financial and managerial accounting wild/shaw/chiappetta fourth edition wild/shaw/chiappetta fourth...

Financial and Managerial Accounting

Wild/Shaw/Chiappetta

Fourth Edition

Wild/Shaw/Chiappetta

Fourth Edition

McGraw-Hill/Irwin Copyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.

Accounting with Special Journals

Appendix E

Conceptual Chapter Objectives

C1: Identify the principles and components of accounting information systems.

C2: Explain the goals and uses of special journals.

C3: Describe the use of controlling accounts and subsidiary ledgers.

APPE-3

Analytical Chapter Objectives

A1: Compute segment return on assets and use it to evaluate segment performance.

APPE-4

Procedural Chapter Objectives

P1: Journalize and post transactions using special journals.

P2: Prepare and prove the accuracy of subsidiary ledgers.

P3: Journalize and post transactions using special journals in a periodic inventory system (see text for details).

APPE-5

Fundamental System Principles

Control PrincipleControl Principle Internal controls for

management to monitor the business.

Control PrincipleControl Principle Internal controls for

management to monitor the business.

Relevance PrincipleRelevance Principle Provide relevant,

timely and pertinent information.

Relevance PrincipleRelevance Principle Provide relevant,

timely and pertinent information.

Compatibility PrincipleCompatibility Principle System must be

compatible with aims of the company.

Compatibility PrincipleCompatibility Principle System must be

compatible with aims of the company.

Flexibility PrincipleFlexibility Principle System needs to

meet the changing needs of company.

Flexibility PrincipleFlexibility Principle System needs to

meet the changing needs of company.

Cost-Benefit PrincipleCost-Benefit Principle Benefits of the system

must outweigh the costs incurred.

Cost-Benefit PrincipleCost-Benefit Principle Benefits of the system

must outweigh the costs incurred.

C1

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Components of Accounting Systems

Increasingly, source documents are electronic files

creating a “paperless” system.

Increasingly, source documents are electronic files

creating a “paperless” system.

Source DocumentsInvoice from Invoice from suppliersupplier

Billings to Billings to customerscustomers

Employee Employee earnings earnings recordsrecords

C1

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StorageStorage


CDCD

Hard DriveHard Drive

TapeTape

Paper Paper DocumentDocument

CDCD

Hard DriveHard Drive

TapeTape

Paper Paper DocumentDocumentProcessorProcessor

InputInput

Source Documents

Source Documents

C1

APPE-8

PrinterPrinterMonitorMonitor

TelephoneTelephoneCDCD

TapeTapeDiskDisk

Electronic Electronic FileFile

PrinterPrinterMonitorMonitor

TelephoneTelephoneCDCD

TapeTapeDiskDisk

Electronic Electronic FileFile

OutputOutput


StorageStorageProcessorProcessor

InputInput

Source Documents

Source Documents

C1

APPE-9

Special Journalsin Accounting

GeneralGeneralJournalJournalGeneralGeneralJournalJournal

For transactionsFor transactionsnot in specialnot in special

journalsjournals

For transactionsFor transactionsnot in specialnot in special

journalsjournals

CashCashDisbursementsDisbursements

JournalJournal

CashCashDisbursementsDisbursements

JournalJournal

For recordingFor recordingcash paymentscash paymentsFor recordingFor recording

cash paymentscash payments

PurchasesPurchasesJournalJournal

PurchasesPurchasesJournalJournal

For recordingFor recordingcredit purchasescredit purchases

For recordingFor recordingcredit purchasescredit purchases

Cash ReceiptsCash ReceiptsJournalJournal

Cash ReceiptsCash ReceiptsJournalJournal

For recordingFor recordingcash receiptscash receiptsFor recordingFor recordingcash receiptscash receipts

Sales JournalSales JournalSales JournalSales Journal

For recordingFor recordingcredit salescredit sales

For recordingFor recordingcredit salescredit sales

C2

APPE-10

Subsidiary Ledgers

Subsidiary ledgers are a listing of individual Subsidiary ledgers are a listing of individual accounts with common characteristics.accounts with common characteristics.

Subsidiary ledgers are a listing of individual Subsidiary ledgers are a listing of individual accounts with common characteristics.accounts with common characteristics.

CharacteristicControlling

Account Subsidary LedgerAmounts due

from customersAccounts

ReceivableAccounts

Receivable LedgerAmounts owed to

creditorsAccounts Payable

Accounts Payable Ledger

CharacteristicControlling

Account Subsidary LedgerAmounts due

from customersAccounts

ReceivableAccounts

Receivable LedgerAmounts owed to

creditorsAccounts Payable

Accounts Payable Ledger

C3

APPE-11

Accounts Receivable LedgerAccounts Receivable Subsidiary

Adams Company

Date PR Debit Credit Balance

Jan. 1 S5 500 500Accounts Receivable SubsidiaryBaine Company


Jan. 16 S5 1,000 1,000Accounts Receivable SubsidiaryCook Company


Jan. 25 S5 415 415

After all items are posted,

the balance in the accounts

receivable controlling account is

equal toequal to the sum of the balances in

the accounts receivable subsidiary

ledger.

After all items are posted,

the balance in the accounts

receivable controlling account is

equal toequal to the sum of the balances in

the accounts receivable subsidiary

ledger.

C3

APPE-12

SALES JOURNAL Page 1

Account DebitedInvoice Number PR

Accounts Receivable Dr.

Sales Cr.

Cost of Goods Sold. Dr

Inventory Cr.

Jim Carson 824 600 400

Each transaction yields a debit to Accounts Receivable and a credit to Sales. Also, we need to record the cost of the sale for the transaction. This

column total is posted monthly.

Each transaction yields a debit to Accounts Receivable and a credit to Sales. Also, we need to record the cost of the sale for the transaction. This

column total is posted monthly.

Sales JournalP1

APPE-13

Sales Journal

On January 1, Jim Carson purchased $600 of merchandise on account from Barry’s Bikes. The cost of the bikes was $400. Record the entry in the Sales Journal.

(Assume the use of a perpetual inventory system.)

P1

APPE-14

ACCOUNTS RECEIVABLE LEDGERJim Carson


Jan. 1 600 600


Date Account DebitedInvoice Number PR

Dr. Accts. Rec. Cr. Sales

Cost of Goods Sold Dr.

Inventory Cr.

1 Jim Carson 824 600 400

Daily, each transaction is posted

to the appropriate accounts receivable subsidiary account.

Daily, each transaction is posted

to the appropriate accounts receivable subsidiary account.

Sales JournalP1

APPE-15

ACCOUNTS RECEIVABLE LEDGERJim Carson


Jan. 1 S1 600 600



Accounts Receivable Dr.

Sales Cr.


Inventory Cr.

Jan. 1 Jim Carson 824 600 400

A in the posting reference column

indicates the transaction was

posted to the subsidiary account.

Sales JournalP1

APPE-16



Accts. Receivable Dr.

Sales Cr.


Inventory Cr


7 Tom Talley 825 900 600

22 Sue Wright 826 200 134

31 Total 1,700 1,134

Sales Journal

Post the total to the General Ledger

accounts.

P1

APPE-17

Here is the Sales Journal after recording Here is the Sales Journal after recording some additional sales.some additional sales.

Here is the Sales Journal after recording Here is the Sales Journal after recording some additional sales.some additional sales.

Sales JournalP1



Sales Cr.


Inventory Cr


7 Tom Talley 825 900 600

22 Sue Wright 826 200 134

31 Total 1,700 1,134

(106/413) (502/119)

APPE-18




Sales Cr.


Inventory Cr


7 Tom Talley 825 900 600

22 Sue Wright 826 200 134

31 Total 1,700 1,134

Sales JournalP1

APPE-19




Sales Cr.


Inventory Cr


7 Tom Talley 825 900 600

22 Sue Wright 826 200 134

31 Total 1,700 1,134

(106/413) (502/119)

Sales JournalP1

APPE-20

Proving the Subsidiary Ledgers

Barry's BikesSchedule of Accounts Receivable

January 31Jim Carson 600$ Tom Talley 900 Sue Wright 200 Total accounts receivable 1,700$

Barry's BikesSchedule of Accounts Receivable

January 31Jim Carson 600$ Tom Talley 900 Sue Wright 200 Total accounts receivable 1,700$

The Accounts The Accounts Receivable Receivable controlling controlling

account and account and the subsidiary the subsidiary ledger are in ledger are in

balance.balance.

P2

APPE-21

Sales Taxes

On January 4, Jeri’s Jewelry sold a necklace for $450 On January 4, Jeri’s Jewelry sold a necklace for $450 plus 8% sales tax ($450 x .08 = $36) on credit to Joan plus 8% sales tax ($450 x .08 = $36) on credit to Joan Oakes. The cost of the merchandise was $302.Oakes. The cost of the merchandise was $302.

On January 4, Jeri’s Jewelry sold a necklace for $450 On January 4, Jeri’s Jewelry sold a necklace for $450 plus 8% sales tax ($450 x .08 = $36) on credit to Joan plus 8% sales tax ($450 x .08 = $36) on credit to Joan Oakes. The cost of the merchandise was $302.Oakes. The cost of the merchandise was $302.


Date Account DebitedInv. No. PR

Accts. Rec. Debit

Sales Taxes Payable Credit

Sales Credit


Inventory Cr

Jan. 4 Joan Oakes 635 486 36 450 302

P2

APPE-22

Sales Tax

ACCOUNTS RECEIVABLE LEDGER

Joan Oakes


Jan. 4 S1 486 486

Each Each transaction is transaction is

posted daily to posted daily to the appropriate the appropriate

Accounts Accounts Receivable Receivable

Ledger account.Ledger account.

Each Each transaction is transaction is

posted daily to posted daily to the appropriate the appropriate

Accounts Accounts Receivable Receivable

Ledger account.Ledger account.

Column totals are Column totals are posted monthly.posted monthly.

Column totals are Column totals are posted monthly.posted monthly.

P2


Date Account DebitedInv. No. PR

Accts. Rec. Debit

Sales Taxes Payable Credit

Sales Credit


Inventory Cr

Jan. 4 Joan Oakes 635 486 36 450 302

APPE-23

Sales Returns and Allowances

If a company has few sales returns, they may If a company has few sales returns, they may be recorded in the General Journal.be recorded in the General Journal.

If a company has few sales returns, they may If a company has few sales returns, they may be recorded in the General Journal.be recorded in the General Journal.

A company with A company with manymany sales returns may use sales returns may use a Sales Returns and Allowances Journal.a Sales Returns and Allowances Journal.

A company with A company with manymany sales returns may use sales returns may use a Sales Returns and Allowances Journal.a Sales Returns and Allowances Journal.

P2

APPE-24

CASH RECEIPTS JOURNAL Page 1

Accounts Credited Explanation PR

Cash Dr.

Sales Disc. Dr.

Accts. Rec. Cr. Sales Cr.

Other Accts.

Cr.


Inventory Cr

Cash Receipts Journal

Categories of Cash ReceiptsCategories of Cash Receipts• Cash from cash salesCash from cash sales• Cash from credit customersCash from credit customers• Cash from other sourcesCash from other sources

Categories of Cash ReceiptsCategories of Cash Receipts• Cash from cash salesCash from cash sales• Cash from credit customersCash from credit customers• Cash from other sourcesCash from other sources

P2

APPE-25

CASH RECEIPTS JOURNAL (partial) Page 1

DateAccounts Credited Explanation PR

Cash Dr.

Sales Disc. Dr.

Accts. Rec. Cr. Sales Cr.

Other Accts. Cr.

May 7 Sales Cash Sales 300 300

16 Jane Waters Invoice 656 441 9 450

31 Interest Revenue Bank Acct. 409 15 15

31 Total 756 9 450 300 15

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

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

Acct. No. Amount is posted to specified account.

Cash Receipts JournalP2

APPE-26

Purchases Journal

The Purchases Journal is The Purchases Journal is used to record all used to record all

purchases on credit.purchases on credit.

The Purchases Journal is The Purchases Journal is used to record all used to record all

purchases on credit.purchases on credit.

P2

APPE-27

Purchases Journal Page 3

Date AccountInvoice

Date Terms PR

Accts. Pay. Cr.

Inventory Dr.

Offc. Sup. Dr.

Other Accts. Dr.

May 7 Langley Products 5/5 2/10,n/30 300 300

18 Office World 5/18 n/30 125/ 150 125 25

28 Fife Company 5/27 2/10,n/30 200 175 25

31 Total 650 475 150 25

(201) (119) (124) ( )



Purchases JournalP2

APPE-28

Cash Disbursements Journal

The Cash The Cash Disbursements Disbursements

Journal is used to Journal is used to record all record all

payments of cash.payments of cash.

P2

APPE-29



Cash Disbursements Journal

Cash Disbursements Journal Page 1

DateCh. No. Payee

Account Debited PR

Cash Cr.

Inventory. Cr.

Other Accts.

Dr.Accts.

Pay. Dr.

Jun. 2 101 Fife Company Fife Company 196 4 200

15 102 Jane Hooks Salary Expense 622 300 300

28 103 Langley Products Purchases 505 100 100

30 Total 596 4 400 200

(101) (119) ( )(201)

( )

P2

APPE-30

General Journal Transactions

Adjusting Adjusting EntriesEntries

Adjusting Adjusting EntriesEntries

Closing Closing EntriesEntriesClosing Closing EntriesEntries

Reversing Reversing EntriesEntries

Reversing Reversing EntriesEntries

Other transactions Other transactions not recorded in not recorded in

Special Journals Special Journals

Other transactions Other transactions not recorded in not recorded in

Special Journals Special Journals

P2

APPE-31

Technology-Based Accounting Systems

HardwareHardware

Processing unitsProcessing unitsHard DrivesHard Drives

RAMRAMModemsModems

CD-ROM DrivesCD-ROM DrivesSpeakersSpeakersMonitorsMonitorsServersServersPrintersPrinters

HardwareHardware

Processing unitsProcessing unitsHard DrivesHard Drives

RAMRAMModemsModems

CD-ROM DrivesCD-ROM DrivesSpeakersSpeakersMonitorsMonitorsServersServersPrintersPrinters

SoftwareSoftware

Programs with a Programs with a series of series of

commands commands directing operations directing operations

of computer of computer hardware such as hardware such as

data input, storage, data input, storage, processing, or processing, or

output.output.

SoftwareSoftware

Programs with a Programs with a series of series of

commands commands directing operations directing operations

of computer of computer hardware such as hardware such as

data input, storage, data input, storage, processing, or processing, or

output.output.

C1

APPE-32

Computer Technology in Accounting

Integrated Integrated accounting accounting programs programs

automatically automatically update related update related

accounts, accounts, journals, and journals, and ledgers for a ledgers for a

single single transaction. transaction.

Integrated Integrated accounting accounting programs programs

automatically automatically update related update related

accounts, accounts, journals, and journals, and ledgers for a ledgers for a

single single transaction. transaction.

C1

APPE-33

Data Processing in Accounting

On-lineOn-line processing processing enters and processes enters and processes data immediately.data immediately.

Batch Batch processing processing accumulates information accumulates information for a period of time and for a period of time and then processes all the then processes all the data at one time (daily, data at one time (daily, weekly, or monthly).weekly, or monthly).

On-lineOn-line processing processing enters and processes enters and processes data immediately.data immediately.

Batch Batch processing processing accumulates information accumulates information for a period of time and for a period of time and then processes all the then processes all the data at one time (daily, data at one time (daily, weekly, or monthly).weekly, or monthly).

C1

APPE-34

Enterprise Resource Planning Software

Enterprise resource planning software, such as Enterprise resource planning software, such as SAP or Oracle, links ordering, inventory, SAP or Oracle, links ordering, inventory,

production, purchasing, planning, tracking and production, purchasing, planning, tracking and human resources for many of the world’s largest human resources for many of the world’s largest

companies.companies.

Enterprise resource planning software, such as Enterprise resource planning software, such as SAP or Oracle, links ordering, inventory, SAP or Oracle, links ordering, inventory,

production, purchasing, planning, tracking and production, purchasing, planning, tracking and human resources for many of the world’s largest human resources for many of the world’s largest

companies.companies.

C1

APPE-35

A good AIS collects financial data for a A good AIS collects financial data for a company’s various segments. company’s various segments.

A good AIS collects financial data for a A good AIS collects financial data for a company’s various segments. company’s various segments.

Segment Return on Assets

A A segmentsegment is a part is a part of a company that is of a company that is separately identified separately identified

by its products, by its products, services, or services, or

geographic market. geographic market.

A A segmentsegment is a part is a part of a company that is of a company that is separately identified separately identified

by its products, by its products, services, or services, or

geographic market. geographic market.

A1

APPE-36

This ratio reflects the This ratio reflects the profitability of the profitability of the

segment. segment.

This ratio reflects the This ratio reflects the profitability of the profitability of the

segment. segment.

Segment Return on Assets

Segment return

on assets

= Segment operating incomeSegment average assets

A1

APPE-37

Special Journals Under a Periodic System

•The sales journal and cash receipts journal both The sales journal and cash receipts journal both have one less column as there is no need to have one less column as there is no need to record the cost of goods sold.record the cost of goods sold.•The purchases account replaces the inventory The purchases account replaces the inventory account in the purchases journal.account in the purchases journal.•The purchases discounts account replaces the The purchases discounts account replaces the inventory column in the cash disbursements inventory column in the cash disbursements journal.journal.

Many of the same concepts that we have Many of the same concepts that we have been studying for a perpetual system can been studying for a perpetual system can

also be used with a periodic inventory also be used with a periodic inventory system. Here are some differences:system. Here are some differences:

P3

APPE 38

End of Appendix E

APPE-39

financial and managerial accounting wild/shaw/chiappetta fourth edition wild/shaw/chiappetta fourth...

Documents

c3 appe

sales journal p1 appe

recording credit sales

accounting general journal

paperless system

use of controlling accounts

accuracy of subsidiary

periodic inventory system