ACCT 1006

Accounting and Financial Management

Week5
Accountingsubsystems
JanineCoupe

BUSINESS
SCHOOL

Learning Objectives/Outcomes
1. Identify the basic principles of accounting information systems.
2. Explain the major phases in the development of an accounting system.
3. Describe the nature and purpose of control accounts and subsidiary ledgers.
4. Explain how special journals are used in recording transactions and posting to
ledgers.
5. Indicate how a multicolumn special journal is posted.
6. Understand the basic features of computerised accounting systems.
7. Identify the advantages and disadvantages of computerised accounting
systems.

Readings: Chapter 6
2

CONTROL ACCOUNTS AND SUBSIDIARY

LEDGERS
Subsidiary ledgers are groups of accounts with a common
characteristic
The control account in the general ledger provides a summary of
the details in the subsidiary ledgers
Two common subsidiary ledgers are:
- Accounts _____________ (customers) which collects transaction
data of individual customers
- Accounts ______________ (suppliers) which collects transaction
data of individual creditors

CONTROL ACCOUNTS AND SUBSIDIARY

LEDGERS continued

CONTROL ACCOUNTS AND SUBSIDIARY

LEDGERS continued

Advantages of subsidiary ledgers

1. Show transactions in a single account providing up

to date information
2. Free the general ledger of excessive details
individual account details are kept in the subsidiary ledger

3. Provide effective internal control compare the total

of the individual subsidiary leger accounts with the GL
control account balance

4. Provide for segregation of duties

SPECIAL JOURNALS
Special journals are used to record ___________ types of
transactions that occur regularly.
Recording all transactions in a General Journal is impractical
and inefficient, as many entries are of a like (similar) nature.
Examples
- Sales journal
- Cash receipts journal
- Purchases journal
- Cash payments journal

SPECIAL JOURNALS
The use of Special Journals for similar transactions:
increases recording efficiency
-

like transactions are grouped together

one line per transaction record

lowers processing and ledger posting time & costs

-

Batch posting of totals to the ledger accounts

increases data accuracy and control

-

cross totalling and allows overview and total of like transactions

Increases flexibility & task separation/specialisation

-

Allows flexibility in design of documents and journal columns to meet

the needs of the business and to Improve work flow

Special Journals - Summary

_________________ Journal (___)

All sales of inventory on account i.e., on credit

__________________Journal (___)

All cash received (e.g. cash sales, receipts from

receivables, other)

_________________ Journal (___)

All purchases of inventory on account i.e., on

credit

__________________Journal (___)

All cash paid (e.g. cash purchases, payments to

payables, wages etc.)

__________________ Journal (__)

Transactions that cannot be entered in a special

journal (e.g. correcting, adjusting and closing
entries).

ACTIVE LEARNING OPPORTUNITY

Identify the journal in which each of the following transactions is recorded:
a) Cash Sales
b) Owner withdrawal of cash
c) Cash purchase of land
d) Credit sales
e) Purchase of inventory on account
f)

Receipt of cash for services performed

g) Depreciation of equipment

10

Sales journal

Used to record sales of inventory on account

Cash sales recorded in _________________ journal

11

Active Learning Opportunity Sales Journal

Example
- Karns Wholesale Supplies uses a perpetual
inventory system
- 3 May Credit sale to Abbot Sisters Ltd for $10,600
with a cost of sales of $6,360
- Record firstly using a general journal and then
using a sales journal

12

Recording a sale using a General Journal

General Journal
Date

Account Name (Narration)

Debit

Credit

May 3

(To record credit sale to Abbot Sisters Ltd)

May 3

(To record cost of inventories sold to Abbot Sisters Ltd)

13

Recording a sale using a Sales Journal

Karns Wholesale Supply
SALES JOURNAL
Date

Account debited

2013
May 3
7
14
19
21
24
27

Babson Ltd
Carson Ltd
Deli Ltd
Abbot Sisters Ltd
Deli Ltd
Babson Ltd

Invoice
A/Cs Rec. Dr
no.
Ref.
Sales Cr
101
102
103
104
105
106
107

11 350
7 800
9 300
15 400
21 210
14 570
90 230
112/401

S1
COS Dr
Inventory Cr

7 370
5 070
6 510
10 780
15 900
10 200
62 190
(505/120) 14

Active Learning Opportunity Sales Journal cont.

Example
- 7 May Credit sale to Babson Ltd for $11,350 with a
cost of sales of $7,370
- Record in the sales journal

15

Sales journal continued - Posting

Posting the sales journal
Postings made ______ to individual accounts receivable in the
subsidiary ledger
At the ____________column totals of sales journal are posted
to the general ledger:
- Debit to Accounts Receivable account
- Credit to Sales account
- Debit to Cost of Goods Sold account
- Credit to Inventory account

16

Sales journal continued - Posting

We will now post individual details to the relevant Subsidiary (Receivable) Ledger DAILY

Karns Wholesale Supply

SALES JOURNAL

S1

Invoice
A/Cs Rec. Dr
COS Dr
Date
Account debited
no.
Ref.
Sales Cr
Inventory Cr
2013
May 3 Abbot Sisters Ltd 101

10 600
6 360
14 Carson Ltd
103

7 800
5 070
19 Deli Ltd
104

9 300
6 510
We debit
Abbott
Sisters
A/c in105
the Receivable
Subsidiary
21
Abbot
Sisters
Ltd

15 400 ledger 10 780

Abbott
24 Deli Ltd
106SistersLtd 21 210
15 900
27 Babson
Ltd

14Credit
570
10 200
Date
Explanation
Ref107
Debit
Balance
90 230
62 190
May
17

Sales journal continued - Posting

Karns Wholesale Supply
SALES JOURNAL
Date

Account debited

2013
May 3
7
14
19
21
24
27

Abbot Sisters Ltd

Babson Ltd
Carson Ltd
Deli Ltd
Abbot Sisters Ltd
Deli Ltd
Babson Ltd

Invoice
A/Cs Rec. Dr
no.
Ref.
Sales Cr
101
102
103
104
105
106
107

10 600
11 350
7 800
9 300
15 400
21 210
14 570
90 230

S1
COS Dr
Inventory Cr
6 360
7 370
5 070
6 510
10 780
15 900
10 200
62 190
18

Posting the Sales Journal to GL

GENERAL LEDGER
Accounts Receivable
Date

No. 112

Explanation

Ref

May 31

Debit

Credit

S1

Balance
90 230 Dr

Inventory
Date

No. 120
Explanation

Ref

May 31

Debit

Credit

S1

Balance
62 190 Cr

Sales

No. 401

Date

Explanation

Ref

May 31

Debit

Credit

S1

Balance
90 230 Cr

Cost of Sales
Date

No. 505

Explanation

Ref

May 31

Debit

Credit

S1

Balance
62 190 Dr
19

Cash receipts journal

Used to record all receipts of cash
Debit columns
- Cash
- Discount Allowed
Credit columns
- Accounts Receivable
- Sales
- Other accounts
Debit and credit column
- Cost of Goods Sold and Inventory
20

Cash receipts journal continued

Karns Wholesale Supply
CASH RECEIPTS JOURNAL
Date
2013
May 1
7
10
12
17
22
23
28

Account credited Ref.

Cash
Dr

Disc. A/Cs
Alld Rec. Sales
Dr
Cr
Cr

CR1
Other COGS Dr
A/Cs Inventory
Cr
Cr

DA Karns, Capital 301 5 000

5 000
1 900
1 900
Abbot Sisters Ltd 10 388
212 10 600
2 600
2 600
Babson Ltd
11 122 227 11 350
Bank Loan
200 6 000
6 000
Carson Ltd

7 644 156 7 800

Deli Ltd

9 114 186 9 300

53 759 781 39 050 4 500 11 000
(101) (504) (112) (401)
(x)

1 240
1 690

2 930
505)/(120)
21

Cash receipts journal continued

Posting the cash receipts journal

All column totals (excluding other accounts)
posted to account specified once at the
______________________
Individual accounts in other accounts posted
separately to relevant individual general ledger
accounts (either daily or individually at end of
month, textbook EOM, practice set - daily)
Individual amounts, posted in total to Accounts
Receivable control account, posted _______ to
individual subsidiary ledger accounts
22

Purchases journal

Used to record purchases of inventory on

account
Cash purchases are recorded in the
__________________ journal

23

Purchases journal continued

Posting the purchases journal

Postings made ______ to individual accounts
payable in the subsidiary ledger
At the end of the ______ column totals of purchases
journal are posted to the general ledger:
- Debit to Inventory account (Perpetual)
- Credit to Accounts Payable account

24

**USE HANDOUT PROVIDED ON BB FOR THIS**

Active Learning Opportunity Purchases Journal

Date

Supplier

Amount

May 6

Jasper Manufacturing Ltd

$11 000

May 10

Eaton and Howe Ltd

May 14

Fabor and Son Ltd

May 19

Jasper Manufacturing Ltd

May 26

Fabor and Son Ltd

May 29

Eaton and Howe Ltd

7 200
6 900
17 500
8 700
12 600

Record the above in the Purchases Journal

Post to the general ledger and Accounts Payable subsidiary ledger
Check that the balance in the general ledger control account agrees to the
sum of the subsidiary ledger
Use posting references where required
25

Review in your own time

Cash payments journal
Used to record all cash payments
Credit columns
- Cash paid
- Discount Received
Debit columns
- Accounts Payable
- Cash purchases
- Other accounts paid

26

Review in your own time

Cash payments journal continued
Karns Wholesale Supply
CASH PAYMENTS JOURNAL
Date
2013
May 1
3
8
10
19
23
28
30

Chq
No. Account debited

Ref.

101
102
103
104
105
106
107
108

130
120
120

306

Prepaid Insurance
Inventory
Inventory
Jasper Manufacturing Ltd
Eaton and Howe Ltd
Faber and Son Ltd
Jasper Manufacturing Ltd
DA Karns, Drawings

CP1

Other
A/Cs
Disc. Cash
A/Cs Dr Payable Dr Rec.Cr Cr
1 200
100
4 400

500
6 200
(x)

11 000
7 200
6 900
17 500
42 600
(201)

1 200
100
4 400
220 10 780
216
6 984
69
6 831
350 17 150
500
855 47 945
(405) (101)
27

Review in your own time

Cash payments journal continued

Posting the cash payments journal

All column totals (excluding other accounts)
posted to account specified at end of month
Individual accounts in other accounts
posted separately to relevant individual
general ledger accounts (daily or individually
at end of month, textbook EOM, practice
set - daily)
Individual amounts, posted in total to
Accounts Payable control account, posted
daily to individual subsidiary ledger accounts
28

Effects of special journals

on general journal

Reduces number of transactions requiring

recording in the general journal
Where control and subsidiary ledgers used 2
changes from earlier procedures are needed:
- Journalising: ______ control account and
subsidiary ledger must be identified
- Posting: transaction posted to control
account and subsidiary account

29

General Journal
The General Journal is now used for transactions that are exceptions. The
entry is posted to the relevant General Ledger a/c or control a/c, and any
individual receivable or payable is posted to the relevant subsidiary ledger.
G1

General Journal
Date

Account Name (Narration)

31/5

Accounts Payable-Fabor & Son Ltd

Post
Ref.

Debit

Credit

500

Inventory

500

(received credit for returned goods)

Debit
Debit
Credit

Fabor & Son Ltds A/c in the Accounts Payable Subsidiary Ledger
Accounts Payable control account no.201 in the GL
Inventory account no.120 in the GL
30

10

General Journal continued

31

Learning Objectives/Outcomes
1. Identify the basic principles of accounting information systems.
2. Explain the major phases in the development of an accounting system.
3. Describe the nature and purpose of control accounts and subsidiary
ledgers.
4. Explain how special journals are used in recording transactions and
posting to ledgers.
5. Indicate how a multicolumn special journal is posted.
6. Understand the basic features of computerised accounting systems.
7. Identify the advantages and disadvantages of computerised accounting
systems.
32

11