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Chapter 7

Chapter 7 . Subsidiary Ledgers Special Journals. Study Objectives. Identify the basic concepts of an accounting information system. Describe the nature and purpose of a subsidiary ledger. Explain how companies use special journals in journalizing.

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Chapter 7

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  1. Chapter 7 Subsidiary Ledgers Special Journals

  2. Study Objectives • Identify the basic concepts of an accounting information system. • Describe the nature and purpose of a subsidiary ledger. • Explain how companies use special journals in journalizing. • Indicate how companies post a multi-column journal.

  3. Accounting Information Systems Basic Concepts of Accounting Information Systems Subsidiary Ledgers Special Journals Computerized accounting systems Manual accounting systems Example Advantages Sales journal Cash receipts journal Purchases journal Cash payments journal Effects of special journals on general journal

  4. Basic Concepts of AIS • The accounting information system (AIS)collects and processes transaction data and communicates financial information to decision makers. • Includes: • All steps in the accounting cycle. • Documents that provide evidence of transactions. • Manual or computerized accounting system. SO 1 Identify the basic concepts of an accounting information system.

  5. Basic Concepts of AIS Computerized Accounting Systems • Software programs (functions include sales, purchases, receivables, payables, cash receipts and disbursements, and payroll). • Generate financial statements. • Advantages: • Typically enter data only once. • Many human errors are eliminated. • More timely information. SO 1 Identify the basic concepts of an accounting information system.

  6. Special Journals Usedto record similar types of transactions. Illustration 7-5 If a transaction cannot be recorded in a special journal, the company records it in the general journal. SO 3 Explain how companies use special journals in journalizing.

  7. Subsidiary Ledgers Relationship of general ledger and subsidiary ledgers Illustration 7-3 SO 2 Describe the nature and purpose of a subsidiary ledger.

  8. Subsidiary Ledgers Advantages of Subsidiary Ledgers 1. Show in a single account transactions affecting one customer or one creditor. 2. Free the general ledger of excessive details. 3. Help locate errors in individual accounts. 4. Make possible a division of labor. SO 2 Describe the nature and purpose of a subsidiary ledger.

  9. Special Journals Sales Journal Illustration 7-6 • Under a perpetual inventory system, one entry at selling price in 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. SO 3 Explain how companies use special journals in journalizing.

  10. Special Journals Illustration 7-7 POSTING THE SALES JOURNAL Companies make daily postings from the sales journal to the individual accounts receivable in the subsidiary ledger. SO 3 Explain how companies use special journals in journalizing.

  11. Special Journals Illustration 7-7 POSTING THE SALES JOURNAL Posting to the general ledger is done monthly. SO 3 Explain how companies use special journals in journalizing.

  12. Special Journals Cash Receipts Journal Illustration 7-9 • In the cash receipts journal, companies record all receipts of cash. • The posting of the cash receipts journal is similar to the posting of the sale journal. See complete Illustration 7-9 in the text. SO 3 Explain how companies use special journals in journalizing.

  13. Special Journals Illustration 7-13 Purchases Journal Daily postings are made from the purchases journal to the accounts payable subsidiary ledger. SO 4 Indicate how companies post a multi-column journal.

  14. Special Journals Illustration 7-13 Purchases Journal At the end of the accounting period, the company posts totals to the general ledger. SO 4 Indicate how companies post a multi-column journal.

  15. Special Journals Cash Payments Journal Illustration 7-16 • In a cash payments (cash disbursements) journal, companies record all disbursements of cash. • The procedures for posting the cash payments journal are similar to those for other journals. SO 4 Indicate how companies post a multi-column journal.

  16. Special Journals Effects of Special Journals on the General Journal Special journals substantially reduce the number of entries that companies make in the general journal. Only transactions that cannot be entered in a special journal are recorded in the general journal. Also, correcting, adjusting, and closing entries are made in the general journal. SO 4 Indicate how companies post a multi-column journal.

  17. Special Journals Effects of Special Journals on the General Journal Special journals substantially reduce the number of entries that companies make in the general journal. Only transactions that cannot be entered in a special journal are recorded in the general journal. Also, correcting, adjusting, and closing entries are made in the general journal. SO 4 Indicate how companies post a multi-column journal.

  18. ASSIGNMENTS • E7.7 • E7.8 • E7.9 • E7.10 • P7-6A

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