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Accounting Using Excel for Success

PowerPoint Presentation by:PowerPoint Presentation by:Douglas Cloud, Professor Emeritus Accounting, Pepperdine UniversityDouglas Cloud, Professor Emeritus Accounting, Pepperdine University

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Accounting Systems

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Student Version

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Define and describe an accounting system.

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An accounting system is the methods and procedures for collecting, classifying, summarizing, and reporting a business’s financial and operating information.

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Accounting System

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As a business grows and changes, accounting systems also change in the following three-step process:• Step 1. Analyze user information

needs.• Step 2. Design the system to meet

the user needs.• Step 3. Implement the system.

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Once a system has been implemented, feedback, or input from the users of the information can be used to analyze and improve the system.

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Feedback

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Internal controls are policies and procedures that protect assets from misuse, ensure that business information is accurate, and ensure that laws and regulations are being followed.

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Internal Controls

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Processing methods are the means by which the system collects, summarizes, and reports accounting information. These methods may be either manual or computerized.

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Processing Methods

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Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals.

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A large number of individual accounts with a common characteristic can be grouped together in a separate ledger called a subsidiary ledger.

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Subsidiary Ledger

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The primary ledger, which contains all of the balance sheet and income statement accounts, is called a general ledger.

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General Ledger

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Each subsidiary ledger is represented in the general ledger by a summarizing account, called a controlling account.

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Controlling Account

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The individual customers’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts receivable subsidiary ledger or customers ledger.

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The individual creditors’ accounts are arranged in alphabetical order in a subsidiary ledger called the accounts payable subsidiary ledger, or creditors ledger.

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Each special journal is designed to be used for recording a single kind of transaction that occurs frequently.

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Special Journal

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SELLING

Providing services on account

Revenue JournalRevenue Journalrecorded in

Receipt of cash from any source

Cash Receipts JournalCash Receipts Journalrecorded in

Special Journals

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Purchase of items on account

Purchases JournalPurchases Journalrecorded in

Payment of cash for any purpose

Cash Payments JournalCash Payments Journalrecorded in

Special Journals

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BUYING

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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.

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General Journal

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The revenue journal is used for recording fees earned on account. Cash fees earned would be recorded in the cash receipts journal.

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Other Special Journals

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Revenue JournalExhibit 2

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Revenue Journal Postings to Ledger

Exhibit 3

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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.

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Cash Receipts Journal

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Cash Receipts Journal and Postings

Exhibit 4

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Accounts Receivable—(Controlling)

Balance, March 1, 2010 $3,400

Total debits (from revenue journal) 9,600

Total credits (from cash receipts journal) (7,350)

Balance, March 31, 2010 $5,650

NetSolutions’ Accounts Receivable Subsidiary LedgerCustomer Balance Summary Report, March 31, 2010

Accessories By Claire $3,000

RapZone 0

Web Cantina 2,650

Total accounts receivable $5,650

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The purchases journal is designed for recording all purchases on account.

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Purchases Journal

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Purchases Journal and Postings

Exhibit 5

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All transactions involving a credit to Cash are recorded in the cash payments journal.

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Cash Payments Journal

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Cash Payments Journal and Postings

Exhibit 6

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2Accounts Payable Control

Account and Subsidiary LedgerAccounts Payable (Control)

Balance, March 1, 2010 $1,230Total credits (from purchases journal) 6,230Total debits (from cash payments journal) (5,050)Balance, March 31, 2010 $2,410

NetSolutionsSupplier Balance Summary Report

March 31, 2010

Donnelly Supplies $1,450Grayco Supplies 0Howard Supplies 960Jewett Business Systems 0Total $2,410

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Describe and give examples of other subsidiary ledgers and modified special journals.

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A business may modify its special journals by adding one or more columns for recording transactions that occur frequently.

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Nov. 2 NetSolutions issued Invoice No. 842 to Litten Company for $4,770, which included sales taxes of $270.

3 Issued Invoice No. 843 to Kauffman Supply Company for $1,166, which included sales taxes of $66.

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Modified Special Journal

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Describe and illustrate the use of a computerized accounting system.

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Computerized Accounting System

1. Computerized systems simplify the record-keeping process in that transactions are recorded in electronic forms and, at the same time, posted electronically to general and subsidiary ledger accounts.

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2. Computerized systems are generally more accurate than manual systems.

3. Computerized systems provide management with current account balance information to support decision making, since account balances are posted as the transactions occur.

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Exhibit 7 Revenue and Cash Receipts in QuickBooks©

(continued)

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Exhibit 7Revenue and Cash Receipts in QuickBooks© (continued)

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Describe the basic features of e-commerce.

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Using the Internet to perform business transactions is termed e-commerce.

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e-Commerce

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When transactions are between a company and a consumer, it is termed B2C (business-to-consumer) e-commerce.

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Three more advanced areas where the Internet is being used for business purposes are:1. Supply chain management (SCM)

2. Consumer relationship management (CRM)

3. Product life-cycle management (PLM)

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