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CHAPTER
7
ACCOUNTING INFORMATION SYSTEMS
An accounting information system (AIS) involves collecting and processing data and disseminating financial information to interested parties. An AIS may either be manual or computerized.
It must be timely!
It must be accurate!
ILLUSTRATION 7-2
Follow up
Evaluating and monitoring effectiveness and efficiency and correcting any weaknesses
Implementation
Installing the system, training personnel, and making the system operational
SUBSIDIARY LEDGERS
A subsidiary ledger is a group of accounts with a common characteristic, such as customer accounts. The subsidiary ledger is assembled to facilitate the recording process by freeing the general ledger from details concerning individual balances. Two common subsidiary ledgers are the Accounts Receivable Ledger and the Accounts Payable Ledger.
CONTROL ACCOUNT
The general ledger account that summarizes subsidiary ledger data is called a control account. Each general ledger control account balance must equal the composite balance of the individual accounts in the subsidiary ledger.
ILLUSTRATION 7-3
General Ledger
Cash
Accounts Receivable
Accounts Payable
Owners Capital
Subsidiary Ledgers
SUBSIDIARY LEDGERS
Advantages of using subsidiary ledgers are that they: 1. Show transactions affecting one customer or one creditor in a single account. 2. Free the general ledger of excessive details. 3. Help locate errors in individual accounts by reducing the number of accounts combined in one ledger and by using controlling accounts. 4. Create a division of labour in posting by allowing one employee to post to the general ledger and a different employee to post to the subsidiary ledger.
SPECIAL JOURNALS
Special journals are used to group similar types of transactions. If a transaction cannot be recorded in a special journal, it is recorded in the general journal. Special journals permit greater division of labour and reduce time necessary to complete the posting process.
ILLUSTRATION 7-5
General Journal
Used for: Transactions that cannot be entered in a special journal, including correcting, adjusting, and closing entries
The types of special journals used depend largely on the types of transactions that occur frequently in a business enterprise.
S1
Cost of Goods Sold Dr Merchandise Inventory Cr 6,360 7,370 5,070 6,510 10,780 15,900 10,200 62,190
Under a perpetual inventory system, one entry at selling price in the 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. Postings are made monthly to the general ledger and daily to the accounts receivable subsidiary ledger.
ILLUSTRATION 7-8
To prove the accuracy of the ledgers it is necessary to determine whether the sum of the accounts receivable subsidiary ledger balances equals the balance in the general ledgers Accounts Receivable control account.
4,500
2,930
11,000
54,550
The
debit columns for cash and cost of goods sold must be equal to the total of the credit columns for accounts receivable, sales, inventory, and other accounts.
Column totals are posted at the end of each month. The total of the Other Accounts column is not posted. The individual amounts comprising the total are posted separately to the general ledger accounts specified in the Accounts Credited column. The individual amounts in the Accounts Receivable column are posted daily to the subsidiary ledger account specified in the Accounts Credited column.
ILLUSTRATION 7-11 PROVING THE LEDGERS AFTER POSTING THE SALES AND THE CASH RECEIPTS JOURNALS
Accounts Receivable Subsidiary Ledger Abbot Sisters Babson Co. Deli Co. $15,400 14,570 21,210 $51,180
General Ledger Debits Cash Accounts Receivable Cost of Goods Sold $54,550 51,180 65,120 $170,850
After the posting of the cash receipts journal is completed, it is necessary to prove the ledgers. The general ledger totals are in agreement and the sum of the subsidiary ledger balances equals the control account balance.
In
a perpetual system, each entry results in a debit to Merchandise Inventory and a credit to Accounts Payable. Postings are made daily to the accounts payable subsidiary journal and monthly to the general ledger.
ILLUSTRATION 7-13
Eaton and Howe, Inc. $19,800 Fabor and Son 15,600 Jasper Manufacturing Inc. 28,500 $63,900
To prove the ledgers it is necessary to determine that the sum of the subsidiary ledger balances equals the balance in the control account.
306
500 1,700
Journalizing
procedures are similar to cash receipts journal Posting procedures are also like the cash receipts journal
ILLUSTRATION 7-16
To prove the ledgers it is necessary to determine that the sum of the subsidiary ledger balances equals the balance in the control account.
ILLUSTRATION 7-17
Fabor and Son Ref Debit Credit P1 CP1 P1 G1 6,900 6,900 8,700 500
General Ledger Merchandise Inventory Date Ref Debit Credit 2002 May 31 S1 62,190 31 CR1 2,930 31 P1 63,900 31 CP1 4,500 31 G1 500
Accounts Payable 201 Date Ref Debit Credit Balance 2002 May 31 P1 63,900 63,900 31 CP1 42,600 21,300 31 G1 500 20,800
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