1. 5 Accounting Systems Accounting Principles Using Excel for Success
PowerPoint Presentation by:
Douglas Cloud, Professor Emeritus Accounting, Pepperdine University
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Accounting Systems
Student Version

2. Define and describe an accounting system.1
Define and describe an accounting system.
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3. 1
Accounting System
An accounting system is the methods and procedures for collecting, classifying, summarizing, and reporting a business’s financial and operating information.

4. 1
As a business grows and changes, accounting systems also change in the following three-step process:
Step 1. Analyze user information needs.
Step 2. Design the system to meet the user needs.
Step 3. Implement the system.

5. 1
Feedback
Once a system has been implemented, feedback, or input from the users of the information can be used to analyze and improve the system.

6. 1
Internal Controls
Internal controls are policies and procedures that protect assets from misuse, ensure that business information is accurate, and ensure that laws and regulations are being followed.

7. 1
Processing Methods
Processing methods are the means by which the system collects, summarizes, and reports accounting information. These methods may be either manual or computerized.

8. 2
Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals.
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9. 2
Subsidiary Ledger
A large number of individual accounts with a common characteristic can be grouped together in a separate ledger called a subsidiary ledger.

10. 2
General Ledger
The primary ledger, which contains all of the balance sheet and income statement accounts, is called a general ledger.

11. 2
Controlling Account
Each subsidiary ledger is represented in the general ledger by a summarizing account, called a controlling account.

12. 2
The individual customers’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts receivable subsidiary ledger or customers ledger.

13. 2
The individual creditors’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts payable subsidiary ledger, or creditors ledger.

14. 2
Special Journal
Each special journal is designed to be used for recording a single kind of transaction that occurs frequently.

15. 2 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

16. 2 Special Journals Purchases Journal Cash Payments Journal
BUYING
Purchase of items on account
Purchases Journal
recorded in
Payment of cash for any purpose
Cash Payments Journal
recorded in

17. 2
General Journal
The all-purpose two-column journal, called the general journal or simply the journal can be used for entries that do not fit into any of the special journals.

18. Other Special Journals2
Other Special Journals
The revenue journal is used for recording fees earned on account. Cash fees earned would be recorded in the cash receipts journal.

19. 2
Exhibit 2
Revenue Journal

20. 2
Exhibit 3
Revenue Journal Postings to Ledger

21. 2
Cash Receipts Journal
All transactions that involve the receipt of cash are recorded in a cash receipts journal. Every entry recorded in the cash receipts journal will involve a debit to the “Cash Dr.” column.

22. 2
Exhibit 4
Cash Receipts Journal and Postings

23. 2
Accounts Receivable—(Controlling)
Balance, March 1, 2010 $3,400
Total debits (from revenue journal) 9,600
Total credits (from cash receipts journal) (7,350)
Balance, March 31, 2010 $5,650
NetSolutions’ Accounts Receivable Subsidiary Ledger
Customer Balance Summary Report, March 31, 2010
Accessories By Claire $3,000
RapZone 0
Web Cantina 2,650
Total accounts receivable $5,650

24. 2
Purchases Journal
The purchases journal is designed for recording all purchases on account.

25. 2
Exhibit 5
Purchases Journal and Postings

26. 2
Cash Payments Journal
All transactions involving a credit to Cash are recorded in the cash payments journal.

27. 2
Exhibit 6
Cash Payments Journal and Postings

28. Accounts Payable Control Account and Subsidiary Ledger2
Accounts Payable Control Account and Subsidiary Ledger
Accounts Payable (Control)
Balance, March 1, 2010 $1,230
Total credits (from purchases journal) 6,230
Total debits (from cash payments journal) (5,050)
Balance, March 31, 2010 $2,410
NetSolutions
Supplier Balance Summary Report
March 31, 2010
Donnelly Supplies $1,450
Grayco Supplies 0
Howard Supplies 960
Jewett Business Systems
Total $2,410

29. 3
Describe and give examples of other subsidiary ledgers and modified special journals.
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30. 3
A business may modify its special journals by adding one or more columns for recording transactions that occur frequently.

31. 3
Nov. 2 NetSolutions issued Invoice No. 842 to Litten Company for $4,770, which included sales taxes of $270.
3 Issued Invoice No. 843 to Kauffman Supply Company for $1,166, which included sales taxes of $66.

32. Modified Special Journal3
Modified Special Journal

33. Describe and illustrate the use of a computerized accounting system.4
Describe and illustrate the use of a computerized accounting system.
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34. Computerized Accounting System4
Computerized Accounting System
Computerized systems simplify the record-keeping process in that transactions are recorded in electronic forms and, at the same time, posted electronically to general and subsidiary ledger accounts.

35. Computerized systems are generally more accurate than manual systems.4
Computerized systems are generally more accurate than manual systems.
Computerized systems provide management with current account balance information to support decision making, since account balances are posted as the transactions occur.

36. 4
Exhibit 7
Revenue and Cash Receipts in QuickBooks©
(continued)

37. 4
Revenue and Cash Receipts in QuickBooks© (continued)
Exhibit 7

38. Describe the basic features of e-commerce.5
Describe the basic features of e-commerce.
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39. 5
e-Commerce
Using the Internet to perform business transactions is termed e-commerce.

40. 5
When transactions are between a company and a consumer, it is termed B2C (business-to-consumer) e-commerce.

41. 5
Three more advanced areas where the Internet is being used for business purposes are:
Supply chain management (SCM)
Consumer relationship management (CRM)
Product life-cycle management (PLM)