DOCSLIB.ORG

Accounting 1 Instructor Notes

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Accounting 1 Instructor Notes Accounting 1 Instructor Notes CHAPTER 5 ACCOUNTING SYSTEMS SPECIAL JOURNALS AND SUBSIDIARY LEDGERS You interact with accounting systems, maybe even everyday. You write a check, you use your debit or credit cards, you make a deposit into your checking or savings accounts. These are all types of business transaction, taking place between you and your bank. You record deposits in your check registrar as additions, you subtract out when you use your debit card. Now imagine how complicated this type of daily transactions can become for a large business? Think about how long it took you to post each transaction in the chapter 2 problems? This is where Special Journals come into the picture. They can be used to total and summarize a group of transactions to be posted, instead of posting each transaction individual to the ledger accounts. There is also programs (for example, Quicken or Quickbooks) that can handle easily large amounts of transactions. We will also be talking about subsidiary ledgers. A company lists one balance for Accounts Receivable on the balance sheet, but how do they keep track of how much is owed and by whom? Subsidiary ledgers can provide that information. Introduction A. Subsidiary ledgers (detailed in next section) are used to provide information on the amounts due from various customers (AR) and amounts owed to various creditors (AP). Remember General Ledgers still keep a total balance of all subsidiary ledgers (example all that is owed in AR or AP). B. Special Journals for certain transactions that occur frequently can eliminate some needless writing. 1. Revenue or Sales Journal (abbreviated by R or S) -- Sale of merchandise on account. Therefore it must be Dr.-- AR Cr.-- Fees Earned or Sales 2. Cash Receipts Journal (CR) -- Receipt of cash from any source. Therefore it must be Dr. -- Cash Cr. -- can be Fees Earned, Sales, Capital, Cash refund, AR payment, etc. 3. Purchases Journal (P) -- Purchase of merchandise or other items on account. Therefore it must be Cr. -- AP Dr. -- can be Merchandise Inventory, Equipment, Supplies, anything that is bought on Account. 4. Cash Payments Journal (CP) -- Payment of cash for any purpose. Therefore it must be Cr. -- Cash Dr. -- can be Merchandise Inventory, Equipment, Supplies, Drawing, payment on AP, Expenses, etc. 5. General Journal (G) -- same old journal you are used to. Used for anything else that does not fit in any of the above journals such as returns and allowances. Adjusting and closing entries would also be in the General Journal. A transaction will go to one journal or another journal, not more than one journal!!!! SUBSIDIARY LEDGERS There should also be forms filled out for what we call subsidiary ledgers. This is to keep track of the individual companies that we buy from (AP), and sell to (AR). That way we know exactly which company owes us how much and vise versa. A way to help you out would be to look at the following: For an Accounts Receivable customer: A. Look at the Sales/Revenue journal for sales on account to be recorded to customer's individual subsidiary ledger. B. Look at the Cash Receipts journal and record any cash received from the customer also record on their subsidiary ledger. C. Look at the General Journal incase there is a credit for the customer that needs to be recorded on the subsidiary ledger. For Accounts Receivable, fees that we earned on account, would be a debit (or the left side of a T-Account). When we receive payment from a customer on account that would be a credit (or the right side of a T-account). The T-Accounts for a customer would be increase on the left, decrease on the right, just like the AR account itself. Invoiced ABC Company for fees earned on Account $2,000. You would debit the account.: ABC Company 2,000 l l l As we receive payment from the customer, you would credit the account. A Customer Balance Summary (AR Subsidiary): This is just listing all customers and how much they owe us (balance in account). We total it, then put it as a debit to AR. For example, suppose we have ABC Company balance and two other companies that owe us for fees earned on account: ABC Company $2,000 EFT Company $1,000 TTT Company $3,000 Total AR $6,000 The $6,000 total is then posted as a debit to AR account. Accounts Receivable 6,000 l l l For an Accounts Payable: A. Look at the Purchases Journal for purchases on account to be recorded to the individual subsidiary ledger of the company from which the purchase was made. B. Look at the Cash Payments Journal and record any cash payments we made to the company we purchased from also to be recorded on the subsidiary ledger. C. Look at the General Journal incase there is a credit given to us that needs to be recorded on the subsidiary ledger. _____________________________________________________ SAMPLE PROBLEMS: Look at this sample problem with sample transaction that identifies which of the five special journals the entry would be written in. Special Journals Problem May 1 Owner invested $20,000 cash - CR May 2 Cash sale of $1,000 - CR May 3 Credit sale of $2,000 to Sooner Enterprises - R May 4 Credit sale of $2,000 to Baker Corp. - R May 5 Purchase Merchandise on Credit for $3,000 from Bigger Corporation - P May 6 Purchased equipment for cash of $5,000 - CP May 7 Received $500 on account from Sooner Enterprise - CR May 8 Made a $500 payment on account to Bigger Corporation - CP May 9 Gave $300 credit to Baker Corp. for merchandised returned - G May 10 Purchased $500 worth or supplies with cash - CP May 11 Received cash of $100 for supplies we returned - CR May 12 Made payment to Bigger of $500 - CP Subsidiary Ledgers Problem 1. Accounts Payable Based on the transaction above, those items that were purchased on account would go in an accounts payable subsidiary ledger. If we made any payments on our account or received any credit, that would also go in the AP subsidiary. Here is how it would look as a t-account and in a subsidiary ledger for Bigger, the only company we purchased from on account. Accounts Payable T-account and Subsidiary Ledger. What is the amount we owe to: __- Bigger _________+_______ │ May 5 $3,000 May 8 $500 │ May 12 $500 │ │ Balance $2,000 Bigger DATE Debit Credit Balance (to AP - (to AP - payment) purchase) May 5 3,000 3,000 May 8 500 2,500 May 12 500 2,000 2. Accounts Receivable Based on the transaction above, fees earned or sales on account would go in an accounts receivable subsidiary ledger. If we received any payments on our customers on their account or issued any credit, that would also go in the AR subsidiary. Here is how it would look as a t-account and in a subsidiary ledger for Sooner and Baker, the two companies we earned fees from on account. Accounts Receivable T-account and Subsidiary Ledgers. T he following companies owe us: __+ __ Sooner _____ ___-_____ __ __+ Baker _____ ___-_ May 3 $3,000 │ May 4 $2,000 │ │ May 7 $500 │ May 9 $300 │ │ Balance $2,500 │ Balance $1,700 │ Sooner DATE Debit Credit Balance (to AR - (to AR - purchase) Payment) May 3 3,000 3,000 May 7 500 2,500 Baker DATE Debit Credit Balance May 4 2,000 2,000 May 9 300 1,700 TEST NUMBER 2 You are now ready for Test #2. You will be tested over: Worksheet Adjusting Entries Closing Entries Financial Statements Special Journals Identification (which journal an entry would be recorded) Subsidiary Ledgers Again, your homework and chapter notes are excellent study tools. Especially Problem 4-3A, Ex 5-2, 5-3, and 5-4. .
Load more

Recommended publications
  • Accounting I
    Accounting I Course Text Wild, John J., Kermit D. Larson, and Barbara Chiapetta. Fundamental Accounting Principles, Volume 1, 18th edition. McGraw-Hill/Irwin, 2007. ISBN 0-07-328661-3 Course Description This course focuses on ways in which accounting principles are used in business operations. Students learn to identify and use Generally Accepted Accounting Principles (GAAP), ledgers and journals throughout the steps of the accounting cycle. This course introduces bank reconciliation methods, balance sheets, assets, and liabilities. Students also learn about financial statements including assets, liabilities, and equity. Business ethics are also discussed. Course Objectives After completing this course, students will be able to: • Identify and apply Generally Accepted Accounting Principles (GAAP). • Apply the steps of the accounting cycle. • Post and analyze transactions using ledgers and journals. • Record adjusting entries for prepaid expenses and unearned revenue. • Complete an adjusted trial balance. • Perform a bank reconciliation. • Explain the purpose of the sales journal and the Accounts Receivable ledger and post entries to both. • Record the costs associated with the acquisition of property, plant, and equipment. • Explain the purpose of and prepare entries for the purchase order journal and accounts payable (A/P) ledger. • Identify the fundamental principles of an accounting information system. Course Prerequisites There are no prerequisites to take Accounting I. Course Evaluation Criteria StraighterLine does not apply letter grades. Students earn a score as a percentage of 100%. A passing percentage is 70% or higher. If you have chosen a Partner College to award credit for this course, your final grade will be based upon that college's grading scale.
    [Show full text]
  • Accounting for a Service Business Organized As a Proprietorship (Chapters 2 – 10)
    Unit 1: Accounting for a Service Business Organized as a Proprietorship (Chapters 2 – 10) I. Analyzing Business Transactions A. Effect of business transactions on the fundamental accounting equation B. Principles of debit and credit C. Recording balances in the account (opening entry) D. Recording changes in asset liability and owner’s equity accounts II. Journalizing (Chapter 5) A. General Journal (book of original entry) B. Source documents C. Journalizing Procedures 1. Date 2. Titles of the accounts to be debited and credited 3. Amounts of the debits and credits 4. Source Document (cross- reference for auditing) D. Error Correction (Chapter 8 - pp.183-187) III. Posting (Chapter 6) A. Chart of Accounts B. General Ledger C. Ledger account format (four amount columns) 1. Account Title 2. Account Number 3. Date Accounting – Unit 1 – p. 1 4. Item 5. Posting Reference 6. Debit 7. Credit 8. Debit Balance 9. Credit Balance D. Opening an account E. Journal to general ledger posting 1. Recording Date 2. Amount of the debit or credit 3. Amount of the debit or credit balance 4. Posting References (In general ledger AND general journal) IV. Cash Control Systems (Banking and Petty Cash) (Chapter 7 & Checking Account Simulation Packet Provided By Rome Savings Bank) A. Checking Accounts 1. Opening an account - Authorizing Signatures 2. Preparing Checks a) Parts of a check b) Preparing Check Stubs/Check Register c) Voiding a check 3. Depositing Cash 4. Endorsing Checks a) Blank endorsement Accounting – Unit 1 – p. 2 b) Special endorsement c) Restrictive endorsement B. Bank Statements 1. Verifying a Bank Statement 2.
    [Show full text]
  • Basic Accounting Terminology: • Event: a Happening Or Consequence
    GOVERNMENTAL ACCOUNTING All those involved in the oversight or management of government operations, and those whose livelihood and interest rely on the finances of local governments, need to have a clear understanding of governmental accounting, auditing, and financial reporting which are based on a sound set of principles and interrelated practices and procedures. Accounting, financial reporting, and the financial statement audit provide the informational infrastructure of public finance. Accountability: Term used by GASB to describe a government’s duty to justify the raising and spending of public resources. The GASB has identified accountability as the “paramount objective” of financial reporting “from which all other objectives must flow”. Accounting and financial reporting (primarily the responsibility of management) are complementary rather than identical. Accounting: The process of assembling, analyzing, classifying, and recording data relevant to a government’s finances. Financial reporting: “Accounting” and “financial reporting” are similar but distinctly different terms that are often used together. The process of taking the information thus assembled, analyzed, classified, and recorded and providing it in usable form to those who need it. Financial reporting can take one of three forms: internal financial reporting (management reports), special purpose financial reporting (outside parties), and general purpose external financial reporting (GPEFR). The nationally recognized standards that govern GPEFR are known as generally accepted accounting principles (GAAP). 1 Display: The display method of communication provides that items are reported as dollar amounts on the face of the financial statements if they both 1) meet the definition of one of the seven financial statement elements and 2) can be reliably measured.
    [Show full text]
  • Experiential Learning Portfolio for 10101101 Financial Accounting 1
    Experiential Learning Portfolio for 10101101 Financial Accounting 1 Student Contact Information: Name: _________________________________________Student ID#____________________ Email: _________________________________________Phone:________________________ It is required that you speak with the Academic Dean or instructor who teaches this course prior to completing a portfolio. Directions Consider your prior work, military, volunteer, education, training and/or other life experiences as they relate to each competency and its learning objectives. Courses with competencies that include speeches, oral presentations, or skill demonstrations may require scheduling face-to- face sessions. You can complete all of your work within this document using the same font, following the template format. 1. Complete the Student Contact Information at the top of this page. 2. Write an Introduction to the portfolio. Briefly introduce yourself to the reviewer summarizing your experiences related to this course and your future goals. 3. Complete each “Describe your learning and experience with this competency” section in the space below each competency and its criteria and learning objectives. Focus on the following: • What did you learn? • How did you learn through your experience? • How has that learning impacted your work and/or life? 4. Compile all required and any suggested artifacts (documents and other products that demonstrate learning). • Label artifacts as noted in the competency • Scan paper artifacts • Provide links to video artifacts • Attach all artifacts to the end of the portfolio 5. Write a Conclusion for your portfolio. Briefly summarize how you have met the competencies. 6. Proofread. Overall appearance, organization, spelling, and grammar will be considered in the review of the portfolio. 7. Complete the Learning Source Table.
    [Show full text]
  • Solutions to Questions for Chap 6
    CHAPTER 6 Accounting Information Systems ANSWERS TO QUESTIONS 01. (a) An accounting information system involves collecting and processing data and disseminating financial information. (b) Disagree. An accounting information system applies regardless of whether manual or com- puterized procedures are used to process the transaction data. 02. There are three principles for developing an accounting information system: Cost awareness. The system must be cost-effective; that is, the benefits obtained from the infor- mation disseminated must outweigh the cost of providing it. Useful output. To be useful, information must be understandable, relevant, reliable, timely, and accurate. Flexibility. The system should be able to accommodate a variety of users and changing informa- tion needs. 03. Cost awareness—The system must be cost-effective; that is, the benefits obtained from the infor- mation disseminated must outweigh the cost of providing it. In this case, the cost appears to out- weigh the benefits. 04. The phases of an accounting system are: Analysis, which involves planning and identifying information needs and sources. Design, which includes creating forms, documents, procedures, job descriptions, and reports. Implementation, which consists of installing the system, training personnel, and making the system wholly operational. Follow-up, which involves evaluating and monitoring effectiveness and efficiency and correcting any weaknesses. 05. A subsidiary ledger is a group of accounts with a common characteristic. The accounts are as- sembled together to facilitate the accounting process by freeing the general ledger from details concerning individual balances. The advantages of using subsidiary ledgers are that they: < Permit transactions affecting a single customer or single creditor to be shown in a single account, thus providing necessary up-to-date information on specific account balances.
    [Show full text]
  • Special Journals
    SPECIAL JOURNALS Special journals are used to make recording and posting frequently occurring transactions more efficient. Special journals are customized to fit the needs of each business. Special journals are made up of “special” columns labeled with account titles for accounts used in frequently occurring transactions. All special journals also include an “Other” or “Sundry” column that is used to hold accounts and amounts for items that do not fit in the special columns. When using a special journal system, analyze transactions as normal and record the transaction in the appropriate journal as discussed below. Posting from special journals occurs differently from the General Journal. Any amounts affecting a customer or creditor are posted immediately from the special journal to the appropriate account in the Accounts Receivable or Accounts Payable subsidiary ledger. A check mark is placed in the Post Reference column of the journal to indicate this amount has been posted to the customer or creditor account. Any amounts in the Other column are posted immediately to the account written in the account title column. The account number is placed in the post reference column to show this amount has been posted. Special columns are posted at the end of the month as a column total. Account numbers are placed under each column total in parentheses to indicate that these amounts have been posted. A check mark is placed under the Other column total to indicate that this amount has already been posted (when the individual amounts were posted). POSTING ORDER OF JOURNALS In order to avoid negative balances, the following order of posting column totals is recommended: Purchases Sales/Revenue Cash Receipts Cash Payments MORE ABOUT SPECIAL JOURNALS Four special journals are generally used—Purchases Journal, Revenue/Sales Journal, Cash Receipts Journal and Cash Payments Journal.
    [Show full text]
  • Business Accounting Records .Dennis E
    THE EVALUATION OF MODERN BUSINESS ACCOUNTING RECORDS .DENNIS E. MEISSNER Evaluation of record series for the purpose of bulk reduction is one of the more salient professional responsibilities facing archi- vists today. Problems imposed by bulk become especially vexatious in the cases of large modern business organizations, in great part due to the many series of accounting records created to control and monitor the financial workings of a company. How many of these records must we retain in order to preserve an accurate picture of the financial history of a business organization? Among some sixty articles and book chapters published over the• past forty years relating to business archives and business records, fewer than one-fourth offered any practical appraisal guidelines, and only one-third of that fraction were concerned to any extent with accounting records.' Most appraisal recommendations per- tained instead to narrative format business records such as the sundry levels of corporate correspondence and memoranda; the various series of minutes, annual reports, corporate periodicals, and other publications; publicity releases and news clippings; and other largely textual records. Those pertaining to accounting records tended to make specific retention prescriptions without providing any rationale for so doing. Furthermore, not all writers agree on what particular records should be preserved. As a beginning attempt to fill the apparent void, this paper will describe accounting records common to business in the late nineteenth and twentieth centuries and will suggest ways to define their archival value. There are a few general principles for evaluating accounting records. The first principle is that a sufficient combination of ac- counting records should be kept so as to document completely the revenues, expenses, and net financial picture of the business at any point in its existence, and also to document the accounting methods 76 THE MIDWESTERN ARCHIVIST Vol.
    [Show full text]
  • Presentation of Journal Entries
    Presentation Of Journal Entries Sometimes stalked Quill resiles her halloo precariously, but domiciliary Kelly illiberalize gradually or carbonating mordantly. Sammy is glutinous and donates lispingly while draggy Yankee neaten and surgings. Unsonsy Levi romance no tomes fazing helluva after Janos tan brainsickly, quite sorrel. The template and entries of Expenses journal entries. Funds management may be presented in the presentation of presenting and journal entries. Journal Entries Daily Transactions Journalizing Transactions July 1 Issued 3000 shares of common library for 30000 July 3 Purchased 60000 of clothing. MASBO 2016 Presentations 2016 Annual Presentations. Entered and parked by kind then posted by accounting General Ledger Account. In November 2014 FASB issued Accounting Standards Update ASU. If the presentation of. Define custom source values in other agency. These transactions of presenting and presented separately from a unique code field is recorded into account to? Presentation Writing I September 15 2013 Journal Entry. 35 Use Journal Entries to Record Transactions and glamour to T. Journal Entries in ConnectCarolina Finance and Budget. Journal Entries Learn it you transition to bow about insurance expense definition classification and presentation journal entries and examples. Solved Journal entries and financial statement presentation of. Please take the present value or more products transfers must perform first. Lots our privacy policy to a presentation, while one account is working backward from the source is needed
    [Show full text]
  • Expectations and Outcomes Accounting 1
    DISTRICTOF BLACKRIVER FALLS Expectations and Outcomes Inspiring Excellence Grade Level/Course: 10-12 Content Area: Business Unit Title Guarantees Starting a Proprietorship • Define accounting terms related to starting a service Business organized as a proprietorship • Identify accounting concepts and practices related to starting a service Business organized as a proprietorship • Classify accounts as assets, liabilities or owner’s equity and demonstrate their relationships in the accounting equation • Analyze transactions in an accounting equation • Prepare a balance sheet Starting a Proprietorship: Changes • Define terms related to changes that affect owner’s equity That Affect Owner’s Equity • Identify concepts and practices related to changes that affect a service business organized as a proprietorship • Analyze transactions in an accounting equation Prepare a Balance sheet Analyzing Transactions into Debit and • Define terms related to analyzing transactions into deBit and credit parts Credit Parts and Recording • Identify practices related to analyzing transactions into deBit and credit parts Transactions in a General Journal • Use T accounts to analyze transactions showing which accounts are deBited and credited • Analyze how transactions to set up a business affect accounts • Analyze how transactions affect owner’s equity accounts • Define terms related to journalizing transactions • Identify concepts and practices related to journalizing transactions • Record in a general journal transactions to set up a business • Record in a
    [Show full text]
  • Part Two Analyzing Sales and Cash Receipts
    Part Two Analyzing Sales And Cash Receipts Haptic or iciest, Vernen never outburns any Neoptolemus! Whitman remains reposeful: she thermostat her prions surface too abjectly? Swelled-headed and isochasmic Yacov gutturalize his cherry-pie spurts debases ostensibly. Accounting chapter 6 study take part 2. Century 21 Accounting Multicolumn Journal 2012 Update. Knowing that item is then dried in separate note when you confirm your page is focused on each item or in several different? Is part two t account an inconvenience, part two new roads or as its. Chapter 10 Journalizing Sales and Cash Receipts Using Special Journals. Which two parts. Analyzing Sales Transactions Store Credit Card Sales Charge customers use credit cards. ChapterNotes-2 MGT 11A Chapter 6 Reporting and. Multiple choice Quiz McGraw Hill Canada. Which wreck a solitude of money cash receipts and disbursements for. Fundamentals of Accounting Fall 2010 About Cindy's Website. If two amounts are recorded on the same standing of the accounting equation in equation having no lonter. Chapter 11 part three analyzing transactions recorded in special journals. Social security tax expense accounts receivable subsidiary ledgers can change at clubs and ledgers, receipts and two analyzing cash sales of the transactions into their stock? This will be covered in a receipt. Sales returns and cash sales are not recorded in this journal Entries. Patent Accounting Journal Entry Mecenatetvit. Date II General Journal II Debit Credit a Cash 14750 K Spade Capital. Answer The operating activities section of the statement of cash. California residents collected in? For the receipts and two analyzing sales tax on prior fiscal period also used by providing this transaction does the direct method as shown.
    [Show full text]
  • Ch7-2-Special Journals
    Accounting Systems – Special Journals and Subsidiary Ledgers Chapter 7 Time-Saving Devices Journals Ledgers Problems of Having Only One Journal 1. Only one person can work at a time 2. Book becomes __________________________ Solution: ____________________________________ · Saves a little time ________________________ · Saves a ___________________ of time posting Problems of Having Only One Ledger 1. Only one person can work at a time 2. Book becomes __________________________ Solution: ____________________________________ Account which replaces those removed from the General Ledger is called a ___________ . When all postings have been made, total of ______________ ledger must equal ____________ account in ______________________ ledger. The two common subsidiary ledgers are Accounts ______________ and Accounts _________. Special Journals page 1 of 5 Characteristics of the Special Journals Journal Characteristics Purchases (multi-column ANY purchase on account (illustrated but not emphasized in the textbook; often used in the real world) Purchases (single column) Purchase of ________________________ on account Sale of ____________________________ on account Cash ____________________ collection of cash Cash ___________________ cash disbursement General Journal Anything that will no fit someplace else! (i.e., adjusting, closing, reversing, correcting entries; merchandise returns, etc. Think About Designing the Special Journals (very important) Name some of the solumns one would expect to find in each of the special journals: Purchases __________________________________________________________
    [Show full text]
  • Special Journals • Recording All Transactions in a General Journal Is
    Special Journals • Recording all transactions in a general journal is time consuming, inefficient and impractical, as many entries are of similar nature • Special journals are used to record similar types of transactions that occur regularly • (cross) Referencing is very important for special journals • Special journals are prepared inside the account process • Advantages of special journals o Increases recording efficiency – one line per transaction record o Lowers processing and ledger posting time and costs o Increases data accuracy and control (cross-check totals) o Makes the GL have less detail o Increases flexibility and task separation/specialisation (flexibility in design of documents and journal columns to meet needs of the business and improve work flow, several people can record entries in different journals at the same time) • 5 Special Journals o Sales Journal – all sales of inventory on account (on credit) o Purchases Journal – all purchases of inventory on account (on credit) o Cash Receipts Journal – all cash received (e.g. cash sales, receipts from receivables) o Cash Payments Journal – all cash paid (e.g. cash purchases, payments to payables, wages) o General Journal – transactions that can’t be entered in a special journal (e.g. depreciation, purchase returns and allowances, correcting, adjusting and closing entries) • In terms of recording transactions: o First, record in the relevant special journal o Then, post details of each transaction to the subsidiary ledger, daily ▪ Use a running balance ledger account format when dealing with special journals o Finally, post totals of each special journal to the general ledger control account, monthly • Sales Journal o Example: Karns Wholesale Supplies uses a perpetual inventory system.
    [Show full text]