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© The McGraw-Hill Companies, Inc., 2007 Accounting for Special Journals Appendix E
© 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
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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 PrincipleControl Principle Internal controls for
management to monitor the business.
Relevance PrincipleRelevance Principle Provide relevant,
timely and pertinent information..
Compatibility PrincipleCompatibility Principle System must be
compatible with aims of the company.
Flexibility PrincipleFlexibility Principle System needs to
meet the changing needs of company.
Cost-Benefit PrincipleCost-Benefit Principle Benefits of the system
must outweigh the costs incurred.
C1
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Components of Accounting Systems
Increasingly, source documents are electronic files
creating a “paperless” system.
Source DocumentsInvoice from Invoice from suppliersupplier
Billings to Billings to customerscustomers
Employee Employee earnings earnings recordsrecords
C2
© The McGraw-Hill Companies, Inc., 2007
Components of Accounting Systems
KeyboardsKeyboards
ScannersScanners
ModemsModems
Bar-Code ReaderBar-Code Reader
Input
Source Documents
C2
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Processor
Components of Accounting Systems
HardwareHardware
SoftwareSoftware
Professional Professional JudgmentJudgment
Input
Source Documents
C2
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Storage
Components of Accounting Systems
CDCDHard DriveHard Drive
TapeTapePaper Paper
DocumentDocumentProcessor
Input
Source Documents
C2
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PrinterPrinterMonitorMonitor
TelephoneTelephoneCDCD
TapeTapeDiskDisk
Electronic Electronic FileFile
Output
Components of Accounting Systems
StorageProcessor
Input
Source Documents
C2
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Now, let’s look at how we use special journals in accounting.
C3
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Special Journals in Accounting
GeneralGeneralJournalJournal
For transactionsFor transactionsnot in specialnot in special
journalsjournals
CashCashDisbursementsDisbursements
JournalJournal
For recordingFor recordingcash paymentscash payments
PurchasesPurchasesJournalJournal
For recordingFor recordingcredit purchasescredit purchases
Cash ReceiptsCash ReceiptsJournalJournal
For recordingFor recordingcash receiptscash receipts
Sales JournalSales Journal
For recordingFor recordingcredit salescredit sales
C3
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Subsidiary Ledgers
Subsidiary ledgers are a listing of individual Subsidiary ledgers are a listing of individual accounts with common characteristics.accounts with common characteristics.
CharacteristicControlling
Account Subsidary LedgerAmounts due
from customersAccounts
ReceivableAccounts
Receivable LedgerAmounts owed to
creditorsAccounts Payable
Accounts Payable Ledger
C4
© The McGraw-Hill Companies, Inc., 2007
Accounts Receivable LedgerAccounts Receivable Subsidiary
Adams CompanyDate PR Debit Credit Balance
Jan. 1 S5 500 500Accounts Receivable SubsidiaryBaine Company
Date PR Debit Credit BalanceJan. 16 S5 1,000 1,000Accounts Receivable SubsidiaryCook Company
Date PR Debit Credit BalanceJan. 25 S5 415 415
After all items are posted, the balance in the
accounts receivable controlling account is equal toequal to the sum of the
balances in the accounts receivable subsidiary
ledger.
C4
© The McGraw-Hill Companies, Inc., 2007
SALES JOURNAL Page 1
Account DebitedInvoice Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold. Dr
Inventory Cr.Jim Carson 824 600 400
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 JournalP1
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Sales JournalOn 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
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ACCOUNTS RECEIVABLE LEDGERJim Carson
Date PR Debit Credit BalanceJan. 1 600 600
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Dr. Accts. Rec. Cr. Sales
Cost of Goods Sold Dr.
Inventory Cr.1 Jim Carson 824 600 400
Daily, each transaction is posted
to the appropriate accounts receivable subsidiary account.
Sales JournalP1
© The McGraw-Hill Companies, Inc., 2007
ACCOUNTS RECEIVABLE LEDGERJim Carson
Date PR Debit Credit BalanceJan. 1 S1 600 600
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Accounts Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory Cr.Jan. 1 Jim Carson 824 600 400
A in the posting reference column
indicates the transaction was
posted to the subsidiary account.
Sales JournalP1
© The McGraw-Hill Companies, Inc., 2007
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Accts. Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory CrJan. 1 Jim Carson 824 600 400
7 Tom Talley 825 900 60022 Sue Wright 826 200 13431 Total 1,700 1,134
Sales Journal
Post the total to the General Ledger
accounts.
P1
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Here is the Sales Journal after recording Here is the Sales Journal after recording some additional sales.some additional sales.
Sales JournalP1
Date Account DebitedInvoice Number PR
Accts. Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory CrJan. 1 Jim Carson 824 600 400
7 Tom Talley 825 900 60022 Sue Wright 826 200 13431 Total 1,700 1,134
(106/413) (502/119)
© The McGraw-Hill Companies, Inc., 2007
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Accts. Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory CrJan. 1 Jim Carson 824 600 400
7 Tom Talley 825 900 60022 Sue Wright 826 200 13431 Total 1,700 1,134
Sales JournalP1
© The McGraw-Hill Companies, Inc., 2007
SALES JOURNAL Page 1
Date Account DebitedInvoice Number PR
Accts. Receivable Dr.
Sales Cr.
Cost of Goods Sold Dr.
Inventory CrJan. 1 Jim Carson 824 600 400
7 Tom Talley 825 900 60022 Sue Wright 826 200 13431 Total 1,700 1,134
(106/413) (502/119)
Sales JournalP1
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Proving the LedgersBarry's Bikes
Schedule of Accounts ReceivableJanuary 31
Jim Carson 600$ Tom Talley 900 Sue Wright 200 Total accounts receivable 1,700$
The Accounts The Accounts Receivable Receivable controlling controlling
account and account and the subsidiary the subsidiary ledger are in ledger are in
balance.balance.
P2
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Sales Taxes
On January 4, Jeri’s Jewelry sold a necklace for On January 4, Jeri’s Jewelry sold a necklace for $450 plus 8% sales tax on credit to Joan Oakes.$450 plus 8% sales tax on credit to Joan Oakes.
$450 $450 .08 = $36.08 = $36
The cost of the merchandise was 302.The cost of the merchandise was 302.
SALES JOURNAL Page 1
Date Account DebitedInv. No. PR
Accts. Rec. Debit
Sales Taxes Payable Credit
Sales Credit
Cost of Goods Sold Dr.
Inventory CrJan. 4 Joan Oakes 635 486 36 450 302
P2
© The McGraw-Hill Companies, Inc., 2007
Sales Tax
ACCOUNTS RECEIVABLE LEDGERJoan Oakes
Date PR Debit Credit BalanceJan. 4 S1 486 486
Each Each transaction is transaction is
posted daily to posted daily to the appropriate the appropriate
Accounts Accounts Receivable Receivable
Ledger account.Ledger account.
Column totals are Column totals are posted monthly.posted monthly.
P2
SALES JOURNAL Page 1
Date Account DebitedInv. No. PR
Accts. Rec. Debit
Sales Taxes Payable Credit
Sales Credit
Cost of Goods Sold Dr.
Inventory CrJan. 4 Joan Oakes 635 486 36 450 302
© The McGraw-Hill Companies, Inc., 2007
Sales Returns and AllowancesIf a company has few sales returns, they may If a company has few sales returns, they may
be recorded in the General Journal.be recorded in the General Journal.
A company with A company with manymany sales returns may use sales returns may use a Sales Returns and Allowances Journal.a Sales Returns and Allowances Journal.
P2
© The McGraw-Hill Companies, Inc., 2007
CASH RECEIPTS JOURNAL Page 1
Accounts Credited Explanation PR
Cash Dr.
Sales Disc. Dr.
Accts. Rec. Cr. Sales Cr.
Other Accts. Cr.
Cost of Goods Sold
Dr. Inventory Cr
Cash Receipts Journal
Categories of Cash ReceiptsCategories of Cash Receipts• Cash from cash salesCash from cash sales• Cash from credit customersCash from credit customers• Cash from other sourcesCash from other sources
P2
© The McGraw-Hill Companies, Inc., 2007
CASH RECEIPTS JOURNAL Page 1
DateAccounts Credited Explanation PR
Cash Dr.
Sales Disc. Dr.
Accts. Rec. Cr. Sales Cr.
Other Accts. Cr.
May 7 Sales Cash Sales 300 30016 Jane Waters Invoice 656 441 9 45031 Interest Revenue Bank Acct. 409 15 1531 Total 756 9 450 300 15
(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 JournalP2
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Purchases Journal
The Purchases Journal is The Purchases Journal is used to record all used to record all
purchases on credit.purchases on credit.
P2
© The McGraw-Hill Companies, Inc., 2007
Purchases Journal Page 3
Date AccountInvoice
Date Terms PR
Accts. Pay. Cr.
Inventory Dr.
Offc. Sup. Dr.
Other Accts. Dr.
May 7 Langley Products 5/5 2/10,n/30 300 30018 Office World 5/18 n/30 125/ 150 125 2528 Fife Company 5/27 2/10,n/30 200 175 2531 Total 650 475 150 25
(201) (119) (124) ( )
Amount is not posted individually to an account.Amount is posted individually to subsidiary ledger.
Acct. No. Amount is posted to specified account.
Purchases JournalP2
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Cash Disbursements Journal
The Cash The Cash Disbursements Disbursements
Journal is used to Journal is used to record all record all
payments of cash.payments of cash.
P2
© The McGraw-Hill Companies, Inc., 2007
Amount is not posted individually to an account.Amount is posted individually to subsidiary ledger.
Acct. No. Amount is posted to specified account.
Cash Disbursements JournalCash Disbursements Journal Page 1
DateCh. No. Payee
Account Debited PR
Cash Cr.
Inventory. Cr.
Other Accts.
Dr.Accts.
Pay. Dr.Jun. 2 101 Fife Company Fife Company 196 4 200
15 102 Jane Hooks Salary Expense 622 300 30028 103 Langley Products Purchases 505 100 10030 Total 596 4 400 200
(101) (119) ( )(201)
( )
P2
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General Journal TransactionsAdjusting Adjusting EntriesEntries
Closing Closing EntriesEntries
Reversing Reversing EntriesEntries
Other Other transactions not transactions not
recorded in recorded in Special Journals Special Journals
P2
© The McGraw-Hill Companies, Inc., 2007
Technology-Based Accounting SystemsHardwareHardware
Processing unitsProcessing unitsHard DrivesHard Drives
RAMRAMModemsModems
CD-ROM DrivesCD-ROM DrivesSpeakersSpeakersMonitorsMonitorsServersServersPrintersPrinters
SoftwareSoftwarePrograms with a Programs with a
series of series of commands commands
directing operations directing operations of computer of computer
hardware such as hardware such as data input, storage, data input, storage,
processing, or processing, or outputoutput
C5
© The McGraw-Hill Companies, Inc., 2007
Computer Technology in Accounting Integrated Integrated
accounting accounting programs programs
automatically automatically update related update related
accounts, accounts, journals, and journals, and ledgers for a ledgers for a
single single transaction. transaction.
C5
© The McGraw-Hill Companies, Inc., 2007
Data Processing in Accounting On-lineOn-line processing processing
enters and processes enters and processes data immediately.data immediately.
Batch Batch processing processing accumulates information accumulates information for a period of time and for a period of time and then processes all the then processes all the data at one time (daily, data at one time (daily, weekly, or monthly).weekly, or monthly).
C5
© The McGraw-Hill Companies, Inc., 2007
Computer Networks in Accounting
Computer networksComputer networks are links among computers are links among computers giving different users access to common giving different users access to common
databases and programs.databases and programs.
Server
Work Stations
C5
© The McGraw-Hill Companies, Inc., 2007
Enterprise Resource Planning SoftwareEnterprise resource planning software, such as Enterprise resource planning software, such as
SAP or Oracle, links ordering, inventory, SAP or Oracle, links ordering, inventory, production, purchasing, planning, tracking and production, purchasing, planning, tracking and
human resources for many of the world’s largest human resources for many of the world’s largest companies.companies.
C5
© The McGraw-Hill Companies, Inc., 2007
A good AIS collects financial data for a A good AIS collects financial data for a company’s various segments. company’s various segments.
Segment Return on Assets
A A segmentsegment is a part is a part of a company that is of a company that is separately identified separately identified
by its products, by its products, services, or services, or
geographic market. geographic market.
A1
© The McGraw-Hill Companies, Inc., 2007
This ratio reflects the This ratio reflects the profitability of the profitability of the
segment. 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
