Chapter 5

Accounting Systems and

Internal Controls
Accounting, 21st Edition
Warren Reeve Fess

Copyright 2004 South-Western, a division

PowerPoint Presentation by Douglas Cloud
Professor Emeritus of Accounting
Pepperdine University
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 ofof the
the action
action has
has been
been automated,
automated, soso
click
click the
the mouse
mouse when
whenyouyou see
see this
this
lightning
lightning bolt
bolt in
in the
the lower
lower right-hand
right-hand
corner
corner ofof the
the screen.
screen. YouYou can
can point
point and
and
click
click anywhere
anywhere on on the
the screen.
screen.
 Objectives
Objectives
1. Define an accounting system and
After
After studying
studying this
this
describe its implementation.
chapter,
chapter, you
you should
should
2. List the three objectives
be of internal
be able
able to:
to:
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 e-commerce.
 Basic
Basic
Accounting
Accounting
System
System
 Analysis
F
E
E
Design D
B
A
C
K
Implementation
 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. Control environment
2. Risk assessment
3. Control procedures
4. Monitoring
5. Information and communication
Elements of Internal Control
1. Control environment
2. Risk assessment
3. Control procedures
4. Monitoring
5. Information and communication
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. Control environment
2. Risk assessment
3. Control procedures
4. Monitoring
5. Information and communication
 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 ofof occurring,
occurring, and
and toto
determine
determine actions
actions that
that will
will minimize
minimize them.
them.
Elements
Elements of
of Internal
Internal Control
Control
1. Control environment
2. Risk assessment
3. Control procedures
4. Monitoring
5. Information and communication
 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
Separating Responsibilities for
Related Operations
Separating Operations,
Custody of Assets, and
Accounting
Proofs and Security Measures
 Otherwise,
Otherwise,Separating
the
the following
Separating following
Responsibilities
abuses
abuses are
are possible:
Responsibilities possible: for
for
Related
Related
1. Orders Operations
Operations
may be placed on the basis of
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
Separating Responsibilities for
Related Operations
Separating Operations,
Custody of Assets, and
Accounting
Proofs and Security Measures
 Custody of
Assets Independent
check
Independent
check

Operations Accounting

Independent
check
Elements
Elements of
of Internal
Internal Control
Control
1. Control environment
2. Risk assessment
3. Control procedures
4. Monitoring
5. Information and communication
 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

A B C D

Supplies 14 Accounts Payable

Subsidiary Ledger

Accts. Pay. 21 Creditor Accounts

A B C D
 Special Journals
SELLING
Providing services on account
recorded
recordedinin Revenue journal
Receipt of cash from any source
recorded
recordedin
in Cash receipts journal

BUYING
Purchase of items on account
recorded
recordedin
in Purchases journal
Payment of cash for any purpose
recorded
recordedin
in Cash payments journal
 The
The Revenue
Revenue Journal
Journal
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
1 1
2 2
3 3
4 4
5 5
6 6

All
All sales
sales onon 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
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
2006
1 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1
2 2
3 3
4 4
5 5
6 6

Performed
Performed services
services on
on credit
credit to
to
MyMusic.com,
MyMusic.com, $2,200.
$2,200.
 The
The Revenue
Revenue Journal
Journal
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
2006
1 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1
2 2
3 3
4 4
5 5
6 6

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
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
2006
1 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1
2 2
3 3
4 4
5 5
6 6

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
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
2006
1 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1
2 2
3 3
4 4
Accounts Receivable Subsidiary Ledger
5 5
MyMusicClub.com
6 Date Item P.R. Debit Credit Balance 6
2006
Mar. 2 R35 2,200 2,200
 Posting
Posting from
from the
the Revenue
Revenue Journal
Journal
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
2006
1 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1
2 2
3 3
4 4
Accounts Receivable Subsidiary Ledger
5 5
MyMusicClub.com
6 Date Item P.R. Debit Credit Balance 6
2006
Mar. 2 R35 2,200 2,200

This procedure is repeated for each posting

to the accounts receivable subsidiary ledger.
 Posting
Posting from
from the
the Revenue
Revenue Journal
Journal
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
2003
2006
1 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1
2 6 616 RapZone.com 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
4 27 618 MyMusicClub.com 3 0 0 0 00 4
5 5
6 6

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
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
2006
1 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1
2 6 616 RapZone.com 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
4 27 618 MyMusicClub.com 3 0 0 0 00 4
5 31 9 6 0 0 00 5
6 6

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

Next,
Next, the
the revenue
revenue journals
journals total
total
($9,600)
($9,600) isis posted
posted to
to the
the general
general ledger.
ledger.
 Posting
Posting the
the Revenue
Revenue Journal
Journal Total
Total

GENERAL LEDGER

ACCOUNT Accounts Receivable Account No. 12

Post. Balance
Date Item Ref. Dr. Cr.
Dr. Cr.
2006
Mar. 1 Balance 3 400 00

31 R359 600 00 13 000 00

Revenue Journal, page 35

 Posting
Posting the
the Revenue
Revenue Journal
Journal Total
Total
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
2006
1 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1
2 6 616 RapZone.com 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
4 27 618 MyMusicClub.com 3 0 0 0 00 4
5 31 9 6 0 0 00 5
6 (12)(41) 6

By placing the account number here, we

indicate that $9,600 has been debited to
Accounts Receivable in the general ledger.
 Posting
Posting the
the Revenue
Revenue Journal
Journal Total
Total

GENERAL LEDGER

ACCOUNT Fees Earned Account No. 41

Post. Balance
Date Item Ref. Dr. Cr.
Dr. Cr.
2006
Mar. 31 R35 9 600 00 9 600 00
 Posting
Posting the
the Revenue
Revenue Journal
Journal Total
Total
Revenue Journal Page 35
Invoice Post Accts. Rec. Debit
Date No. Account Debited Ref. Fees Earned Credit
2006
1 Mar. 2 615 MyMusicClub.com 2 2 0 0 00 1
2 6 616 RapZone.com 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
4 27 618 MyMusicClub.com 3 0 0 0 00 4
5 31 9 6 0 0 00 5
6 (12)(41) 6

Placing 41 here indicates that $9,600 has

been posted to the credit side of Fees
Earned in the general ledger.
The
The Cash
Cash Receipts
Receipts Journal
Journal
The
The Cash
Cash Receipts
Receipts Journal
Journal
All
All transactions
transactions thatthat
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 Page 14
Other Accounts
Post Accounts Receivable Cash
Date Account Credited Ref. Cr. Cr. Dr.
2006
Mar. 1 Rent Revenue 400 400

NetSolutions
NetSolutions received
received $400
$400 cash
cash
on
on March
March 11 for
for the
the months
months rent.
rent.
 The
The Cash
Cash Receipts
Receipts Journal
Journal
CASH RECEIPTS JOURNAL Page 14
Other Accounts
Post Accounts Receivable Cash
Date Account Credited Ref. Cr. Cr. Dr.
2006
Mar. 1 Rent Revenue 400 400
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 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
CASH RECEIPTS JOURNAL Page 14
Other Accounts
Post Accounts Receivable Cash
Date Account Credited Ref. Cr. Cr. Dr.
2006
Mar. 1 Rent Revenue 400 400
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 1,750

Each
Each account
account underunder 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
CASH RECEIPTS JOURNAL Page 14
Other Accounts
Post Accounts Receivable Cash
Date Account Credited Ref. Cr. Cr. Dr.
2006
Mar. 1 Rent Revenue 400 400
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 1,750

Accounts Receivable Subsidiary Ledger

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

Accounts Receivable Subsidiary Ledger

Web Cantina
Date Item P.R. Debit Credit Balance
2006
Mar. 1 Bal. 3,400
18 R35 2,650 6,050
2,650
19 CR14 3,400
 The
The Cash
Cash Receipts
Receipts Journal
Journal

After
After all
all journalizing
journalizing andand 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
CASH RECEIPTS JOURNAL Page 14
Other Accounts
Post Accounts Receivable Cash
Date Account Credited Ref. Cr. Cr. Dr.
2006
Mar. 1 Rent Revenue 400 400
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 1,750
31 400 7,350 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
CASH RECEIPTS JOURNAL Page 14
Other Accounts
Post Accounts Receivable Cash
Date Account Credited Ref. Cr. Cr. Dr.
2006
Mar. 1 Rent Revenue 400 400
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 1,750
31 400 7,350 7,750

GENERAL LEDGER
Account: Accounts Receivable No. 12
The
The three
three circled
P.R. items
circled
Date Item items are
are Balance
Debit Credit
posted to
to1 the
Balgeneral ledger.
2006
posted
Mar. the general
ledger. 3,400
31 R35 9,600 13,000
Lets
Lets post
post Accounts
Accounts Receivable
Receivable..
 Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
CASH RECEIPTS JOURNAL Page 14
Other Accounts
Post Accounts Receivable Cash
Date Account Credited Ref. Cr. Cr. Dr.
2006
Mar. 1 Rent Revenue 400 400
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 1,750
31 400 7,350 7,750

GENERAL LEDGER
Account: Accounts Receivable No. 12
Date Item P.R. Debit Credit Balance
2006
Mar. 1 Bal 3,400
31 R35 9,600 13,000
31 CR14 7,350 5,650
 Posting
Posting the
the Cash
Cash Receipts
Receipts Journal
Journal
CASH RECEIPTS JOURNAL Page 14
Other Accounts
Post Accounts Receivable Cash
Date Account Credited Ref. Cr. Cr. Dr.
2006
Mar. 1 Rent Revenue 400 400
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 1,750
31 400 7,350 7,750
( ) (12)
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 beenbeen 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 cashcash
receipts
receipts journal
journal isis shown
shown
in
in the
the next
next slide.
slide.
 Posted
Posted Cash
Cash Receipts
Receipts Journal
Journal
CASH RECEIPTS JOURNAL Page 14
Other Accounts
Post Accounts Receivable Cash
Date Account Credited Ref. Cr. Cr. Dr.
2006
Mar. 1 Rent Revenue 42 400 400
19 Web Cantina 3,400 3,400
28 MyMusicClub.com 2,200 2,200
30 RapZone.com 1,750 1,750
31 400 7,350 7,750
( ) (12) (11)

 GENERAL LEDGER
Accounts ACCOUNT Accounts Receivable No. 12
Receivable Date Item P.R. Debit Credit Balance
Mar. 1 Bal 3,400
Control 31 R35 9,600 13,000
Account 31 CR14 7,350 5,650

If
If the
the accounts
accounts receivable
receivable
account
account in in the
the general
general ledger
ledger
only
onlyshows
shows summary
summary totals,
totals,
where
whereare arethe
the individual
individual
customer
customerbalances?
balances?
 GENERAL LEDGER
Accounts ACCOUNT Accounts Receivable No. 12
Receivable Date Item P.R. Debit Credit Balance
Mar. 1 Bal 3,400
Control 31 R35 9,600 13,000
Account 31 CR14 7,350 5,650
MyMusicClub.com
Date Item P.R. Debit Credit Balance
3/2 R35 2,200 2,200
3/27 R35 3,000 5,200
Accounts 3/28 CR14 2,200 3,000

RapZone.com
Receivable Date Item P.R. Debit Credit Balance

Subsidiary 3/6
3/30
R35 1,750
CR14 1,750
1,750
--
Ledger Web Cantina
Date Item P.R. Debit Credit Balance
3/1 Bal. 3,400
3/18 R35 2,650 6,050
3/19 CR14 3,400 2,650
 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
PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
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
PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600

Accounts Payable Subsidiary Ledger

Howard Supplies
Date Item P.R. Dr. Cr. Balance
2006
To keep
Mar 3 the accounts payable
600 600

subsidiary ledger current, this entry

is posted on March 3.
 Posting
Posting the
the Purchases
Purchases Journal
Journal
PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600

Accounts Payable and Supplies

will be posted as totals.
 Journalizing
Journalizing in
in the
the Purchases
Purchases Journal
Journal
PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600
7 Donnelly Supplies 420 420

On March 7, NetSolutions
purchased supplies from Donnelly
Supplies, $420.
 Journalizing
Journalizing in
in the
the Purchases
Purchases Journal
Journal
PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600
7 Donnelly Supplies 420 420
 Journalizing
Journalizing in
in the
the Purchases
Purchases Journal
Journal
PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600
7 Donnelly Supplies 420 420
12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800

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.
 Journalizing
Journalizing in
in the
the Purchases
Purchases Journal
Journal
PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600
7 Donnelly Supplies 420 420
12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800
19 Donnelly Supplies 1,450 1,450
27 Howard Supplies 960 960

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
PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600
7 Donnelly Supplies 420 420
12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800
19 Donnelly Supplies 1,450 1,450
27 Howard Supplies 960 960
31 6,230 3,430 2,800

At
At the
the end
end of
of March,
March, all
all columns
columns are
are totaled
totaled
and $6,230
$6,230 == $3,430
$3,430 ++ $
$ 2,800
2,800
and equality of debits and credits isis verified.
equality of debits and credits verified.
 Posting
Posting the
the Purchases
Purchases Journal
Journal
PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600
7 Donnelly Supplies 420 420
12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800
19 Donnelly Supplies 1,450 1,450
27 Howard Supplies 960 960
31 6,230 3,430 2,800

The next step is to post to the

general journal.
 PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600
7 Donnelly Supplies 420 420
12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800
19 Donnelly Supplies 1,450 1,450
27 Howard Supplies 960 960
31 6,230 3,430 2,800

GENERAL LEDGER
ACCOUNT Accounts Payable No. 21
Date Item P.R. Debit Credit Balance
Mar. 1 Bal 1,230
31 P11 6,230 7,460
 PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2003
Mar. 3 Howard Supplies 600 600
7 Donnelly Supplies 420 420
12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800
19 Donnelly Supplies 1,450 1,450
27 Howard Supplies 960 960
31 6,230 3,430 2,800
(21)

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

Supplies is posted as a total of $3,430

to general ledger account 21. Office
Equipment is posted individually.
 PURCHASES JOURNAL Page 11
Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2006
Mar. 3 Howard Supplies 600 600
7 Donnelly Supplies 420 420
12 Jewett Bus. Sys. 2,800 Off. Equip. 18 2,800
19 Donnelly Supplies 1,450 1,450
27 Howard Supplies 960 960
31 6,230 3,430 2,800
(21) (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.
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 byby
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 PAGE 7
Other Accounts
Ck. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
2006
Mar. 2 150 Rent Expense 1,600 1,600

On March 2, NetSolutions paid

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

On March 15, issued Check No. 151 to

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

Accounts Payable Subsidiary Ledger

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

On March 21, issued Check No.

152 as payment on account to
Jewett Business Systems, $2,800.
 CASH PAYMENTS JOURNAL PAGE 7
Other Accounts
Ck. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
2006
Mar. 2 150 Rent Expense 1,600 1,600
15 151 Grayco Supplies 1,230 1,230
21 152 Jewett Business Sys. 2,800 2,800
22 153 Donnelly Supplies. 420 420

On March 22, issued Check No.

153 as payment on account to
Donnelly Supplies, $420.
 CASH PAYMENTS JOURNAL PAGE 7
Other Accounts
Ck. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
2006
Mar. 2 150 Rent Expense 1,600 1,600
15 151 Grayco Supplies 1,230 1,230
21 152 Jewett Business Sys. 2,800 2,800
22 153 Donnelly Supplies. 420 420
30 154 Utilities Expense 1,050 1,050

On March 30, issued Check No. 154 as

payment for utility bill, $1,050.
 CASH PAYMENTS JOURNAL PAGE 7
Other Accounts
Ck. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
2006
Mar. 2 150 Rent Expense 1,600 1,600
15 151 Grayco Supplies 1,230 1,230
21 152 Jewett Business Sys. 2,800 2,800
22 153 Donnelly Supplies. 420 420
30 154 Utilities Expense 1,050 1,050
31 155 Howard Supplies 600 600

On March 31, issued Check

No. 155 on account to Howard
Supplies, $600
 CASH PAYMENTS JOURNAL PAGE 7
Other Accounts
Ck. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
2006
Mar. 2 150 Rent Expense 1,600 1,600
15 151 Grayco Supplies 1,230 1,230
21 152 Jewett Business Sys. 2,800 2,800
22 153 Donnelly Supplies. 420 420
30 154 Utilities Expense 1,050 1,050
31 155 Howard Supplies 600 600
31 2,650 5,050 7,700

The journal is ruled, summed, and

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

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
Payable
Control
Control
Accounts
Accounts Payable
Payable
 GENERAL LEDGER
Accounts Payable ACCOUNT Accounts Payable No. 12
Date Item P.R. Debit Credit Balance
(Controlling) Mar. 1 Bal 1,230
31 P11 6,230 7,460
31 CP7 5,050 2,410
Donnelly Supplies
Date Item P.R. Debit Credit Balance
Mar 2 P11 420 420
19 P11 1,450 1,870
Accounts 22 CP7 420 1,450

Jewett Business
Payable Grayco Supplies
Date Item P.R. Debit Credit Balance
SystemsSubsidiary
also has Mar 1 Bal. 1,230
15 CP7 1,230 0
a zero balance, so
Ledger --
Howard Supplies
that account was Date Item P.R. Debit Credit Balance

omitted for space Mar 3

27
P11
P11
600
960
600
1,560
reasons. 31 CP7 600 960
 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 record-
keeping 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
From Exhibit 10, page 203 of textbook
 The
The Revenue
Revenue and
and Collection
Collection
Cycle
Cycle in
in QuickBooks
QuickBooks Continued
Continued
From Exhibit 10, page 203 of textbook
 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