chapter 05 - financial accounting

Download Chapter 05 - Financial Accounting

Post on 21-Dec-2015

14 views

Category:

Documents

6 download

Embed Size (px)

DESCRIPTION

Chapter 05 ACCOUNTING SYSTEMS

TRANSCRIPT

  • 299 22001122 CCeennggaaggee LLeeaarrnniinngg.. AAllll RRiigghhttss RReesseerrvveedd.. MMaayy nnoott bbee ssccaannnneedd,, ccooppiieedd oorr dduupplliiccaatteedd,, oorr ppoosstteedd ttoo aa ppuubblliiccllyy

    aacccceessssiibbllee wweebbssiittee,, iinn wwhhoollee oorr iinn ppaarrtt..

    CHAPTER 5 ACCOUNTING SYSTEMS

    DISCUSSION QUESTIONS

    1. The individual accounts receivable ledger accounts provide business managers infor-mation on the status of individual customer accounts, which is necessary for managing collections. Managers need to know which customers owe money, how much they owe, and how long the amount owed has been outstanding.

    2. The major advantages of the use of special journals are substantial savings in record-keeping expenses and a reduction of record-keeping errors.

    3. a. 400 b. None 4. a. 250

    b. 1 5. a. Sometime following the end of the

    current month, one of two things may happen: (1) an overdue notice will be received from Kelly Co., and/or (2) a let-ter will be received from Kelley Co., in-forming the buyer of the overpayment. (It is also possible that the error will be discovered at the time of making pay-ment if the original invoice is inspected at the time the check is being written.)

    b. The schedule of accounts payable would not agree with the balance of the accounts payable account. The error might also be discovered at the time the invoice is paid.

    c. The creditor will call the attention of the debtor to the unpaid balance of $800.

    d. The error will become evident during the verification process at the end of the month. The total debits in the purchases journal will be less than the total credits by $3,600.

    6. a. Purchases journal b. Cash payments journal

    c. Purchases journal d. Cash payments journal e. Cash payments journal

    7. An electronic form is a software window that provides the inputs for a particular transac-tion. For example, a check form provides the inputs (payee, amount, date) for a cash payment transaction. An electronic invoice provides the inputs (customer, amount sold, item sold) for recording revenues earned on account.

    8. The use of controlling accounts to verify the accuracy of subsidiary accounts is used in a manual system. In a computerized system, it is assumed that the computer will accurately sum the individual transactions in the sub-sidiary accounts in determining the aggre-gate balance.

    9. For automated systems that use electronic forms, the special journals are not used to record original transactions. Rather, elec-tronic forms capture the original transaction detail from an invoice, for example, and au-tomatically post the transaction details to the appropriate ledger accounts.

    10. E-commerce can be used by a business to conduct transactions directly with custom-ers. Thus, an order can be received directly from the customers Internet input and cash can be received from the credit card. Many times, the cash is received prior to actually shipping the product, resulting in a faster revenue/collection cycle. Reducing paper-work throughout the cycle also improves the efficiency of the process. For example, all of the accounting transactions can be fed au-tomatically from the initial Internet-based inputs.

  • 300 22001122 CCeennggaaggee LLeeaarrnniinngg.. AAllll RRiigghhttss RReesseerrvveedd.. MMaayy nnoott bbee ssccaannnneedd,, ccooppiieedd oorr dduupplliiccaatteedd,, oorr ppoosstteedd ttoo aa ppuubblliiccllyy

    aacccceessssiibbllee wweebbssiittee,, iinn wwhhoollee oorr iinn ppaarrtt..

    PRACTICE EXERCISES

    PE 51A

    REVENUE JOURNAL Invoice Post. Accounts Rec. Dr. Date No. Account Debited Ref. Fees Earned Cr.

    Oct. 7 121 Darcy Co. ............................... 320 17 122 Triple A Inc. ........................... 470 21 123 Whaley Co. ............................ 530

    PE 51B

    REVENUE JOURNAL Invoice Post. Accounts Rec. Dr. Date No. Account Debited Ref. Fees Earned Cr.

    May 6 78 Lemon Co. ............................. 1,240 9 79 Hitchcock Inc. ....................... 3,420 19 80 Conrad Inc. ............................ 1,470

    PE 52A

    June 20. Collected cash of $95 from Signal Communications Inc. (Invoice No. 579). Amount posted from page 106 of the cash receipts journal.

    28. Provided $75 of services on account to Signal Communications Inc., itemized on Invoice No. 527. Amount posted from page 92 of the reve-nue journal.

    PE 52B

    Sept. 8. Provided $840 services on account to Mobility Products Inc., itemized on Invoice No. 119. Amount posted from page 24 of the revenue jour-nal.

    17. Collected cash of $590 from Mobility Products Inc. (Invoice No. 106). Amount posted from page 46 of the cash receipts journal.

  • 301 22001122 CCeennggaaggee LLeeaarrnniinngg.. AAllll RRiigghhttss RReesseerrvveedd.. MMaayy nnoott bbee ssccaannnneedd,, ccooppiieedd oorr dduupplliiccaatteedd,, oorr ppoosstteedd ttoo aa ppuubblliiccllyy

    aacccceessssiibbllee wweebbssiittee,, iinn wwhhoollee oorr iinn ppaarrtt..

    PE 53A

    PURCHASES JOURNAL Accounts Party Other Post. Payable Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount

    Aug. 11 Party Zone Supplies Inc. ....... 390 390 ............................ ............ 14 Fun 4 All Supplies Inc. ........... 290 290 ............................ ............ 29 Office Space Inc. .................... 3,560 ............. Office Furniture 3,560

    PE 53B

    PURCHASES JOURNAL Accounts Office Other Post. Payable Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount

    Dec. 6 Supply Hut Inc. ....................... 415 415 ............................ ............ 14 Zell Computer Inc. .................. 1,950 ............. Office Equipment 1,950 19 Supply Hut Inc. ....................... 450 450 ............................ ............

  • 302 22001122 CCeennggaaggee LLeeaarrnniinngg.. AAllll RRiigghhttss RReesseerrvveedd.. MMaayy nnoott bbee ssccaannnneedd,, ccooppiieedd oorr dduupplliiccaatteedd,, oorr ppoosstteedd ttoo aa ppuubblliiccllyy

    aacccceessssiibbllee wweebbssiittee,, iinn wwhhoollee oorr iinn ppaarrtt..

    PE 54A

    Nov. 11. Made purchases of $2,790 on account from Newton Computer Services Inc. (Invoice No. 75). Amount posted from page 8 of the purchases journal.

    21. Paid $6,550 to Newton Computer Services Inc. on account (Invoice No. 43). Amount posted from page 46 of the cash payments journal.

    PE 54B

    Feb. 11. Paid $79 to Daisy Inc. on account (Invoice No. 122). Amount posted from page 71 of the cash payments journal.

    20. Made purchases of $57 on account from Daisy Inc. (Invoice No. 139). Amount posted from page 55 of the purchases journal.

    PE 55A

    Horizontal analysis: Increase (Decrease) 2012 2011 Amount Percent

    Retail ...................................... $ 80,000 $ 75,000 $ 5,000 6.7% Wholesale .............................. 120,000 140,000 (20,000) 14.3 Total revenue ........................ $200,000 $215,000 $ (15,000) 7.0

    Vertical analysis: 2012 2011 Amount Percent Amount Percent

    Retail ...................................... $ 80,000 40.0% $ 75,000 34.9% Wholesale .............................. 120,000 60.0 140,000 65.1 Total revenue ........................ $200,000 100.0% $215,000 100.0%

  • 303 22001122 CCeennggaaggee LLeeaarrnniinngg.. AAllll RRiigghhttss RReesseerrvveedd.. MMaayy nnoott bbee ssccaannnneedd,, ccooppiieedd oorr dduupplliiccaatteedd,, oorr ppoosstteedd ttoo aa ppuubblliiccllyy

    aacccceessssiibbllee wweebbssiittee,, iinn wwhhoollee oorr iinn ppaarrtt..

    PE 55B

    Horizontal analysis: Increase (Decrease) 2012 2011 Amount Percent

    Camping ................................ $250,000 $280,000 $ (30,000) 10.7% Fishing ................................... 100,000 60,000 40,000 66.7 Total revenue ........................ $350,000 $340,000 $ 10,000 2.9

    Vertical analysis: 2012 2011 Amount Percent Amount Percent

    Camping ................................ $250,000 71.4% $280,000 82.4% Fishing ................................... 100,000 28.6 60,000 17.6 Total revenue ........................ $350,000 100.0% $340,000 100.0%

  • 304 22001122 CCeennggaaggee LLeeaarrnniinngg.. AAllll RRiigghhttss RReesseerrvveedd.. MMaayy nnoott bbee ssccaannnneedd,, ccooppiieedd oorr dduupplliiccaatteedd,, oorr ppoosstteedd ttoo aa ppuubblliiccllyy

    aacccceessssiibbllee wweebbssiittee,, iinn wwhhoollee oorr iinn ppaarrtt..

    EXERCISES

    Ex. 51

    1. General ledger accounts: (e) 2. Subsidiary ledger accounts: (a), (b), (c), (d)

    Ex. 52

    a., b., and c. Accounts Receivable June 1 Bal. 530 June 30 6,445 June 30 Bal. 6,975

    Eco-Systems Hazmat Safety Co.

    June 18 1,600 June 1 2,625 June 30 Bal. 1,600 June 30 Bal. 2,625

    Masco Co. Nero Enterprises June 10 980 June 1 Bal. 530 June 30 Bal. 980 June 27 1,240 June 30 Bal. 1,770 d.

    GAMMA SERVICES INC. Accounts Receivable Subsidiary Ledger Balances

    June 30, 2012

    Eco-Systems........................................................................................ $1,600 Hazmat Safety Co. ............................................................................... 2,625 Masco Co.............................................................................................. 980

Recommended

View more >