing from other employees. 5. Excessive use of alcohol or drugs.

Clues to Potential Problems Warning signs from the accounting system: 1. Missing documents or gaps in transaction numbers. 2. An unusual increase in customer refunds. 3. Differences between daily cash receipts and bank deposits. 4. Sudden increase in slow payments. 5. Backlog in recording transactions.

Manual Accounting Systems

General Ledger and Subsidiary Ledgers Accounts Receivable Subsidiary Ledger A B C D Customer Accounts Cash 11 Accts. Rec. 12 Supplies 14 Accounts Payable Subsidiary Ledger A B C D Creditor Accounts Accts. Pay. 21

Special Journals Revenue journal Cash receipts journal SELLING Providing services on account Revenue journal recorded in Receipt of cash from any source Cash receipts journal recorded in BUYING Purchase of items on account Purchases journal recorded in Payment of cash for any purpose Cash payments journal recorded in

The Revenue Journal

The Revenue Journal Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 All sales on account are recorded in this journal. Each sales invoice is listed in numerical order.

Performed services on credit to MyMusic.com, $2,200. The Revenue Journal Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 Performed services on credit to MyMusic.com, $2,200.

Notice that only one line is required to make the entry. The Revenue Journal Revenue Journal Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2006 1 2 3 4 5 6 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 Notice that only one line is required to make the entry.

Posting from the Revenue Journal Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2006 1 2 3 4 5 6 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 To update the MyMusicClub.com account, the $2,200 debit is posted to the accounts receivable subsidiary ledger.

Posting from the Revenue Journal Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1 2 3 4 5 6 Accounts Receivable Subsidiary Ledger MyMusicClub.com Date Item P.R. Debit Credit Balance Mar. 2 R35 2,200 2,200 2006

Posting from the Revenue Journal Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1 2 3 4 5 6 Accounts Receivable Subsidiary Ledger MyMusicClub.com Date Item P.R. Debit Credit Balance Mar. 2 R35 2,200 2,200 2006 This procedure is repeated for each posting to the accounts receivable subsidiary ledger.

Posting from the Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2003 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 Assume that similar entries were journalized and posted during the month of March.

Posting from the Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 31 9 6 0 0 00 On March 31, the revenue journal is totaled and ruled.

Posting the Revenue Journal Total Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2006 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 31 9 6 0 0 00 Next, the revenue journal’s total ($9,600) is posted to the general ledger.

Posting the Revenue Journal Total GENERAL LEDGER Accounts Receivable ACCOUNT Account No. 12 Balance Post. Ref. Date Item Dr. Cr. Dr. Cr. 2006 Mar. 1 Balance 3 400 00 31 R35 9 600 00 13 000 00 Revenue Journal, page 35

Posting the Revenue Journal Total Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2006 1 2 3 4 5 6 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 31 9 6 0 0 00 By placing the account number here, we indicate that $9,600 has been debited to Accounts Receivable in the general ledger. (12)(41)

Posting the Revenue Journal Total ACCOUNT Fees Earned Account No. 41 Balance Dr. Cr. Date Item Post. Ref. GENERAL LEDGER 2006 Mar. 31 R35 9 600 00 9 600 00

Posting the Revenue Journal Total Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2006 1 2 3 4 5 6 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 6 616 RapZone.com 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 MyMusicClub.com 3 0 0 0 00 31 9 6 0 0 00 (12)(41) Placing “41” here indicates that $9,600 has been posted to the credit side of Fees Earned in the general ledger.

The Cash Receipts Journal

The Cash Receipts Journal All transactions that involve the receipt of cash are recorded in the cash receipts journal.

The Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 2006 Mar. 1 Rent Revenue 400 400 NetSolutions received $400 cash on March 1 for the month’s rent.

The Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 2006 Mar. 1 Rent Revenue 400 400 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 During March, NetSolutions collected cash from three customers.

Posting the Cash Receipts Journal Mar. 1 Rent Revenue 400 400 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 Page 14 2006 Each account under “Accounts Receivable Cr.” is posted to the accounts receivable subsidiary ledger.

Posting the Cash Receipts Journal Mar. 1 Rent Revenue 400 400 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 2006 Accounts Receivable Subsidiary Ledger Web Cantina Date Item P.R. Debit Credit Balance Mar. 1 Bal. 3,400 18 R35 2,650 6,050 2006 19 3,400 2,650

Posting the Cash Receipts Journal Mar. 1 Rent Revenue 400 400 CASH RECEIPTS JOURNAL Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 19 Web Cantina 3,400 3,400 28 MyMusicClub.com 2,200 2,200 30 RapZone.com 1,750 1,750 2006  Accounts Receivable Subsidiary Ledger Date Item P.R. Debit Credit Balance Web Cantina Mar. 1 Bal. 3,400 18 R35 2,650 6,050 2006 3,400 19 CR14 2,650

The Cash Receipts Journal After all journalizing and posting to the accounts receivable subsidiary ledger for the month is complete, the columns are totaled.

The Cash Receipts Journal Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. Page 14 2006 Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 The total “Cash Dr.” column equals the total of the two credit columns.

Posting the Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 2006 Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 Account: Accounts Receivable No. 12 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal  3,400 31 R35 9,600 13,000 2006 The three circled items are posted to the general ledger. Let’s post Accounts Receivable.

Posting the Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 2006 Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 Account: Accounts Receivable No. 12 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal  3,400 31 R35 9,600 13,000 2006 31 CR14 7,350 5,650

Posting the Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 2006 Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 ( ) (12) 

Posting the Cash Receipts Journal The $7,750 total in the Cash Debit column is posted to Cash in a similar manner.

Posting the Cash Receipts Journal The $400 credit to Rent Revenue could have been posted earlier, but posting it at the same time as other general ledger accounts is proper.

Posting the Cash Receipts Journal A completely posted cash receipts journal is shown in the next slide.

Posted Cash Receipts Journal Page 14 Other Accounts Post Accounts Receivable Cash Date Account Credited Ref. Cr. Cr. Dr. 2006 42 Mar. 1 Rent Revenue 400 400 19 Web Cantina  3,400 3,400 28 MyMusicClub.com  2,200 2,200 30 RapZone.com  1,750 1,750 31 400 7,350 7,750 ( ) (12) (11) 

Accounts Receivable Control Account ACCOUNT Accounts Receivable No. 12 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal 3,400 31 R35 9,600 13,000 7,350 5,650 31 CR14  Accounts Receivable Control Account If the accounts receivable account in the general ledger only shows summary totals, where are the individual customer balances?

Accounts Receivable Subsidiary MyMusicClub.com ACCOUNT Accounts Receivable No. 12 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal 3,400 31 R35 9,600 13,000 7,350 5,650 31 CR14  Accounts Receivable Control Account Date Item P.R. Debit Credit Balance 3/2 R35 2,200 2,200 3/27 R35 3,000 5,200 3/28 CR14 2,200 3,000 Accounts Receivable Subsidiary Ledger RapZone.com Date Item P.R. Debit Credit Balance 3/6 R35 1,750 1,750 3/30 CR14 1,750 -- Web Cantina Date Item P.R. Debit Credit Balance 3/1 Bal. 3,400 3/18 R35 2,650 6,050 3/19 CR14 3,400 2,650 

The Purchases Journal

The purchases journal is designed for recording all purchases on account.

Journalizing in the Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 2006 On March 3, 2003, NetSolutions purchased supplies from Howard Supplies, $600.

Posting the Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 2006 Accounts Payable Subsidiary Ledger Date Item P.R. Dr. Cr. Balance Howard Supplies Mar 3 600 600 2006 To keep the accounts payable subsidiary ledger current, this entry is posted on March 3.

Posting the Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 2006 Accounts Payable and Supplies will be posted as totals.

Journalizing in the Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 On March 7, NetSolutions purchased supplies from Donnelly Supplies, $420.

Journalizing in the Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420

Journalizing in the Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 On March 12, NetSolutions purchased office equipment from Jewett Business Systems, $2,800. Because there isn’t a special column for Office Equipment, this purchase was recorded under “Other Accounts Dr.”

Journalizing in the Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 Now, let’s look at the rest of March’s entries (assume that all postings to the accounts payable subsidiary ledger have been made).

Totaling the Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 31 6,230 3,430 2,800 $6,230 = $3,430 + $ 2,800 At the end of March, all columns are totaled and equality of debits and credits is verified.

Posting the Purchases Journal Page 11 Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 31 6,230 3,430 2,800 The next step is to post to the general journal.

GENERAL LEDGER PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 31 6,230 3,430 2,800 GENERAL LEDGER ACCOUNT Accounts Payable No. 21 Date Item P.R. Debit Credit Balance Mar. 1 Bal 1,230 31 P11 6,230 7,460

GENERAL LEDGER PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2003 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 31 6,230 3,430 2,800 (21) ACCOUNT Accounts Payable No. 21 GENERAL LEDGER Date Item P.R. Debit Credit Balance Mar. 1 Bal 1,230 6,230 7,460 31 P11

PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2003 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 31 6,230 3,430 2,800 18 (21) (14) Supplies is posted as a total of $3,430 to general ledger account 21. Office Equipment is posted individually.

PURCHASES JOURNAL Accts. Other Post Payable Supplies Accounts Post Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount Page 11 Mar. 3 Howard Supplies 600 600 2006 7 Donnelly Supplies 420 420 12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 19 Donnelly Supplies 1,450 1,450 27 Howard Supplies 960 960 31 6,230 3,430 2,800 (21) (14) 18 ( ) NetSolutions had only one entry in the “Other Accounts Dr.” column. If there were others, they would be posted individually. Therefore, the total is not posted. A check mark indicates that the total was not posted.

The Cash Payments Journal

All payments are recorded in the cash payments journal All payments are recorded in the cash payments journal. NetSolutions makes all payments by check.

Let’s make all of the cash payment journal entries for March.

CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 2006 Mar. 2 150 Rent Expense 1,600 1,600 On March 2, NetSolutions paid the rent for March by issuing Check No. 150 for $1,600.

CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230 On March 15, issued Check No. 151 to Grayco Supplies on account, $1,230.

CASH PAYMENTS JOURNAL PAGE 7 Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230  Accounts Payable Subsidiary Ledger Grayco Supplies Mar. 3 Bal. 1,230 Date Item P.R. Dr. Cr. Balance Let’s post to the accounts payable subsidiary ledger at this time to keep the creditor’s account current. 15 CP7 1,230 ---

CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230   21 152 Jewett Business Sys. 2,800 2,800 On March 21, issued Check No. 152 as payment on account to Jewett Business Systems, $2,800.

CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230  21 152 Jewett Business Sys. 2,800 2,800  22 153 Donnelly Supplies. 420 420 On March 22, issued Check No. 153 as payment on account to Donnelly Supplies, $420.

On March 30, issued Check No. 154 as payment for utility bill, $1,050. CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230  21 152 Jewett Business Sys. 2,800 2,800  22 153 Donnelly Supplies. 420 420  30 154 Utilities Expense 1,050 1,050 On March 30, issued Check No. 154 as payment for utility bill, $1,050.

On March 31, issued Check No. 155 on account to Howard Supplies, $600 CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230  21 152 Jewett Business Sys. 2,800 2,800  22 153 Donnelly Supplies. 420 420  30 154 Utilities Expense 1,050 1,050 31 155 Howard Supplies 600 600 On March 31, issued Check No. 155 on account to Howard Supplies, $600

CASH PAYMENTS JOURNAL Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr PAGE 7 2006 Mar. 2 150 Rent Expense 1,600 1,600 15 151 Grayco Supplies 1,230 1,230  21 152 Jewett Business Sys. 2,800 2,800  22 153 Donnelly Supplies. 420 420  30 154 Utilities Expense 1,050 1,050 31 155 Howard Supplies 600 600  31 2,650 5,050 7,700 The journal is ruled, summed, and verified for equality of debits and the “Cash Cr.” column.

CASH PAYMENTS JOURNAL PAGE 7 Other Accounts Ck. Post Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr 2006 Mar. 2 150 Rent Expense 1,600 1,600 52 15 151 Grayco Supplies 1,230 1,230  21 152 Jewett Business Sys. 2,800 2,800  22 153 Donnelly Supplies. 420 420  30 154 Utilities Expense 1,050 1,050 54 31 155 Howard Supplies 600 600  31 2,650 5,050 7,700 ( )   (21) (11) Individual items in the “Other Accounts Dr.” column are posted. Then the totals for “Accounts Payable Dr.” and “Cash Cr.” are posted.

Accounts Payable Control

Accounts Payable (Controlling) Accounts Payable Subsidiary GENERAL LEDGER Accounts Payable (Controlling) ACCOUNT Accounts Payable No. 12 Date Item P.R. Debit Credit Balance Mar. 1 Bal 1,230 31 P11 6,230 7,460 31 CP7 5,050 2,410 Donnelly Supplies Date Item P.R. Debit Credit Balance Mar 2 P11 420 420 19 P11 1,450 1,870 22 CP7 420 1,450 Accounts Payable Subsidiary Ledger Jewett Business Systems also has a zero balance, so that account was omitted for space reasons. Grayco Supplies Date Item P.R. Debit Credit Balance Mar 1 Bal. 1,230 15 CP7 1,230 0 --  Howard Supplies Date Item P.R. Debit Credit Balance Mar 3 P11 600 600 27 P11 960 1,560 31 CP7 600 960

Advantages of a Computerized Accounting System Over a Manual Accounting System 1. Computerized systems simplify the record-keeping process. 2. Computerized systems are generally more accurate. 3. Computerized systems provide management current account balance information to support decision making.

The Revenue and Collection Cycle in QuickBooks From Exhibit 10, page 203 of textbook Mail invoice to customer

The Revenue and Collection Cycle in QuickBooks Continued From Exhibit 10, page 203 of textbook

The Revenue and Collection Cycle in QuickBooks Continued From Exhibit 10, page 203 of textbook

Advanced Areas Where the Internet is Being Used for Business Purposes Supply chain management (SCM) Customer relationship management (CRM) Product life-cycle management (PLM)

Chapter 5 The End