Chapter Accounting Systems and Internal Controls Accounting, 21st Edition Warren Reeve Fess PowerPoint Presentation by Douglas Cloud Professor Emeritus of Accounting Pepperdine University © Copyright 2004 South-Western, a division 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 of of the the action action has has been been automated, automated, so so click click the the mouse mouse when when you you see see this this lightning lightningbolt bolt in in the the lower lower right-hand right-hand corner corner of of the the screen screen You You can can point point and and click click anywhere anywhere on on the the screen screen Objectives Objectives Define an accounting system and After studying this After studying this describe its implementation chapter, chapter, you you should should List the three objectives of internal be be able able to: to: control, and define and give examples of the five elements of internal control Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals Objectives Objectives Describe and give examples of additional subsidiary ledgers and modified special journals Apply computerized accounting to the revenue and collection cycle Describe the basic features of e-commerce Basic Basic Accounting Accounting System System Analysis Design Implementation F E E D B A C K Objectives Objectives of of Internal Internal Control Control To provide reasonable assurance that: assets are safeguarded and used for business purposes business information is accurate employees comply with laws and regulations Elements of Internal Control Control environment Risk assessment Control procedures Monitoring Information and communication Elements of Internal Control Control environment Risk assessment Control procedures Monitoring Information and communication Management Management philosophy philosophy and and operating operating style style influences influences the the control control environment environment CASH PAYMENTS JOURNAL Date 2006 Mar 15 Ck No 150 151 Account Debited Rent Expense Grayco Supplies PAGE Other Accounts Post Accounts Payable Ref Dr Dr 1,600 √ 1,230 Cash Cr 1,600 1,230 Accounts Payable Subsidiary Ledger Grayco Supplies Let’s post to the accounts payable Date Item P.R Dr Cr Balance subsidiary Mar ledger at this time to keep1,230 Bal 15 CP7 1,230 the creditor’s account current - CASH PAYMENTS JOURNAL Date 2006 Mar 15 21 Ck No 150 151 152 Account Debited PAGE Other Accounts Post Accounts Payable Ref Dr Dr Rent Expense Grayco Supplies √ Jewett Business Sys 1,600 1,230 2,800 On March 21, issued Check No 152 as payment on account to Jewett Business Systems, $2,800 Cash Cr 1,600 1,230 2,800 CASH PAYMENTS JOURNAL Date 2006 Mar 15 21 22 Ck No 150 151 152 153 Account Debited PAGE Other Accounts Post Accounts Payable Ref Dr Dr Rent Expense Grayco Supplies √ Jewett Business Sys √ Donnelly Supplies 1,600 1,230 2,800 420 On March 22, issued Check No 153 as payment on account to Donnelly Supplies, $420 Cash Cr 1,600 1,230 2,800 420 CASH PAYMENTS JOURNAL Date 2006 Mar 15 21 22 30 Ck No 150 151 152 153 154 Account Debited PAGE Other Accounts Post Accounts Payable Ref Dr Dr Rent Expense Grayco Supplies √ Jewett Business Sys √ Donnelly Supplies √ Utilities Expense 1,600 1,230 2,800 420 1,050 Cash Cr 1,600 1,230 2,800 420 1,050 On March 30, issued Check No 154 as payment for utility bill, $1,050 CASH PAYMENTS JOURNAL Date 2006 Mar 15 21 22 30 31 Ck No 150 151 152 153 154 155 Account Debited PAGE Other Accounts Post Accounts Payable Ref Dr Dr Rent Expense Grayco Supplies √ Jewett Business Sys √ Donnelly Supplies √ Utilities Expense Howard Supplies 1,600 1,230 2,800 420 1,050 600 On March 31, issued Check No 155 on account to Howard Supplies, $600 Cash Cr 1,600 1,230 2,800 420 1,050 600 CASH PAYMENTS JOURNAL Date 2006 Mar 15 21 22 30 31 31 Ck No 150 151 152 153 154 155 Account Debited Rent Expense Grayco Supplies Jewett Business Sys Donnelly Supplies Utilities Expense Howard Supplies PAGE Other Accounts Post Accounts Payable Ref Dr Dr 1,600 √ √ √ √ 1,230 2,800 420 1,050 2,650 600 5,050 The journal is ruled, summed, and verified for equality of debits and the “Cash Cr.” column Cash Cr 1,600 1,230 2,800 420 1,050 600 7,700 CASH PAYMENTS JOURNAL Date 2006 Mar 15 21 22 30 31 31 Ck No 150 151 152 153 154 155 Account Debited Rent Expense Grayco Supplies Jewett Business Sys Donnelly Supplies Utilities Expense Howard Supplies PAGE Other Accounts Post Accounts Payable Ref Dr Dr 52 √ √ √ 54 √ 1,600 600 5,050 1,600 1,230 2,800 420 1,050 600 7,700 (21) (11) 1,230 2,800 420 1,050 2,650 (√ ) Cash Cr 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 (Controlling) ACCOUNT Accounts Payable Date Item P.R Mar Bal 31 31 No 12 Debit Credit P11 CP7 5,050 6,230 Balance 1,230 7,460 2,410 Donnelly Supplies Date Accounts Jewett Business Payable SystemsSubsidiary also has a zero balance, so Ledger that account was omitted for space reasons Item Mar 19 22 P.R P11 P11 CP7 Debit Credit 420 1,450 420 Balance 420 1,870 1,450 Grayco Supplies Date Item P.R Mar Bal 15 ✔ CP7 -Howard Supplies Date Mar 27 31 Item P.R P11 P11 CP7 Debit Credit 1,230 1,230 Debit Credit 600 960 600 Balance Balance 600 1,560 960 Advantages Advantages of of aa Computerized Computerized Accounting Accounting System System Over Over aa Manual Manual Accounting Accounting System System Computerized systems simplify the recordkeeping process Computerized systems are generally more accurate 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 The The End End ... screen screen Objectives Objectives Define an accounting system and After studying this After studying this describe its implementation chapter, chapter, you you should should List the three... modified special journals Apply computerized accounting to the revenue and collection cycle Describe the basic features of e-commerce Basic Basic Accounting Accounting System System Analysis Design... Separating Operations, Custody of Assets, and Accounting Proofs and Security Measures Custody of Assets Independent check Independent check Operations Accounting Independent check Elements Elements