Accounting Information Systems

C H A P T E R 8C H A P T E R 8

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1. Explain the relationship of the accounting information system to the management information system and identify the components of an AIS

2. Explain the goals and uses of special journals.

3. Describe the use of controlling accounts and subledgers.

Learning ObjectivesLearning Objectives

4. Journalize and post transactions using special journals.

5. Prepare and test the accuracy of subledgers.

6. Apply journalizing and posting of transactions using special journals in a periodic inventory system. (Appendix 8A)

7. Journalize and post transactions with sales taxes to special journals. (Appendix 8B)

Learning ObjectivesLearning Objectives

A system designed to collect and process data within an organization for the purpose of providing users with information.

Management Information SystemsManagement Information Systems

Management Information System

Sales and Marketing

System

Finance System

Accounting Information

System

Human Resources

System

Production System

Internal External

Community

Competitors

Customers

Government

Industry

Suppliers

The people, records, methods, and equipment that collect and process data from transactions and organize them in useful forms, and communicate results to decision makers.

Accounting Information Systems Accounting Information Systems (AIS)(AIS)

Components of an AIS

Accounting Information

System

Accounts Payable

PayrollCapital Assets

Accounts Receivable

Inputs

Source Documents

Outputs

Reports/ Information to Internal/

External Users

Feedback Loop

Impact of technology-based systems on accounting. Electronic funds transfer (EFT) E-commerce Computer hardware Computer software

Accounting and TechnologyAccounting and Technology

Most organizations use Special Journals to enhance efficiency of transaction processing.Types Sales Journal Cash Receipts Journal Purchases Journal Cash Disbursements Journal

Special JournalsSpecial Journals

A listing of individual accounts with a common characteristic.Common Subledgers Accounts Receivable Accounts Payable Inventory

SubledgersSubledgers

ACCOUNTS RECEIVABLE LEDGER

Adams Company

Date PR Debit Credit Balance

Jan. 1 S5 500 500ACCOUNTS RECEIVABLE LEDGER

Baine Company

Date PR Debit Credit Balance

Jan. 16 S5 1,000 1,000ACCOUNTS RECEIVABLE LEDGER

Cook Company

Date PR Debit Credit Balance

Jan. 25 S5 415 415

Accounts Receivable Subledger

A separate subledger account is used to show how much each

individual customer owes.

A separate subledger account is used to show how much each

individual customer owes.

ACCOUNTS RECEIVABLE LEDGER

Adams Company

Date PR Debit Credit Balance

Jan. 1 S5 500 500ACCOUNTS RECEIVABLE LEDGER

Baine Company

Date PR Debit Credit Balance

Jan. 16 S5 1,000 1,000ACCOUNTS RECEIVABLE LEDGER

Cook Company

Date PR Debit Credit Balance

Jan. 25 S5 415 415

After all items are posted,

the balance in the Accounts Receivable controlling

account must equal the sum

of the balances in

the subledger.

Accounts Receivable Subledger

A subsidiary ledger:   A) Includes transactions not covered by special

journals.  

B) Is a listing of all of the accounts of a business.  

C) Is a listing of individual accounts with a common characteristic.  

D) Is a listing of all accounts with balances.  

E) Is a listing of all special journals.

Mini-QuizMini-Quiz

A subsidiary ledger:   A) Includes transactions not covered by special

journals.  

B) Is a listing of all of the accounts of a business.  

C) Is a listing of individual accounts with a common characteristic.  

D) Is a listing of all accounts with balances.  

E) Is a listing of all special journals.

Mini-QuizMini-Quiz

The sales journal is used to record sales of merchandise on credit.

Sales JournalSales Journal

On February 2, Jason Henry purchased $450 of merchandise on account from Outdoors Unlimited. The goods originally cost Outdoors $315. Record the entry in the Sales Journal.

(Assume the use of a perpetual inventory system.)

Sales Journal — Example

Sales Journal

Page 1

DateAccount Debited

Invoice Number PR

Dr. A/R Cr. Sales

Dr. COGS Cr.

Inventory2011

Feb. 2 Jason Henry 307 450 315

SALES JOURNAL

Since each transaction yields a debit to Accounts Receivable and a credit to Sales, we need only one

column for these two accounts. This column total is posted monthly.

Sales Journal

Page 1

DateAccount Debited

Invoice Number PR

Dr. A/R Cr. Sales

Dr. COGS Cr.

Inventory2011

Feb. 2 Jason Henry 307 450 315

SALES JOURNAL

Similarly, each transaction yields a debit to Cost of Goods Sold and a credit to Inventory. Therefore, these accounts can also be included together in one column.

This column total would also be posted monthly.

ACCOUNTS RECEIVABLE SUBLEDGER

Jason Henry

Date PR Debit Credit Balance

Feb. 2 450 450

Sales JournalPage 1

DateAccount Debited

Invoice Number PR

Dr. A/R Cr. Sales

Dr. COGS Cr.

Inventory2011

Feb. 2 Jason Henry 307 450 315

SALES JOURNAL

Daily, each transaction is posted

to the appropriate Accounts Receivable subledger account.

ACCOUNTS RECEIVABLE SUBLEDGER

Jason Henry

Date PR Debit Credit Balance

2011

Feb. 2 S1 450 450

Sales Journal

Page 1

DateAccount Debited

Invoice Number PR

Dr. A/R Cr. Sales

Dr. COGS Cr.

Inventory2011

Feb. 2 Jason Henry 307 450 315

SALES JOURNAL

A in the PR column indicates

the transaction has been posted to the subledger account.

Here is the Sales Journal after recording some additional sales.

Sales Journal

Page 1

DateAccount Debited

Invoice Number PR

Dr. A/R Cr. Sales

Dr. COGS Cr.

Inventory2011

Feb. 2 Jason Henry 307 450 3157 Albert Co. 308 500 35513 Bam Moore 309 350 26015 Paul Roth 310 200 150

SALES JOURNAL

Sales JournalPage 1

DateAccount Debited

Invoice Number PR

Dr. A/R Cr. Sales

Dr. COGS Cr.

Inventory2011

Feb. 2 Jason Henry 307 450 315 7 Albert Co. 308 500 355 13 Bam Moore 309 350 260 15 Paul Roth 310 200 150 22 Jason Henry 311 225 155 25 Frank Booth 312 175 95 28 Albert Co. 313 250 170

28 Totals 2,150 1,500

(106/413) (502/119)

SALES JOURNAL

On Feb. 28th , post the column total to Accounts

Receivable and Sales.Feb. 2 S1 2,150 2,150

Feb. 2 S1 2,150 2,150

2011

2011

Sales JournalPage 1

DateAccount Debited

Invoice Number PR

Dr. A/R Cr. Sales

Dr. COGS Cr.

Inventory2011

Feb. 2 Jason Henry 307 450 315 7 Albert Co. 308 500 355 13 Bam Moore 309 350 260 15 Paul Roth 310 200 150 22 Jason Henry 311 225 155 25 Frank Booth 312 175 95 28 Albert Co. 313 250 170

28 Totals 2,150 1,500

(106/413) (502/119)

SALES JOURNAL

Now post to the COGS and Inventory accounts …

Feb. 2 S1 1,500 1,500

Feb. 2 S1 1,500 1,5002011

2011

Sales JournalPage 1

DateAccount Debited

Invoice Number PR

Dr. A/R Cr. Sales

Dr. COGS Cr.

Inventory2011

Feb. 2 Jason Henry 307 450 315 7 Albert Co. 308 500 355 13 Bam Moore 309 350 260 15 Paul Roth 310 200 150 22 Jason Henry 311 225 155 25 Frank Booth 312 175 95 28 Albert Co. 313 250 170

28 Totals 2,150 1,500

(106/413) (502/119)

SALES JOURNAL

… and include the posting references.

Feb. 2 S1 1,500 1,500

Feb. 2 S1 1,500 1,5002011

2011

Schedule of Accounts ReceivableFebruary 28, 2011

Frank Booth 175$ Jason Henry 675 Bam Moore 350 Paul Roth 200 Albert Co. 750 Total accounts receivable 2,150$

The Accounts Receivable controlling

account and the subledger are in balance.

Testing the Ledger

GENERAL LEDGER

Accounts Receivable No. 106

Date PR Debit Credit Balance

2011

Feb 28 S1 2,150 2,150

If a company has few sales returns, they may record them in the General Journal.

But, if a company has lots of sales returns, they may use a Sales Returns and Allowances Journal.

Sales Returns and Allowances

The cash receipts journal is used to record all receipts of cash.

Cash Receipts JournalCash Receipts Journal

Categories of Cash ReceiptsCash from cash salesCash from credit customersCash from other sources

Cash Receipts Journal — ExampleCASH RECEIPTS JOURNAL Page 1

Date Accounts Credited PR ExplanationCash Dr.

Sales Discount

Dr.

Accts. Rec. Cr.

Sales Cr.

Other Accts.

Cr.

COGS Dr. Inventory

Cr2011

Feb. 7 Sales Cash sale 4,450 4,450 3,150 12 Jason Henry Invoice, Feb 2 441 9 450 14 Sales Cash sale 3,925 3,925 2,950 17 Albert Co. Invoice, Feb 7 490 10 500 20 Note payable Note to bank 750 750 21 Sales Cash sale 4,700 4,700 3,400 22 Interest revenue Bank account 250 250 23 Bam Moore Invoice, Feb 13 343 7 350 25 Paul Roth Invoice, Feb 17 196 4 200 28 Sales Cash sale 4,225 4,225 3,050

28 Total 19,770 30 1,500 17,300 1,000 12,550

(101) (415) (106) (413) (x) (502/119)

Amount is posted individually to subledger.Acct. No. Amount is posted to specified account.

Cash Receipts Journal

CASH RECEIPTS JOURNAL Page 1

Date Accounts Credited PR Explanation Cash Dr.

Sales Discount

Dr.Accts. Rec.

Cr. Sales Cr.

Other Accts.

Cr.COGS Dr.

Inventory Cr2011

Feb. 7 Sales Cash sale 4,450 4,450 3,150 12 Jason Henry Invoice, Feb 2 441 9 450 14 Sales Cash sale 3,925 3,925 2,950 17 Albert Co. Invoice, Feb 7 490 10 500

20 Note payable 245 Note to bank 750 750 21 Sales Cash sale 4,700 4,700 3,400

22 Interest revenue 409 Bank account 250 250 23 Bam Moore Invoice, Feb 13 343 7 350 25 Paul Roth Invoice, Feb 17 196 4 200 28 Sales Cash sale 4,225 4,225 3,050

28 Total 19,770 30 1,500 17,300 1,000 12,550

(101) (415) (106) (413) (x) (502/119)

The Purchases Journal is used to record all purchases on credit.

Purchases JournalPurchases Journal

Amount is not posted individually to an account.Amount is posted individually to subsidiary ledger.

Acct. No. Amount is posted to specified account.

Purchases Journal

PURCHASES JOURNAL Page 3

Date AccountInvoice

Date Terms PR

Accts. Payable

Cr.Inventory

Dr.

Office Supplies

Dr.

Other Accts.

Dr.2011

Feb 3 Horung Supply Co Feb. 2 n/30 350 275 755 Ace Mfg. Co 5 2/10,n/30 200 20013 Wynet & Co. 10 2/10,n/30 150 15020 Smite Co. 18 2/10,n/30 300 30025 Ace Mfg. Co 24 2/10,n/30 100 10028 Store supplies/ITT Co. 28 n/30 125/ 225 125 25 75

28 Totals 1,325 1,150 100 75

(201) (505) (124) ( )

The Cash Disbursements

Journal is used to record all

payments of cash.

Outdoors Unlimited

Cash Disbursements JournalCash Disbursements Journal

Amount is not posted individually to an account.Amount is posted individually to subledger.

Acct. No. Amount is posted to specified account.

Cash Disbursements Journal

CASH DISBURSEMENTS JOURNAL Page 1

Date Ch. No. Payee Account Debited PRCash Cr.

Merch. Inventory

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.2011

Feb. 3 105 L & N Railroad Inventory 119 15 155 106 East Sales Co. Inventory 119 25 2513 107 Ace Mfg. Co Ace Mfg. Co. 196 4 20020 108 Jerry Hale Salaries expense 622 250 25025 109 Wynet & Co. Wynet & Co. 147 3 15028 110 Smite Co. Smite Co. 294 6 300

28 Totals 927 13 290 650

(101) (119) ( ) (201)

Used for all transactions not recorded in a special journal. Closing entries Adjusting entries Correcting entries Other entries

General JournalGeneral Journal

Mini-QuizMini-Quiz

Purchased equipment on credit.

Sold merchandise for cash.

Paid for supplies that were purchased on account.

Sold merchandise on account.

Give the name of the journal in which the following transactions should be recorded.

PJ

CRJ

CDJ

SJ

Recording and posting is similar to a perpetual system.

Some of the columns change in a periodic system.

Special Journals Under a Special Journals Under a Periodic System-Appendix 8APeriodic System-Appendix 8A

The column for Cost of Goods

Sold and Inventory is not needed with the

periodic system.

Sales Journal — Periodic System

SALES JOURNAL Page 3

DateAccount Debited

Invoice Number PR

Dr. A/R Cr. Sales

2011Feb. 2 Jason Henry 307 450

7 Albert Co. 308 50013 Bam Moore 309 35015 Paul Roth 310 20022 Jason Henry 311 22525 Frank Booth 312 17528 Albert Co. 313 250

28 Total 2,150

(106/413)

Cash Receipts Journal Periodic System

CASH RECEIPTS JOURNAL Page 1

Date Accounts Credited PR Explanation Cash Dr.

Sales Discount

Dr.Accts. Rec.

Cr. Sales Cr.

Other Accts.

Cr.2011

Feb. 7 Sales Cash sale 4,450 4,450 12 Jason Henry Invoice, Feb 2 441 9 450 14 Sales Cash sale 3,925 3,925 17 Albert Co. Invoice, Feb 7 490 10 500

20 Note payable 245 Note to bank 750 750 21 Sales Cash sale 4,700 4,700

22 Interest revenue 409 Bank account 250 250 23 Bam Moore Invoice, Feb 13 343 7 350 25 Paul Roth Invoice, Feb 17 196 4 200 28 Sales Cash sale 4,225 4,225

28 Total 19,770 30 1,500 17,300 1,000

(101) (415) (106) (413) (x)

The column for Cost of Goods Sold and Inventory is not needed with the periodic system.

Purchases Journal — Periodic SystemPURCHASES JOURNAL Page 3

Date AccountInvoice

Date Terms PR

Accts. Payable

Cr.Purchases

Dr.

Office Supplies

Dr.

Other Accts.

Dr.2011

Feb 3 Horung Supply Co Feb. 2 n/30 350 275 755 Ace Mfg. Co 5 2/10,n/30 200 20013 Wynet & Co. 10 2/10,n/30 150 15020 Smite Co. 18 2/10,n/30 300 30025 Ace Mfg. Co 24 2/10,n/30 100 10028 Store supplies/ITT Co. 28 n/30 125/ 225 125 25 75

28 Totals 1,325 1,150 100 75

(201) (505) (124) ( )

The Inventory column in the perpetual system is replaced with Purchases column in the periodic

system.

Cash Disbursements JournalPeriodic System

CASH DISBURSEMENTS JOURNAL Page 1

Date Ch. No. Payee Account Debited PRCash Cr.

Purchase Discounts

Cr.

Other Accounts

Dr.

Accounts Payable

Dr.2011

Feb. 3 105 L & N Railroad Inventory 119 15 155 106 East Sales Co. Inventory 119 25 2513 107 Ace Mfg. Co Ace Mfg. Co. 196 4 20020 108 Jerry Hale Salaries expense 622 250 25025 109 Wynet & Co. Wynet & Co. 147 3 15028 110 Smite Co. Smite Co. 294 6 300

28 Totals 927 13 290 650

(101) (507) (x) (201)

The Inventory column in the perpetual system is replaced with Purchases Discounts column in the

periodic system.

Additional columns must be added to special journals to record PST and GST.

Column Needed

JournalPST

PayableGST

PayableGST

Receivable

Sales yes yes

Cash Rec. yes yes

Purchases yes

Cash Disb. yes

Special Journals and Sales Special Journals and Sales Taxes- Appendix 8BTaxes- Appendix 8B

Identify the different types of special journals?

Sales journal

Cash receipts journal

Purchases journal

Disbursements journal

ReviewReview

What is the purpose of special journals?Special journals help reduce the costs related to the time and effort of posting accounts.

ReviewReview

Why should sales to and receipts of cash from credit customers be recorded and posted daily?

Daily recording and posting of credit sales and cash receipts from customers provides up-to-date information used in decisions about granting credit to customers. Also, up-to-date account balances are needed if customers inquire about the amount of their balances.

ReviewReview

End of Chapter End of Chapter