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Chapter 71

Chapter 72

Chapter 7

Accounting Information Systems

Accounting Principles, Ninth Edition

Chapter 73

1. Identify the basic concepts of an accounting information system.

2. Describe the nature and purpose of a subsidiary ledger.

3. Explain how companies use special journals in journalizing.

4. Indicate how companies post a multi-column journal.

Study Objectives Study Objectives Study Objectives

Chapter 74

Basic Concepts of Accounting Information Systems

Basic Concepts Basic Concepts of Accounting of Accounting Information Information Systems Systems

Subsidiary Ledgers Subsidiary Subsidiary Ledgers Ledgers

Special Journals Special Special Journals Journals

Computerized Computerized accounting accounting systems systems Manual Manual accounting accounting systems systems

Example Example Advantages Advantages

Sales journal Sales journal Cash receipts Cash receipts journal journal Purchases Purchases journal journal Cash payments Cash payments journal journal Effects of special Effects of special journals on journals on general journal general journal

Accounting Information Systems Accounting Information Systems Accounting Information Systems

Chapter 75

The accounting information system (AIS) collects and processes transaction data and communicates financial information to decision makers.

Includes: All steps in the accounting cycle.

Documents that provide evidence of transactions.

Manual or computerized accounting system.

Basic Concepts of AIS Basic Concepts of AIS Basic Concepts of AIS

SO 1 Identify the basic concepts of an accounting information s SO 1 Identify the basic concepts of an accounting information system. ystem.

Chapter 76



Cost Effectiveness - Benefits must outweigh the costs.

Flexibility - The system should be sufficiently flexible to meet

the resulting changes in the demands made upon it.

Useful Output

Illustration 7-1 Principles of an efficient and effective AIS.

Chapter 77

Software programs (functions include sales, purchases, receivables, payables, cash receipts and disbursements, and payroll).

Generate financial statements.

Advantages: Ø Typically enter data only once. Ø Many human errors are eliminated. Ø More timely information.

Computerized Accounting Systems



Chapter 78

Choosing a software package

Entry-Level Software

Ø Common features and benefits:

v Easy data access and report preparation

v Audit trail

Enterprise Resource Planning Systems

Computerized Accounting Systems



Chapter 79

Perform each step in the accounting cycle by hand.

Satisfactory in a company with a low volume of transactions.

Must understand manual accounting systems to understand computerized accounting systems.

Manual Accounting Systems



Chapter 710

Chapter 711

Used to keep track of individual balances.

Two common subsidiary ledgers are:

1. Accounts receivable (customers‛)

2. Accounts payable (creditors‛)

Subsidiary Ledgers Subsidiary Ledgers Subsidiary Ledgers

SO 2 Describe the nature and purpose of a subsidiary ledger. SO 2 Describe the nature and purpose of a subsidiary ledger.

Each general ledger control account balance must equal the composite balance of the individual accounts in the related subsidiary ledger.

Chapter 712

Illustration 7-3



Relationship of general ledger and subsidiary ledgers

Chapter 713

1. Show in a single account transactions affecting one customer or one creditor.

2. Free the general ledger of excessive details.

3. Help locate errors in individual accounts.

4. Make possible a division of labor.



Advantages of Subsidiary Ledgers

Chapter 714

Chapter 715

Special Journals Special Journals Special Journals

SO 3 Explain how companies use special journals in journalizing SO 3 Explain how companies use special journals in journalizing. .

Used to record similar types of transactions.

If a transaction cannot be recorded in a special journal, the company records it in the general journal.

Illustration 7-5

Chapter 716

Each of the following is a subsidiary ledger except the:

a. accounts receivable ledger. b. accounts payable ledger. c. customer‛s ledger. d. general ledger.

Review Question Review Question


Chapter 717



Sales Journal Illustration 7-6

Under a perpetual inventory system, one entry at selling price in Sales Journal results in a debit to Accounts Receivable and a credit to Sales. Another entry at cost results in a debit to Cost of Goods Sold and a credit to Merchandise Inventory.

Chapter 718



Illustration 7-7

Companies make daily postings from the sales journal to the individual accounts receivable

in the subsidiary ledger.

POSTING THE SALES JOURNAL

Chapter 719



Illustration 7-7

Posting to the general ledger is done monthly.

POSTING THE SALES JOURNAL

Chapter 720

One-line entry for each sales transaction saves time.

Only totals, rather than individual entries, are posted to the general ledger.

A division of labor results.

Advantages of Sales Journal



Chapter 721



In the cash receipts journal, companies record all receipts of cash. The posting of the cash receipts journal is similar to the posting of the sale journal. See complete Illustration 7-9 in the text.

Illustration 7-9 Cash Receipts Journal

Chapter 722

Cash sales of merchandise are recorded in the: a. cash payments journal. b. cash receipts journal. c. general journal. d. sales journal.




Chapter 723

Which of the following is not one of the credit columns in the cash receipts journal:

a. Other accounts. b. Accounts payable. c. Accounts receivable. d. Sales.




Chapter 724


SO 4 Indicate how companies post a multi SO 4 Indicate how companies post a multi- -column journal. column journal.

Illustration 7-13

Daily postings are made from the purchases journal to the accounts

payable subsidiary ledger.

Purchases Journal

Chapter 725



Illustration 7-13

Purchases Journal

At the end of the accounting period, the company posts totals to

the general ledger.

Chapter 726

All of the following are advantages of using subsidiary ledgers except they:

a. show transactions affecting one customer or one creditor in a single account.

b. free the general ledger of excessive details. c. eliminate errors in individual accounts. d. make possible a division of labor.



Chapter 727


In a cash payments (cash disbursements) journal, companies record all disbursements of cash. The procedures for posting the cash payments journal are similar to those for other journals.

Illustration 7-16 Cash Payments Journal


Chapter 728

Credit purchases of equipment or supplies other than merchandise are recorded in the:

a. cash payments journal. b. cash receipts journal. c. general journal. d. purchases journal.




Chapter 729

Cash payments of merchandise are recorded in the:

a. cash payments journal. b. cash receipts journal. c. general journal. d. purchases journal.




Chapter 730

Special journals substantially reduce the number of entries that companies make in the general journal.

Only transactions that cannot be entered in a special journal are recorded in the general journal.

Also, correcting, adjusting, and closing entries are made in the general journal.

Effects of Special Journals on the General Journal



Chapter 731

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