Chapter 5 Worsheet 2

Accounting Systems
Chapter 5
Prepared by: C. Douglas Cloud

Professor Emeritus of Accounting
Pepperdine University
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Learning Objectives
1. Define and describe an accounting system.

2. Journalize and post transactions in a manual
accounting system that uses subsidiary ledgers
and special journals.
3. Describe and illustrate the use of a computerized
accounting system.
4. Describe the basic features of e-commerce.
5. Use segment analysis in evaluating the operating
performance of a company.
2
Learning Objective 1
3 3
LO 1
Basic Accounting Systems
An accounting system is the methods and

procedures for collecting, classifying,
summarizing, and reporting a business’s financial
and operating information.
4
LO 1
As a business grows ▪ Analyze user

and changes, information needs.
accounting systems
also change in the ▪ Design the system
following three-step to meet the user
process. needs.
▪ Implement the
system.
5
LO 1
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.
6
LO 1
Processing Methods
Processing methods are the means by which the

accounting system collects, summarizes, and
reports accounting information. These methods
may be either manual or computerized.
7
Define and describe an accounting system.

Journalize and post transactions in a manual
accounting system that uses subsidiary ledgers and
special journals.
8
LO 2
Manual Accounting Systems
Understanding a manual accounting system is

useful in identifying relationships between
accounting data and reports.
9
LO 2
Subsidiary Ledgers
A large number of individual accounts with a

common characteristic can be grouped together in
a separate ledger called a subsidiary ledger.
10
LO 2
Subsidiary Ledgers
The primary ledger, which contains all of the

balance sheet and income statement accounts, is
called a general ledger.
11
LO 2
Subsidiary Ledgers
Each subsidiary ledger is represented in the

general ledger by a summarizing account, called a
controlling account.
12
LO 2
Subsidiary Ledgers
The individual customer accounts are arranged in

alphabetical order in a subsidiary ledger called the
accounts receivable subsidiary ledger, or
customers ledger.
13
LO 2
Subsidiary Ledgers
The individual creditor accounts are arranged in

alphabetical order in a subsidiary ledger called the
accounts payable subsidiary ledger, or creditors
ledger.
14
LO 2
Subsidiary Ledgers
15
LO 2
Special Journal
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.
16
LO 2
Special Journals
SELLING
BUYING
17
LO 2
Special Journals
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.
18
LO 2
Special Journals
The revenue journal is used for recording fees

earned on account.
19
LO 2
Special Journals
Cash fees earned would be recorded in the cash

receipts journal.
20
LO 2
Special Journals
Purchases made on account (on credit) are

recorded in the purchases journal.
21
LO 2
Special Journals
All cash payments are recorded in the cash

payments journal.
22
LO 2
Special Journals
NetSolutions had the following selected general

ledger balances as of March 1, 2012:
Account
Number Account Balance
11 Cash $6,200
12 Accounts Receivable 3,400
14 Supplies 2,500
18 Office Equipment 2,500
21 Accounts Payable 1,230
23
LO 2
Revenue Journal
If NetSolutions recorded its revenue transactions in

the general journal, the following entries would have
to be made:
24
LO 2
Revenue Journal
Revenues are normally recorded to the revenue

journal when the company sends a bill, referred to
as an invoice, to the customer.
Each invoice is normally numbered in sequence
for future reference.
25
LO 2
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.
26
LO 2
27
LO 2
Revenue Journal
Let’s take a step-by-step look at the process used to

post the first entry. This entry was made on March
2, 2012, when NetSolutions issued Invoice No. 615
to Accessories By Claire for fees earned of $2,200.
28
LO 2
Exhibit 3 (in steps)
Revenue Journal Page 35

Invoice Post Accts. Rec. – Debit
Date No. Account Debited Ref. Fees Earned – Credit
2012
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 (continued)
Steps)”
29
LO 2

2012
2 6 616 RapZone 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
Accounts Receivable Subsidiary Ledger
5 5
Accessories By Claire
6 6
Date Item P.R. Debit Credit
Balance
2012
Mar. 2 R35 2,200 2,200
(continued)
30
LO 2

2012
2 6 616 RapZone 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
5 5
Accessories By Claire
6 6
Balance
2012
Mar. 2 R35 2,200 2,200
(continued)
31
LO 2

2012
2 6 616 RapZone 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
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)
32
LO 2

2012
2 6 616 RapZone 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
5 31 9 6 0 0 00
5
6 6
Next, the amount column would be totaled.

(continued)
33
LO 2
The debit total is posted from the revenue

journal to Accounts Receivable in the general
ledger.
ACCOUNT Accounts Receivable Account No. 12
Post. Balance
Date Item Ref. Dr. Cr.
Dr. Cr.
2012
Mar. 1 Balance 3 400 00
31 R35 9 600 00 13 000 00
Revenue Journal, page 35 (continued)

34
LO 2

2012
2 6 616 RapZone 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
5 31 9 6 0 0 00 5
6 6
(12)
Indicates a debit posting of $9,600 to
Accounts Receivable (General Ledger
Account 12) (continued)
35
LO 2
The credit total is posted from the revenue

journal to Fees Earned in the general
ledger.
ACCOUNT Fees Earned Account No. 41
Post. Balance
Date Item Ref. Dr. Cr.
Dr. Cr.
2012
Mar. 31 R35 9 600 00 9 600 00
Revenue Journal, page 35
(continued)
36
LO 2

2012
2 6 616 RapZone 1 7 5 0 00 2
3 18 617 Web Cantina 2 6 5 0 00 3
5 31 9 6 0 0 00 5
6 6
(12) (41)
Indicates a credit posting of $9,600 to

Fees Earned (General Ledger
Account 41)
37
EE 5-1
38
LO 2
Cash Receipts Journal
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.
39
LO 2
40
LO 2
CASH RECEIPTS JOURNAL Page 14
Other Accounts
Post Accounts Receivable Cash
DateAccount Credited Ref.Cr. Cr. Dr.
2012
Mar. 1 Rent Revenue 400 42
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 Acct. No. 42
Click the Cr.
2012 Bal.
button to skip Mar. 1 CR14 400 400
“Exhibit 4 (in
Steps)”
41
(continued)
LO 2
Other Accounts
2012
400
19 Web Cantina 3,400 3,400
30 RapZone 1,750 1,750

Web Cantina
Balance
2012
Mar. 1 Bal. 3,400 18 R35 2,650
6,050
19 CR14 3,400 2,650
42
(continued)
LO 2
Cash Receipts Journal
After all journalizing and posting to individual

accounts for the month is complete, the columns are
totaled.
43
LO 2

Other Accounts
2012
400
19 Web Cantina 3,400 3,400
30 RapZone 1,750 1,750
31 400 7,350 7,750
( ) (12 ) (11)
A check mark indicates

that items in this column
(continued)
are posted individually.
44
LO 2
Accounts Receivable Account
The total of the accounts in the accounts receivable

subsidiary ledger should match the balance in the
general ledger’s Accounts Receivable account.
45
EE 5-2
46
LO 2
Purchases Journal
The purchases journal is designed for recording

all purchases on account.
47
LO 2
48
LO 2
PURCHASES JOURNAL Page 11

Accts. Other
Post Payable Supplies Accounts Post
Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
2012
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
Click on button
to skip “Exhibit
5 (in steps)” (continued)
49
LO 2

Accts. Other
2012
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)
50
LO 2

Accts. Other
2012
Accounts Payable Subsidiary Ledger
Howard Supplies
Date ItemP.R. Dr. Cr. Balance
2012
Mar. 3 P11 600 600
(continued)
51
LO 2

Accts. Other
2012
The other entries to the accounts payable subsidiary ledger

are recorded using the same procedure.
(continued)
52
LO 2

Accts. Other
2012
12 Jewett Bus. Sys. 2,800 Off. Equip. 2,800 18
This posting reference

indicates that Office
Equipment (Account 18) is
debited in the general
ledger for $2,800.
53
LO 2
Purchases Journal
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.
54
LO 2
Accts. Other
PostPayable SuppliesAccounts Post
2012
12 Jewett Bus. Sys. 2,800 Off. Equip. 18 2,800
31 6,230 3,430 2,800
( ) ( ) ( 21)
Supplies would be
debited for $3,430
GENERAL LEDGER
and 14 written in the
ACCOUNT Accounts Payable No. 21
parentheses.
Date ItemP.R. Debit Credit
Balance
2012
Mar. 1 Bal 1,230
31 P11 6,230 7,460
55
EE 5-3
56
LO 2
Cash Payments Journal
All transactions involving a credit to Cash are

recorded in the cash payments journal.
57
LO 2
58
LO 2
CASH PAYMENTS JOURNAL PAGE 7

Other Accounts
Ck. Post Accounts Payable Cash
Date No. Account Debited Ref. Dr. Dr. Cr
2012
Mar. 2 150 Rent Expense 1,600 1,600
On March 2, 2012,
issued Check 150 for
rent of $1,600.
Click button to
skip “Exhibit 6 (continued)
(in steps)” 59
LO 2
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.
60
LO 2
Other Accounts
2012
Mar. 2 150 Rent Expense 1,600
52 1,600
General Ledger
Account Rent Expense Account No. 52
Date Item P.R. Dr. Cr. Balance
2012
Mar. 2 CP7
1,600 1,600
(continued) 61
LO 2
Other Accounts
2010
52 1,600
15 151 Grayco Supplies 1,230 1,230
On March 15, issued

Check 151 to Grayco
Supplies for $1,230.
(continued)
62
LO 2
Let’s post to the accounts payable subsidiary ledger

at this time to keep the creditors’ accounts current.
63
LO 2
Other Accounts
2012
52 1,600
15 151 Grayco Supplies √1,230 1,230
Accounts Payable Subsidiary Ledger

Grayco Supplies
Date Item P.R. Dr. Cr. Balance
2012
Mar. 1 Bal. 1,230
15 CP7 1,230 ---
© 2011 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as (continued) 64
LO 2
Now, let’s journalize the remainder of March’s

cash disbursements. Following that, let’s post to
the individual creditors’ accounts.
65
LO 2
Other Accounts
2010
Mar. 2 150 Rent Expense 52
1,600 1,600
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
(continued)
66
LO 2
Other Accounts
2012
Mar. 2 150 Rent Expense 52
1,600 1,600
21 152 Jewett Business Sys. √ 2,800 2,800
22 153 Donnelly Supplies √ 420 420
30 154 Utilities Expense 1,050
54 1,050
√
(continued)
67
LO 2
The journal is ruled, summed, and verified for

the equality of the debits and the “Cash Cr.”
column.
68
LO 2
Other Accounts
2008
2012
Mar.
Mar. 2
2 150
150 Rent
Rent Expense
Expense 1,600
52
1,600 1,600
1,600
54 1,050
√
31 2,650 5,050 7,700
(continued)
69
LO 2
Other Accounts
2008
2012
Mar.
Mar. 2
2 150
150 Rent
Rent Expense
Expense 1,600
52
1,600 1,600
1,600
54 1,050
√
31 2,650 5,050 7,700
(√ ) (21) (11)
The totals for “Accounts Payable (continued)

Dr.” and “Cash Cr.” are posted. 70
LO 2
Accounts Payable Account
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.
71
EE 5-4
72

accounting system.
73
LO 3
Computerized Accounting System
Computerized accounting systems have the

following three main advantages over manual
systems:
1. 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.
74
LO 3
Computerized Accounting System
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.
75
LO 3
Computerized Accounting Systems
(continued)76
LO 3
77
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use. (continued)
LO 3
(concluded)
78

accounting system that uses subsidiary ledgers and
special journals.
accounting system.
79 79
LO 4
E-Commerce
Using the Internet to perform business

transactions is termed e-commerce.
80
LO 4
E-Commerce
When transactions are between a company and a

consumer, it is termed B2C
(business-to-consumer) e-commerce.
81
LO 4
E-Commerce
Three more advanced areas ▪ Supply chain

where the Internet is being management (SCM)
used for business purposes ▪ Consumer relationship
are: management (CRM)
▪ Product life-cycle
management (PLM)
82

accounting system.
5. Use segment analysis in evaluating the operating
performance of a company.
83
LO 5
Segment Analysis
One way to report revenue is by different

segments. Businesses may be segmented by region,
by product or service, or by type of customer.
84
LO 5
Segment Analysis
85
LO 5
Segment Analysis
86
LO 5
Segment Analysis
87
EE 5-5
88
Accounting Systems
The End
Prepared by: C. Douglas Cloud
Professor Emeritus of Accounting
Pepperdine University

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Accounting Systems

Prepared by: C. Douglas Cloud

1. Define and describe an accounting system.

1. Define and describe an accounting system.

An accounting system is the methods and

As a business grows ▪ Analyze user

Internal controls are the policies and procedures

Processing methods are the means by which the

Define and describe an accounting system.

Understanding a manual accounting system is

A large number of individual accounts with a

The primary ledger, which contains all of the

Each subsidiary ledger is represented in the

The individual customer accounts are arranged in

The individual creditor accounts are arranged in

One method of processing transactions more

The all-purpose two-column journal, called the

The revenue journal is used for recording fees

Cash fees earned would be recorded in the cash

Purchases made on account (on credit) are

All cash payments are recorded in the cash

NetSolutions had the following selected general

If NetSolutions recorded its revenue transactions in

Revenues are normally recorded to the revenue

If NetSolutions journalized these same fees earned on

Let’s take a step-by-step look at the process used to

Revenue Journal Page 35

Click here to skip

Revenue Journal Page 35

Revenue Journal Page 35

Revenue Journal Page 35

The same procedure would be used to post the other

Revenue Journal Page 35

Next, the amount column would be totaled.

The debit total is posted from the revenue

ACCOUNT Accounts Receivable Account No. 12

31 R35 9 600 00 13 000 00

Revenue Journal, page 35 (continued)

Revenue Journal Page 35

The credit total is posted from the revenue

Revenue Journal, page 35

Revenue Journal Page 35

Indicates a credit posting of $9,600 to

All transactions that involve the receipt of cash are

Accounts Receivable Subsidiary Ledger

After all journalizing and posting to individual

CASH RECEIPTS JOURNAL Page 14

A check mark indicates

The total of the accounts in the accounts receivable

The purchases journal is designed for recording

PURCHASES JOURNAL Page 11

PURCHASES JOURNAL Page 11

Note that the March 12 purchase of office equipment for

PURCHASES JOURNAL Page 11

PURCHASES JOURNAL Page 11

The other entries to the accounts payable subsidiary ledger

PURCHASES JOURNAL Page 11

This posting reference

At the end of March, all columns are totaled and