Accounting System and Internal Control, Warren, 21st Edition

Chapter 5
Accounting Systems and

Internal Controls
Accounting, 21st Edition
Warren Reeve Fess
PowerPoint Presentation by Douglas Cloud

Professor Emeritus of Accounting
Pepperdine University
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.
Some
Some of
of the
the action
action has
has been
been automated,
automated, so
so
click
click the
the mouse
mouse when
when you
you see
see this
this
lightning
lightning bolt
bolt in
in the
the lower
lower right-hand
right-hand
corner
corner of
ofthe
the screen.
screen. You
You can
can point
point and
and
click
click anywhere
anywhere on
on the
the screen.
screen.
Objectives
Objectives
After
After stud
stud
chapter,
chapter, yo
y
be
be ab
ab
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.
Objectives
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 ecommerce.
Basic
Accounting
System
Analysis
Design
Implementation
F
E
E
D
B
A
C
K
Objectives
Objectives of
of Internal
Internal
Control
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.
2.
3.
4.
5.
Control environment
Risk assessment
Control procedures
Monitoring
Information and communication
Elements of Internal Control

1.
2.
3.
4.
5.
Control environment
Risk assessment
Control procedures
Monitoring
Management
Management philosophy
philosophy and
and
operating
operating style
style influences
influences the
the
control
control environment.
environment.
Elements
Elements of
of Internal
Internal Control
Control
1.
2.
3.
4.
5.
Control environment
Risk assessment
Control procedures
Monitoring
Once
Once risks
risks are
are identified,
identified, they
they can
can be
be
analyzed
analyzed to
to estimate
estimate their
their significance,
significance, to
to
assess
assess their
their likelihood
likelihood of
of occurring,
occurring, and
and to
to
determine
determine actions
actions that
that will
will minimize
minimize them.
them.
Elements
Elements of
of Internal
Internal Control
Control
1.
2.
3.
4.
5.
Control environment
Risk assessment
Control procedures
Monitoring
Control
Control Procedures
Procedures
Competent Personnel
Rotating Duties
Mandatory Vacations
Separating Responsibilities for
Related Operations
Separating Operations,
Custody of Assets, and
Accounting
Proofs and Security Measures
Control
Control Procedures
Procedures
Competent Personnel
Rotating Duties
Mandatory Vacations
Related Operations
Accounting
Separating
Otherwise,
the
Separating
Otherwise,
the following
following
Responsibilities
for
abuses
are
Responsibilities
for
abuses
are possible:
possible:
Related
Operations
1. Orders
may be placed
on the basis of
Related
Operations
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
Control Procedures
Procedures
Competent Personnel
Rotating Duties
Mandatory Vacations
Related Operations
Accounting
Custody of
Assets
Independent
check
Independent
check
Operations
Accounting
Independent
check
Elements
Elements of
of Internal
Internal Control
Control
1.
2.
3.
4.
5.
Control environment
Risk assessment
Control procedures
Monitoring
Clues
Clues to
to Potential
Potential Problems
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
Clues to
to Potential
Potential Problems
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
General Ledger
Ledger and
and Subsidiary
Subsidiary Ledgers
Ledgers
General Ledger
Cash
11
Accounts Receivable
Subsidiary Ledger
Accts. Rec.
12
Customer Accounts
Supplies
14
Accounts Payable
Subsidiary Ledger
Accts. Pay.
21
Creditor Accounts
Special Journals
SELLING
Providing services on account
recorded
Revenue journal
recordedin
in
Receipt of cash from any source
recorded
recordedin
in
Cash receipts journal
BUYING
Purchase of items on account
recorded
Purchases journal
recordedin
in
Payment of cash for any purpose
recorded
recordedin
in
Cash payments journal
The Revenue Journal
The
The Revenue
Revenue Journal
Journal
Page 35
Revenue Journal
Date
Invoice
No.
Account Debited
Post
Ref.
Accts. Rec. Debit

Fees Earned Credit
All
All sales
sales on
on account
account are
are recorded
recorded in
in
this
this journal.
journal. Each
Each sales
sales invoice
invoice isis
listed
listed in
in numerical
numerical order.
order.
The
The Revenue
Revenue Journal
Journal
Page 35
Revenue Journal
Date
2006
1 Mar.
2
2
Invoice
No.
615
Account Debited
MyMusicClub.com
Post
Ref.
Accts. Rec. Debit

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

Fees Earned Credit
MyMusicClub.com
2 2 0 0 00
1
2
Notice
Notice that
that only
only one
one line
line isis
required
required to
to make
make the
the entry.
entry.
Posting
Posting from
from the
the Revenue
Revenue Journal
Journal
Page 35
Revenue Journal
Date
2006
1 Mar.
2
2
Invoice
No.
615
Account Debited
MyMusicClub.com
Post
Ref.
Accts. Rec. Debit

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

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

Fees Earned Credit
MyMusicClub.com
2 2 0 0 00
1
2
MyMusicClub.com
Date
2006
Mar. 2
Item
P.R.
R35
Debit
2,200
Credit
Balance
2,200
This procedure is repeated for each posting

to the accounts receivable subsidiary ledger.
5
6
Posting
Posting from
from the
the Revenue
Revenue Journal
Journal
Page 35
Revenue Journal
Invoice
No.
Date
2003
2006
1 Mar.
2
2
6
3
18
27
Account Debited
Post
Ref.
Accts. Rec. Debit

Fees Earned Credit
615
MyMusicClub.com
2 2 0 0 00
616
RapZone.com
1 7 5 0 00
617
Web Cantina
2 6 5 0 00
618
MyMusicClub.com
3 0 0 0 00
Assume
Assume that
that similar
similar entries
entries were
were
journalized
journalized and
and posted
posted during
during the
the
month
month of
of March.
March.
Posting
Posting from
from the
the Revenue
Revenue Journal
Journal
Page 35
Revenue Journal
Date
2006
1 Mar.
2
2
6
3
18
4
5
6
27
31
Invoice
No.
Account Debited
Post
Ref.
Accts. Rec. Debit

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

Fees Earned Credit
615
MyMusicClub.com
2 2 0 0 00
616
RapZone.com
1 7 5 0 00
617
Web Cantina
2 6 5 0 00
618
MyMusicClub.com
3 0 0 0 00
9 6 0 0 00
Next,
Next, the
the revenue
revenue journals
journalstotal
total
($9,600)
($9,600) isis posted
posted to
to the
the general
general ledger.
ledger.
5
6
Posting
Posting the
the Revenue
Revenue Journal
Journal Total
Total
GENERAL LEDGER
ACCOUNT
Date
2006
Mar. 1
31
Accounts Receivable
Item
Post.
Ref.
Account No. 12
Balance
Dr.
Balance
Cr.
Dr.
3 400 00
R359 600 00
Revenue Journal, page 35
13 000 00
Cr.
Posting
Posting the
the Revenue
Revenue Journal
Journal Total
Total
Page 35
Revenue Journal
Date
2006
1 Mar.
2
2
6
3
18
4
5
6
27
31
Invoice
No.
Account Debited
Post
Ref.
Accts. Rec. Debit

Fees Earned Credit
615
MyMusicClub.com
2 2 0 0 00
616
RapZone.com
1 7 5 0 00
617
Web Cantina
2 6 5 0 00
618
MyMusicClub.com
3 0 0 0 00
9 6 0 0 00
(12)(41)
By placing the account number here, we

indicate that $9,600 has been debited to
Accounts Receivable in the general ledger.
5
6
Posting
Posting the
the Revenue
Revenue Journal
Journal Total
Total
GENERAL LEDGER
ACCOUNT
Date
2006
Mar. 31
Fees Earned
Item
Post.
Ref.
R35
Account No. 41
Balance
Dr.
Cr.
9 600 00
Dr.
Cr.
9 600 00
Posting
Posting the
the Revenue
Revenue Journal
Journal Total
Total
Page 35
Revenue Journal
Date
2006
1 Mar.
2
2
6
3
18
4
5
6
27
31
Invoice
No.
Account Debited
Post
Ref.
Accts. Rec. Debit

Fees Earned Credit
615
MyMusicClub.com
2 2 0 0 00
616
RapZone.com
1 7 5 0 00
617
Web Cantina
2 6 5 0 00
618
MyMusicClub.com
3 0 0 0 00
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.
5
6
The
The Cash
Cash Receipts
Receipts Journal
Journal
The
The Cash
Cash Receipts
Receipts Journal
Journal
All
All transactions
transactions that
that involve
involve
the
the receipt
receipt of
of cash
cash are
are
recorded
recorded in
in the
the cash
cash receipts
receipts
journal.
journal.
The
The Cash
Cash Receipts
Receipts Journal
Journal
CASH RECEIPTS JOURNAL
Date
2006
Account Credited
Mar. 1 Rent Revenue
Post
Ref.
Page 14
Other
Accounts
Cr.
Accounts
Receivable
Cr.
400
NetSolutions
NetSolutions received
received $400
$400 cash
cash
on
on March
March 11 for
for the
the months
months rent.
rent.
Cash
Dr.
400
The
The Cash
Cash Receipts
Receipts Journal
Journal
Date
Account Credited
Mar. 1
19
28
30
Rent Revenue
Web Cantina
MyMusicClub.com
RapZone.com
2006
Post
Ref.
Page 14
Other
Accounts
Cr.
Accounts
Receivable
Cr.
400
3,400
2,200
1,750
Cash
Dr.
400
3,400
2,200
1,750
During
During March,
March, NetSolutions
NetSolutions collected
collected
cash
cash from
from three
three customers.
customers.
Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
Date
Account Credited
Mar. 1
19
28
30
Rent Revenue
Web Cantina
MyMusicClub.com
RapZone.com
2006
Post
Ref.
Page 14
Other
Accounts
Cr.
Accounts
Receivable
Cr.
400
3,400
2,200
1,750
Cash
Dr.
400
3,400
2,200
1,750
Each
Each account
account under
under Accounts
Accounts
Receivable
Receivable Cr.
Cr. isis posted
posted to
to the
the accounts
accounts
receivable
receivable subsidiary
subsidiary ledger.
ledger.
Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
Date
Account Credited
Mar. 1
19
28
30
Rent Revenue
Web Cantina
MyMusicClub.com
RapZone.com
2006
Page 14
Post
Ref.
Other
Accounts
Cr.
Accounts
Receivable
Cr.
Cash
Dr.
400
400
3,400
2,200
1,750
3,400
2,200
1,750

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

Web Cantina
Date
Item
P.R.
Debit
Credit
2006
Mar. 1 Bal.
18 R35
2,650
19
CR14
Balance
3,400
6,050
3,400
2,650
The
The Cash
Cash Receipts
Receipts Journal
Journal
After
After all
all journalizing
journalizing and
and posting
posting
to
to the
the accounts
accounts receivable
receivable
subsidiary
subsidiary ledger
ledger for
for the
the month
month isis
complete,
complete, the
the columns
columns are
are totaled.
totaled.
The
The Cash
Cash Receipts
Receipts Journal
Journal
Date
Account Credited
Mar. 1
19
28
30
31
Rent Revenue
Web Cantina
MyMusicClub.com
RapZone.com
2006
Page 14
Post
Ref.
Other
Accounts
Cr.
Accounts
Receivable
Cr.
400
400
3,400
2,200
1,750
7,350
Cash
Dr.
400
3,400
2,200
1,750
7,750
The
The total
total Cash
Cash Dr.
Dr. column
column
equals
equals the
the total
total of
of the
the two
two
credit
credit columns.
columns.
Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
Date
Account Credited
Mar. 1
19
28
30
31
Rent Revenue
Web Cantina
MyMusicClub.com
RapZone.com
2006
Page 14
Post
Ref.
Other
Accounts
Cr.
Accounts
Receivable
Cr.
400
400
3,400
2,200
1,750
7,350
Cash
Dr.
400
3,400
2,200
1,750
7,750
GENERAL LEDGER
Account: Accounts Receivable
No. 12
The
circled
are
The three
three
circled
items
are Balance
Date Item
P.R. items
Debit Credit
Mar.
Balgeneral
posted
to
ledger.
posted
to1 the
the
general
ledger. 3,400
31
R35 9,600
13,000
Lets
Lets post
post Accounts
Accounts Receivable.
Receivable.
2006
Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
Date
Account Credited
Mar. 1
19
28
30
31
Rent Revenue
Web Cantina
MyMusicClub.com
RapZone.com
2006
Page 14
Post
Ref.
Other
Accounts
Cr.
Accounts
Receivable
Cr.
400
400
3,400
2,200
1,750
7,350
Cash
Dr.
400
3,400
2,200
1,750
7,750
GENERAL LEDGER
Account: Accounts Receivable
Date Item P.R.
2006
Debit Credit
Mar. 1 Bal
31
R35 9,600
31
CR14
7,350
No. 12
Balance
3,400
13,000
5,650
Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
Date
Account Credited
Mar. 1
19
28
30
31
Rent Revenue
Web Cantina
MyMusicClub.com
RapZone.com
2006
Page 14
Post
Ref.
Other
Accounts
Cr.
Accounts
Receivable
Cr.
400
400
3,400
2,200
1,750
7,350
( )
(12)
Cash
Dr.
400
3,400
2,200
1,750
7,750
Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
The
The $7,750
$7,750 total
total in
in the
the Cash
Cash
Debit
Debit column
column isis posted
posted to
to
Cash
Cash in
in aa similar
similar manner.
manner.
Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
The
The $400
$400 credit
credit to
to Rent
Rent Revenue
Revenue
could
could have
have been
been posted
posted earlier,
earlier, but
but
posting
posting itit at
at the
the same
same time
time as
as other
other
general
general ledger
ledger accounts
accounts isis proper.
proper.
Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
A
Acompletely
completely posted
posted cash
cash
receipts
receipts journal
journal isis shown
shown in
in
the
the next
next slide.
slide.
Posted
Posted Cash
Cash Receipts
Receipts Journal
Journal
Date
Account Credited
Mar. 1
19
28
30
31
Rent Revenue
Web Cantina
MyMusicClub.com
RapZone.com
2006
Page 14
Post
Ref.
42
Other
Accounts
Cr.
Accounts
Receivable
Cr.
400
400
( )
3,400
2,200
1,750
7,350
(12)
Cash
Dr.
400
3,400
2,200
1,750
7,750
(11)
Accounts
Receivable
Control
Account
GENERAL LEDGER
ACCOUNT Accounts Receivable
Date Item P.R.
Debit Credit
Mar. 1 Bal
31
R35 9,600
31
CR14
7,350
No. 12
Balance
3,400
13,000
5,650
If
If the
the accounts
accounts receivable
receivable
account
account in
in the
the general
general ledger
ledger
only
only shows
shows summary
summary totals,
totals,
where
whereare
arethe
the individual
individual
customer
customerbalances?
balances?
Accounts
Receivable
Control
Account
GENERAL LEDGER
ACCOUNT Accounts Receivable
Date Item P.R.
Debit Credit
Mar. 1 Bal
31
R35 9,600
31
CR14
7,350
No. 12
Balance
3,400
13,000
5,650
MyMusicClub.com
Date
Accounts
Receivable
Subsidiary
Ledger
Item
3/2
3/27
3/28
P.R.
Debit
Credit Balance
R35 2,200
R35 3,000
CR14
2,200
5,200
3,000
2,200
RapZone.com
Date
Item
3/6
3/30
P.R.
Debit
Credit Balance
R35 1,750
CR14
1,750
--
1,750
Web Cantina
Date
Item
P.R.
Debit
Credit Balance
3/1 Bal.
3/18
R35 2,650
3/19
CR14
3,400
6,050
2,650
3,400
The Purchases Journal
The
The purchases
purchases journal
journal isis
designed
designed for
for recording
recording all
all
purchases
purchases on
on account.
account.
Journalizing
Journalizing in
in the
the Purchases
Purchases Journal
Journal
Date
2006
Page 11
PURCHASES JOURNAL
Accts.
Other
Post Payable Supplies Accounts Post
Account Credited Ref.
Cr.
Dr.
Dr.
Ref. Amount
Mar. 3 Howard Supplies
600
600
On March 3, 2003, NetSolutions

purchased supplies from Howard
Supplies, $600.
Posting
Posting the
the Purchases
Purchases Journal
Journal
Date
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount
2006
600
600
Accounts Payable Subsidiary Ledger

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

will be posted as totals.
Journalizing
Journalizing in
in the
the Purchases
Purchases Journal
Journal
Date
2006
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount

7 Donnelly Supplies
600
420
600
420
On March 7, NetSolutions
purchased supplies from Donnelly
Supplies, $420.
Journalizing
Journalizing in
in the
the Purchases
Purchases Journal
Journal
Date
2006
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount

7 Donnelly Supplies
600
420
600
420
Journalizing
Journalizing in
in the
the Purchases
Purchases Journal
Journal
Date
2006
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount

7 Donnelly Supplies
12 Jewett Bus. Sys.
600
420
2,800
600
420
Off. Equip.
Because
On March
there
12, isnt
NetSolutions
a special purchased
column for
office
Office
equipment
Equipment,
from
thisJewett
purchase
Business
was
recorded under
Systems,
Other
$2,800.
Accounts Dr.
2,800
Journalizing
Journalizing in
in the
the Purchases
Purchases Journal
Journal
Date
2006
Mar. 3
7
12
19
27
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies
600
420
2,800
1,450
960
600
420
Off. Equip.
2,800
1,450
960
Now, lets look at the rest of Marchs entries

(assume that all postings to the accounts payable
subsidiary ledger have been made).
Totaling
Totaling the
the Purchases
Purchases Journal
Journal
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount
Date
2006
Mar. 3
7
12
19
27
31
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies
600
420
2,800
1,450
960
6,230
600
420
Off. Equip.
1,450
960
3,430
2,800
2,800
At
At the
the end
end of
of March,
March, all
all columns
columns are
are totaled
totaled
$6,230
=
$3,430
+
$
2,800
$6,230
=
$3,430
+
$
2,800
and
equality
of
debits
and
credits
and equality of debits and credits isis verified.
verified.
Posting
Posting the
the Purchases
Purchases Journal
Journal
Date
2006
Mar. 3
7
12
19
27
31
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies
600
420
2,800
1,450
960
6,230
600
420
Off. Equip.
1,450
960
3,430
The next step is to post to the

general journal.
2,800
2,800
Date
2006
Mar. 3
7
12
19
27
31
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies
600
420
2,800
1,450
960
6,230
600
420
Off. Equip.
1,450
960
3,430
2,800
GENERAL LEDGER
ACCOUNT Accounts Payable
Date Item P.R.
Mar. 1 Bal
31
P11
Debit Credit
6,230
2,800
No. 21
Balance
1,230
7,460
Date
2003
Mar. 3
7
12
19
27
31
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies
600
420
2,800
1,450
960
6,230
(21)
600
420
Off. Equip.
1,450
960
3,430
2,800
GENERAL LEDGER
Date Item P.R.
Mar. 1 Bal
31
P11
Debit Credit
6,230
2,800
No. 21
Balance
1,230
7,460
Date
2003
Mar. 3
7
12
19
27
31
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies
600
420
2,800
1,450
960
6,230
(21)
600
420
Off. Equip. 18
1,450
960
3,430
(14)
Supplies is posted as a total of $3,430

to general ledger account 21. Office
Equipment is posted individually.
2,800
2,800
Date
2006
Mar. 3
7
12
19
27
31
Page 11
PURCHASES JOURNAL
Accts.
Other
Cr.
Dr.
Dr.
Ref. Amount
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies
600
420
2,800
1,450
960
6,230
(21)
600
420
Off. Equip. 18
1,450
960
3,430
(14)
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.
2,800
2,800
( )
The Cash Payments

Journal
All
All payments
payments are
are recorded
recorded
in
in the
the cash
cash payments
payments
journal.
journal. NetSolutions
NetSolutions
makes
makes all
all payments
payments by
by
check.
check.
Lets
Lets make
make all
all of
of the
the cash
cash
payment
payment journal
journal entries
entries
for
for March.
March.
CASH PAYMENTS JOURNAL
Date
2006
Mar. 2
Ck.
No.
150
Account Debited
Rent Expense
Other Accounts
Post Accounts Payable
Ref.
Dr.
Dr.
1,600
On March 2, NetSolutions paid

the rent for March by issuing
Check No. 150 for $1,600.
PAGE 7
Cash
Cr
1,600
Date
2006
Mar. 2
15
Ck.
No.
150
151
Account Debited
Rent Expense
Grayco Supplies
PAGE 7
Other Accounts
Ref.
Dr.
Dr.
Cash
Cr
1,600
1,230
On March 15, issued Check No. 151 to

Grayco Supplies on account, $1,230.
1,600
1,230
Date
2006
Mar. 2
15
Ck.
No.
150
151
Account Debited
Rent Expense
Grayco Supplies
PAGE 7
Other Accounts
Ref.
Dr.
Dr.
1,600
1,230
Cash
Cr
1,600
1,230
Accounts Payable Subsidiary Ledger

Supplies
Lets postGrayco
to the
accounts payable
Date
Item P.R.
Dr.
Cr.
Balance
subsidiary Mar.
ledger
at this time to keep1,230
3 Bal.
15
CP7 1,230
the creditors
account
current. ---
Date
2006
Mar. 2
15
21
Ck.
No.
150
151
152
Account Debited
PAGE 7
Other Accounts
Ref.
Dr.
Dr.
Rent Expense
Grayco Supplies
Jewett Business Sys.
1,600
1,230
2,800
On March 21, issued Check No.

152 as payment on account to
Jewett Business Systems, $2,800.
Cash
Cr
1,600
1,230
2,800
Date
2006
Mar. 2
15
21
22
Ck.
No.
150
151
152
153
Account Debited
PAGE 7
Other Accounts
Ref.
Dr.
Dr.
Rent Expense
Grayco Supplies

Donnelly Supplies.
1,600
1,230
2,800
420
On March 22, issued Check No.

153 as payment on account to
Donnelly Supplies, $420.
Cash
Cr
1,600
1,230
2,800
420
Date
2006
Mar. 2
15
21
22
30
Ck.
No.
150
151
152
153
154
Account Debited
PAGE 7
Other Accounts
Ref.
Dr.
Dr.
Rent Expense
Grayco Supplies

Donnelly Supplies.
Utilities Expense
Cash
Cr
1,600
1,230
2,800
420
1,050
On March 30, issued Check No. 154 as

payment for utility bill, $1,050.
1,600
1,230
2,800
420
1,050
Date
2006
Mar. 2
15
21
22
30
31
Ck.
No.
150
151
152
153
154
155
Account Debited
PAGE 7
Other Accounts
Ref.
Dr.
Dr.
Rent Expense
Grayco Supplies

Donnelly Supplies.
Utilities Expense
Howard Supplies
1,600
1,230
2,800
420
1,050
600
On March 31, issued Check

No. 155 on account to Howard
Supplies, $600
Cash
Cr
1,600
1,230
2,800
420
1,050
600
Date
2006
Mar. 2
15
21
22
30
31
31
Ck.
No.
150
151
152
153
154
155
Account Debited
Rent Expense
Grayco Supplies
Donnelly Supplies.
Utilities Expense
Howard Supplies
PAGE 7
Other Accounts
Ref.
Dr.
Dr.
1,600
1,230
2,800
420
1,050
2,650
600
5,050
The journal is ruled, summed, and

verified for equality of debits and
the Cash Cr. column.
Cash
Cr
1,600
1,230
2,800
420
1,050
600
7,700
Date
2006
Mar. 2
15
21
22
30
31
31
Ck.
No.
150
151
152
153
154
155
Account Debited
Rent Expense
Grayco Supplies
Donnelly Supplies.
Utilities Expense
Howard Supplies
PAGE 7
Other Accounts
Ref.
Dr.
Dr.
52
54
1,600
600
5,050
1,600
1,230
2,800
420
1,050
600
7,700
(21)
(11)
1,230
2,800
420
1,050
2,650
( )
Cash
Cr
Individual items in the Other Accounts Dr.

column are posted. Then the totals for Accounts
Payable Dr. and Cash Cr. are posted.
Accounts
Accounts Payable
Control
Control
Accounts
Accounts Payable
Payable
GENERAL LEDGER
Accounts Payable
(Controlling)

Date Item P.R.
Mar. 1 Bal
31
31
No. 12
Debit Credit
P11
CP7 5,050
6,230
Balance
1,230
7,460
2,410
Donnelly Supplies
Date
Accounts
Jewett Business
Payable
SystemsSubsidiary
also has
a zero balance,
so
Ledger
that account was
omitted for space
reasons.
Item
Mar 2
19
22
P.R.
P11
P11
CP7
Debit
Credit
420
1,450
420
Balance
420
1,870
1,450
Grayco Supplies
Date
Item
P.R.
Mar 1 Bal.
15 CP7
-Howard Supplies
Date
Mar 3
27
31
Item
P.R.
P11
P11
CP7
Debit
Credit
1,230
0
1,230
Debit
Credit
600
960
600
Balance
Balance
600
1,560
960
Advantages
Advantages of
of aa Computerized
Computerized
Accounting
Accounting System
System Over
Over aa
Manual
Manual Accounting
Accounting System
System
1. Computerized systems simplify the recordkeeping process.
2. Computerized systems are generally more
accurate.
3. Computerized systems provide management
current account balance information to
support decision making.
The
The Revenue
Revenue and
and Collection
Collection
Cycle
Cycle in
in QuickBooks
QuickBooks
From Exhibit 10, page 203 of textbook
Mail invoice to
customer
The
The Revenue
Revenue and
and Collection
Collection
Cycle
Cycle in
in QuickBooks
QuickBooks Continued
Continued
The
The Revenue
Revenue and
and Collection
Collection
Cycle
Cycle in
in QuickBooks
QuickBooks Continued
Continued
Advanced
Advanced Areas
Areas Where
Where the
the
Internet
Internet is
is Being
Being Used
Used for
for
Business
Business Purposes
Purposes
Supply chain management (SCM)
Customer relationship management (CRM)
Product life-cycle management (PLM)
Chapter 5
The
The End
End

Accounting System and Internal Control, Warren, 21st Edition

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Accounting System and Internal Control, Warren, 21st Edition

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Chapter 5

Accounting Systems and

PowerPoint Presentation by Douglas Cloud

Copyright 2004 South-Western, a division

1. Define an accounting system and

Elements of Internal Control

Elements of Internal Control

friendship with a supplier, rather than on

Cash receipts journal

Cash payments journal

The Revenue Journal

Accts. Rec. Debit

Accts. Rec. Debit

Accts. Rec. Debit

Accts. Rec. Debit

Accts. Rec. Debit

Accounts Receivable Subsidiary Ledger

Accts. Rec. Debit

Accounts Receivable Subsidiary Ledger

This procedure is repeated for each posting

Accts. Rec. Debit

Accts. Rec. Debit

Accts. Rec. Debit

Revenue Journal, page 35

Accts. Rec. Debit

By placing the account number here, we

Accts. Rec. Debit

Placing 41 here indicates that $9,600 has

Mar. 1 Rent Revenue

Accounts Receivable Subsidiary Ledger

Accounts Receivable Subsidiary Ledger

The Purchases Journal

Mar. 3 Howard Supplies

On March 3, 2003, NetSolutions

Mar. 3 Howard Supplies

Accounts Payable Subsidiary Ledger

Mar. 3 Howard Supplies

Accounts Payable and Supplies

Mar. 3 Howard Supplies

Mar. 3 Howard Supplies

Mar. 3 Howard Supplies

Now, lets look at the rest of Marchs entries

The next step is to post to the

Supplies is posted as a total of $3,430

NetSolutions had only one entry in the

The Cash Payments

CASH PAYMENTS JOURNAL

On March 2, NetSolutions paid

CASH PAYMENTS JOURNAL

On March 15, issued Check No. 151 to

CASH PAYMENTS JOURNAL

Accounts Payable Subsidiary Ledger

CASH PAYMENTS JOURNAL

Jewett Business Sys.

On March 21, issued Check No.

CASH PAYMENTS JOURNAL

Jewett Business Sys.

On March 22, issued Check No.

CASH PAYMENTS JOURNAL

Jewett Business Sys.

On March 30, issued Check No. 154 as

CASH PAYMENTS JOURNAL

Jewett Business Sys.