c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
Learning Objectives
1.
2.
Define and describe an accounting system.
3.
Describe and illustrate the use of a
computerized accounting system.
4.
5.
Describe the basic features of e-commerce.
Journalize and post transactions in a manual
accounting system that uses subsidiary
ledgers and special journals.
Use segment analysis in evaluating the
operating performance of a company.
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
Basic Accounting Systems
o An accounting system is the methods and
procedures for collecting, classifying,
summarizing, and reporting a business’s
financial and operating information.
BASIC ACCOUNTING SYSTEMS
As a business grows
and changes,
accounting systems
also change in the
following three-step
process.

Analyze user
information needs.

Design the system to
meet the user needs.

Implement the system.
BASIC ACCOUNTING
SYSTEMS
Basic Accounting Systems
o Internal controls are the policies and
procedures that protect assets from misuse,
ensure that business information is accurate,
and ensure that laws and regulations are being
followed.
Processing Methods
o Processing methods are the means by which
the accounting system collects, summarizes,
and reports accounting information. These
methods may be either manual or
computerized.
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
Manual Accounting Systems
o Understanding a manual accounting system is
useful in identifying relationships between
accounting data and reports.
Subsidiary Ledgers
o A large number of individual accounts with a
common characteristic can be grouped
together in a separate ledger called a
subsidiary ledger.
Subsidiary Ledgers
o The primary ledger, which contains all of the
balance sheet and income statement accounts,
is called a general ledger.
Subsidiary Ledgers
o Each subsidiary ledger is represented in the
general ledger by a summarizing account,
called a controlling account.
Subsidiary Ledgers
o The individual customer accounts are
arranged in alphabetical order in a subsidiary
ledger called the accounts receivable
subsidiary ledger, or customers ledger.
Subsidiary Ledgers
o The individual creditor accounts are arranged
in alphabetical order in a subsidiary ledger
called the accounts payable subsidiary ledger,
or creditors ledger.
SUBSIDIARY
LEDGERS
Special Journal
o One method of processing transactions more
efficiently in a manual system is to use special
journals. Special journals are designed to be
used for recording a single kind of transaction
that occurs frequently.
SPECIAL JOURNALS
SELLING
BUYING
Special Journals
o 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.
Special Journals
o The revenue journal is used for recording fees
earned on account.
Special Journals
o Cash fees earned would be recorded in the
cash receipts journal.
Special Journals
o Purchases made on account (on credit) are
recorded in the purchases journal.
Special Journals
o All cash payments are recorded in the cash
payments journal.
Special Journals
o NetSolutions had the following selected
general ledger balances as of March 1, 2014:
Account
Number
Account
Balance
11
12
14
18
21
Cash
Accounts Receivable
Supplies
Office Equipment
Accounts Payable
$6,200
3,400
2,500
2,500
1,230
Revenue Journal
o If NetSolutions recorded its revenue
transactions in the general journal, the
following entries would have to be made:
Revenue Journal
o Revenues are normally recorded to the
revenue journal when the company sends a
bill, referred to as an invoice, to the customer.
o Each invoice is normally numbered in
sequence for future reference.
REVENUE JOURNAL
If NetSolutions journalized these same fees earned on
account entries in the revenue journal, the process is
simplified, as you can see in Exhibit 2.
Revenue Journal
o Let’s take a step-by-step look at the process
used to post the first entry. This entry was
made on March 2, 2014, when NetSolutions
issued Invoice No. 615 to Accessories By Claire
for fees earned of $2,200.
EXHIBIT 3
(IN STEPS)
Page 35
Revenue Journal
Invoice
No.
Date
Account Debited
Post
Ref.
Accts. Rec. – Debit
Fees Earned – Credit
2014
1
Mar. 2
615
Accessories By Claire
2 2 0 0 00
1
2
6
616
RapZone
1 7 5 0 00
2
3
18
617
Web Cantina
2 6 5 0 00
3
4
27
618
Accessories by Claire
3 0 0 0 00
4
5
5
6
6
Click here to skip
“Exhibit 3 (in
Steps)”
(continued)
EXHIBIT 3
(IN STEPS)
Page 35
Revenue Journal
Invoice
No.
Date
Post
Ref.
Account Debited
Accts. Rec. – Debit
Fees Earned – Credit
2014
1
Mar. 2
615
Accessories By Claire
2 2 0 0 00
1
2
6
616
RapZone
1 7 5 0 00
2
3
18
617
Web Cantina
2 6 5 0 00
3
4
27
618
3 0 0 0 00
4
5
6
Accessories by Claire
Accounts Receivable Subsidiary Ledger
5
Accessories By Claire
Date
Item
P.R.
Debit
Credit
Balance
6
2014
Mar. 2
R35
2,200
2,200
(continued)
EXHIBIT 3
(IN STEPS)
Page 35
Revenue Journal
Invoice
No.
Date
Post
Ref.
Account Debited
Accts. Rec. – Debit
Fees Earned – Credit
2014
1
Mar. 2
615
Accessories By Claire
2 2 0 0 00
1
2
6
616
RapZone
1 7 5 0 00
2
3
18
617
Web Cantina
2 6 5 0 00
3
4
27
618
3 0 0 0 00
4
5
6
Accessories by Claire
Accounts Receivable Subsidiary Ledger
5
Accessories By Claire
Date
Item
P.R.
Debit
Credit
Balance
6
2014
Mar. 2
R35
2,200
2,200
(continued)
EXHIBIT 3
(IN STEPS)
Page 35
Revenue Journal
Invoice
No.
Date
Account Debited
Post
Ref.
Accts. Rec. – Debit
Fees Earned – Credit
2014
1
Mar. 2
615
Accessories By Claire
2 2 0 0 00
1
2
6
616
RapZone
1 7 5 0 00
2
3
18
617
Web Cantina
2 6 5 0 00
3
4
27
618
Accessories by Claire
3 0 0 0 00
4
5
5
6
6
The same procedure would be used to post the other transactions to the
individual accounts in the accounts receivable subsidiary ledger.
(continued)
EXHIBIT 3
(IN STEPS)
Page 35
Revenue Journal
Invoice
No.
Date
Account Debited
Post
Ref.
Accts. Rec. – Debit
Fees Earned – Credit
2014
1
Mar. 2
615
Accessories By Claire
2 2 0 0 00
1
2
6
616
RapZone
1 7 5 0 00
2
3
18
617
Web Cantina
2 6 5 0 00
3
4
27
618
Accessories by Claire
3 0 0 0 00
4
5
31
6
9 6 0 0 00 5
6
Next, the amount column would be totaled.
(continued)
EXHIBIT 3
(IN STEPS)
The debit total is posted from the revenue journal to Accounts
Receivable in the general ledger.
ACCOUNT
Date
Accounts Receivable
Item
Post.
Ref.
Account No. 12
Balance
Dr.
Cr.
Dr.
Cr.
2014
Mar.
1
31
Balance
3 400 00
R35
9 600 00
13 000 00
Revenue Journal, page 35
(continued)
EXHIBIT 3
(IN STEPS)
Page 35
Revenue Journal
Invoice
No.
Date
Account Debited
Post
Ref.
Accts. Rec. – Debit
Fees Earned – Credit
2014
1
Mar. 2
615
Accessories By Claire
2 2 0 0 00
1
2
6
616
RapZone
1 7 5 0 00
2
3
18
617
Web Cantina
2 6 5 0 00
3
4
27
618
Accessories by Claire
3 0 0 0 00
4
5
31
9 6 0 0 00
5
(12)
6
6
Indicates a debit posting of $9,600 to Accounts
Receivable (General Ledger Account 12)
(continued)
EXHIBIT 3
(IN STEPS)
The credit total is posted from the revenue journal to Fees
Earned in the general ledger.
ACCOUNT
Date
Fees Earned
Item
Account No. 41
Post.
Ref.
Balance
Dr.
Cr.
Dr.
Cr.
2014
Mar.
31
R35
9 600 00
9 600 00
Revenue Journal, page 35
(continued)
EXHIBIT 3
(IN STEPS)
Page 35
Revenue Journal
Invoice
No.
Date
Account Debited
Post
Ref.
Accts. Rec. – Debit
Fees Earned – Credit
2014
1
Mar. 2
615
Accessories By Claire
2 2 0 0 00
1
2
6
616
RapZone
1 7 5 0 00
2
3
18
617
Web Cantina
2 6 5 0 00
3
4
27
618
Accessories by Claire
3 0 0 0 00
4
5
31
9 6 0 0 00
5
(12) (41)
6
6
Indicates a credit posting of $9,600 to Fees
Earned (General Ledger Account 41)
Cash Receipts Journal
o 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.
EXHIBIT 4
(IN STEPS)
CASH RECEIPTS JOURNAL
Date
Post
Ref.
Account Credited
2014
Mar.
Page 14
Other
Accounts
Cr.
42
1 Rent Revenue
Accounts
Receivable
Cr.
400
Cash
Dr.
400
19 Web Cantina
3,400
3,400
28 Accessories By Claire
2,200
2,200
30 RapZone
1,750
1,750
GENERAL LEDGER
ACCOUNT Rent Revenue
Click the
button to
skip “Exhibit
4 (in Steps)”
Date
Item
P.R.
2014
Mar. 1
CR14
Debit
Acct. No. 42
Credit
400
Cr. Bal.
400
(continued)
EXHIBIT 4
(IN STEPS)
CASH RECEIPTS JOURNAL
Date
Post
Ref.
Account Credited
2014
Mar.
Page 14
Other
Accounts
Cr.
42
1 Rent Revenue
Accounts
Receivable
Cr.
Cash
Dr.
400
400
19 Web Cantina
3,400
3,400
28 Accessories By Claire
2,200
2,200
30 RapZone
1,750
1,750
Accounts Receivable Subsidiary Ledger
Web Cantina
Date
Item
P.R.
Debit
Credit
Balance
2014
Mar.
1 Bal.
18
R35
19
CR14
2,650
3,400
3,400
6,050
2,650
(continued)
Cash Receipts Journal
o After all journalizing and posting to individual
accounts for the month is complete, the
columns are totaled.
EXHIBIT 4
(IN STEPS)
CASH RECEIPTS JOURNAL
Date
Account Credited
2014
Mar.
1 Rent Revenue
Page 14
Post
Ref.
42
Other
Accounts
Cr.
Accounts
Receivable
Cr.
400
Cash
Dr.
400
19 Web Cantina
3,400
3,400
28 Accessories By Claire
2,200
2,200
30 RapZone
31
400
1,750
7,350
1,750
7,750
( )
(12 )
(11)
A check mark indicates that items in
this column are posted individually.
(continued)
Accounts Receivable Account
o The total of the accounts in the accounts
receivable subsidiary ledger should match the
balance in the general ledger’s Accounts
Receivable account.
Purchases Journal
o The purchases journal is designed for
recording all purchases on account.
EXHIBIT 5
(IN STEPS)
Date
Page 11
PURCHASES JOURNAL
Accts.
Other
Post Payable Supplies Accounts Post
Account Credited Ref.
Cr.
Dr.
Dr.
Ref. Amount
2014
Mar. 3
7
12
19
27
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies
Click on button
to skip “Exhibit
5 (in steps)”
600
420
2,800
1,450
960
600
420
Off. Equip.
2,800
1,450
960
(continued)
EXHIBIT 5
(IN STEPS)
Date
Page 11
PURCHASES JOURNAL
Accts.
Other
Post Payable Supplies Accounts Post
Account Credited Ref.
Cr.
Dr.
Dr.
Ref. Amount
2014
Mar. 3
7
12
19
27
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
Note that the March 12 purchase of office equipment for $2,800 is
recorded as a debit in the “Other Accounts Dr.” column. Also note
that the account title is written in for proper posting.
(continued)
EXHIBIT 5
(IN STEPS)
Date
Page 11
PURCHASES JOURNAL
Accts.
Other
Post Payable Supplies Accounts Post
Account Credited Ref.
Cr.
Dr.
Dr.
Ref. Amount
2014
Mar. 3
7
12
19
27
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
Accounts Payable Subsidiary Ledger
Howard Supplies
Date
Item
P.R.
Dr.
Cr.
Balance
2014
Mar. 3
P11
600
600
(continued)
EXHIBIT 5
(IN STEPS)
Date
Page 11
PURCHASES JOURNAL
Accts.
Other
Post Payable Supplies Accounts Post
Account Credited Ref.
Cr.
Dr.
Dr.
Ref. Amount
2014
Mar. 3
7
12
19
27
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
The other entries to the accounts payable subsidiary
ledger are recorded using the same procedure.
(continued)
EXHIBIT 5
(IN STEPS)
Date
Page 11
PURCHASES JOURNAL
Accts.
Other
Post Payable Supplies Accounts Post
Account Credited Ref.
Cr.
Dr.
Dr.
Ref. Amount
2014
Mar. 3
7
12
19
27
Howard Supplies
Donnelly Supplies
Jewett Bus. Sys.
Donnelly Supplies
Howard Supplies
600
420
2,800
1,450
960
600
420
Off. Equip.
1,450
960
This posting reference indicates
that Office Equipment (Account
18) is debited in the general
ledger for $2,800.
18
2,800
Purchases Journal
o At the end of March, all columns are totaled
and the equality of debits and credits is
verified. Then the total amounts in the
“Accounts Payable Cr.” and “Supplies Dr.”
columns are posted. Because Office Equipment
was posted earlier, the $2,800 total is not
posted.
EXHIBIT 5
(IN STEPS)
Date
Page 11
PURCHASES JOURNAL
Accts.
Other
Post Payable Supplies Accounts Post
Account Credited Ref.
Cr.
Dr.
Dr.
Ref. Amount
2014
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
( 21 )
600
420
Off. Equip.
1,450
960
3,430
( )
Supplies would be
debited for $3,430
GENERAL LEDGER
and 14 written in the
ACCOUNT Accounts Payable
parentheses.
Date
Item
P.R.
Debit
P11
2,800
2,800
( )
No. 21
Credit
Balance
6,230
1,230
7,460
2014
Mar. 1 Bal
31
18
Cash Payments Journal
o All transactions involving a credit to Cash are
recorded in the cash payments journal.
EXHIBIT 6
(IN STEPS)
CASH PAYMENTS JOURNAL
Ck.
No.
Date
2014
Mar. 2
150
Account Debited
Rent Expense
PAGE 7
Other Accounts
Post Accounts Payable
Ref.
Dr.
Dr.
1,600
Cash
Cr
1,600
On March 2, 2014,
issued Check 150 for
rent of $1,600.
Click button to
skip “Exhibit 6
(in steps)”
(continued)
Cash Payments Journal
o The amounts listed in the “Other Accounts Dr.”
column are posted on a regular basis. The
$1,600 for Rent Expense is posted to Account
No. 52.
EXHIBIT 6
(IN STEPS)
CASH PAYMENTS JOURNAL
Date
2014
Mar. 2
Ck.
No.
150
Account Debited
PAGE 7
Other Accounts
Post Accounts Payable
Ref.
Dr.
Dr.
Rent Expense
Cash
Cr
1,600
52
1,600
General Ledger
Account Rent Expense
Date
2014
Mar. 2
Item
P.R.
CP7
Account No. 52
Dr.
Cr.
1,600
(continued)
Balance
1,600
EXHIBIT 6
(IN STEPS)
CASH PAYMENTS JOURNAL
Date
2014
Mar. 2
15
Ck.
No.
150
151
Account Debited
Rent Expense
Grayco Supplies
PAGE 7
Other Accounts
Post Accounts Payable
Ref.
Dr.
Dr.
52
1,600
1,230
Cash
Cr
1,600
1,230
On March 15, issued
Check 151 to Grayco
Supplies for $1,230.
(continued)
Cash Payments Journal
o Let’s post to the accounts payable subsidiary
ledger at this time to keep the creditors’
accounts current.
EXHIBIT 6
(IN STEPS)
CASH PAYMENTS JOURNAL
Date
2014
Mar. 2
15
Ck.
No.
Account Debited
PAGE 7
Other Accounts
Post Accounts Payable
Ref.
Dr.
Dr.
150 Rent Expense
151 Grayco Supplies
52
Cash
Cr
1,600

1,600
1,230
1,230
Accounts Payable Subsidiary Ledger
Grayco Supplies
Date
Item
2014
Mar. 1
15
P.R.
Dr.
Bal.
Cr.
Balance
1,230
CP7
1,230
---
(continued)
Cash Payments Journal
o Now, let’s journalize the remainder of March’s
cash disbursements. Following that, let’s post to
the individual creditors’ accounts.
EXHIBIT 6
(IN STEPS)
CASH PAYMENTS JOURNAL
Date
2014
Mar. 2
15
21
22
30
31
Ck.
No.
150
151
152
153
154
155
Account Debited
PAGE 7
Other Accounts
Post Accounts Payable
Ref.
Dr.
Dr.
52
Rent Expense

Grayco Supplies
Jewett Business Sys.
Donnelly Supplies
Utilities Expense
Howard Supplies
1,600
1,230
2,800
420
1,050
600
Cash
Cr
1,600
1,230
2,800
420
1,050
600
(continued)
EXHIBIT 6
(IN STEPS)
CASH PAYMENTS JOURNAL
Date
2014
Mar. 2
15
21
22
30
31
Ck.
No.
Account Debited
150
151
152
153
154
155
Rent Expense
Grayco Supplies
Jewett Business Sys.
Donnelly Supplies
Utilities Expense
Howard Supplies
PAGE 7
Other Accounts
Post Accounts Payable
Ref.
Dr.
Dr.
52



54

1,600
1,230
2,800
420
1,050
600
Cash
Cr
1,600
1,230
2,800
420
1,050
600
(continued)
Cash Payments Journal
o The journal is ruled, summed, and verified for
the equality of the debits and the “Cash Cr.”
column.
CASH PAYMENTS
JOURNAL
CASH PAYMENTS JOURNAL
Date
2008
2014
Mar.
Mar. 2
2
15
21
22
30
31
31
Ck.
No.
Account Debited
150
150
151
152
153
154
155
Rent
Rent Expense
Expense
Grayco Supplies
Jewett Business Sys.
Donnelly Supplies
Utilities Expense
Howard Supplies
PAGE 7
Other Accounts
Post Accounts Payable
Ref.
Dr.
Dr.
52



54
1,600
1,600
600
1,600
1,600
1,230
2,800
420
1,050
600
5,050
7,700
1,230
2,800
420
1,050

2,650
Cash
Cr
(continued)
CASH PAYMENTS
JOURNAL
CASH PAYMENTS JOURNAL
Date
2008
2014
Mar.
Mar. 2
2
15
21
22
30
31
Ck.
No.
Account Debited
150
150
151
152
153
154
155
Rent
Rent Expense
Expense
Grayco Supplies
Jewett Business Sys.
Donnelly Supplies
Utilities Expense
Howard Supplies
PAGE 7
Other Accounts
Post Accounts Payable
Ref.
Dr.
Dr.
52



54
1,600
1,600
1,230
2,800
420
1,050
600

31
The totals for “Accounts Payable
Dr.” and “Cash Cr.” are posted.
2,650
( )
5,050
(21)
Cash
Cr
1,600
1,600
1,230
2,800
420
1,050
600
7,700
(11)
(continued)
Accounts Payable Account
o After all posting has been completed, the
balances in the accounts payable subsidiary
ledger should equal the balance of the
accounts payable controlling account in the
general ledger.
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
Computerized Accounting System
o Computerized accounting systems have the
following three main advantages over manual
systems:
 Computerized systems simplify the record-keeping
process by recording transactions in electronic
forms and, at the same time, posting them
electronically to general and subsidiary ledger
accounts.
Computerized Accounting System
 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.
COMPUTERIZED
ACCOUNTING
SYSTEMS
(continued)
COMPUTERIZED
ACCOUNTING SYSTEMS
(continued)
COMPUTERIZED
ACCOUNTING SYSTEMS
(concluded)
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
E-Commerce
o Using the Internet to perform business
transactions is termed e-commerce.
E-Commerce
o When transactions are between a company
and a consumer, it is termed B2C (business-toconsumer) e-commerce.
E-COMMERCE
Three more advanced
areas where the
Internet is being used
for business purposes
are:

Supply chain
management (SCM)

Customer relationship
management (CRM)

Product life-cycle
management (PLM)
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.
Segment Analysis
o One way to report revenue is by different
segments. Businesses may be segmented by
region, by product or service, or by type of
customer.
SEGMENT ANALYSIS
USING SEGMENT INFORMATION
TO PERFORM
HORIZONTAL ANALYSIS
USING SEGMENT INFORMATION
TO PERFORM
VERTICAL ANALYSIS
c. 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, or posted to a publicly accessible website, in whole or in part.