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Ch04 Accounting Systems: Chapter Four Accounting Systems 5.1. Manual and Computerized Accounting Systetems
Ch04 Accounting Systems: Chapter Four Accounting Systems 5.1. Manual and Computerized Accounting Systetems
CHAPTER FOUR
ACCOUNTING SYSTEMS
5.1. MANUAL AND COMPUTERIZED ACCOUNTING SYSTETEMS
An accounting system is the methods and procedures for collecting, classifying, summarizing, and
reporting a business’s financial and operating information.
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.
A. 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.
B. Manual Accounting Systems:
Perform each step in the accounting cycle by hand.
Satisfactory in a company with a low volume of transactions.
Must understand manual accounting systems to understand computerized accounting
systems.
A large number of individual accounts with a common characteristic can be grouped together in a
separate ledger called a subsidiary ledger. The primary ledger, which contains all of the balance sheet
and income statement accounts, is then called the general ledger. Each subsidiary ledger is represented in
the general ledger by a summarizing account, called a controlling account. The sum of the balances of
the accounts in a subsidiary ledger must equal the balance of the related controlling account. Thus, a
subsidiary ledger is a secondary ledger that supports a controlling account in the general ledger.
The accounts payable subsidiary ledger, or creditors’ ledger, lists individual creditor accounts in
alphabetical order. The related controlling account in the general ledger is Accounts Payable.
Each general ledger control account balance must equal the composite balance of the individual
accounts in the related subsidiary ledger.
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.
C. PURCHASE JOURNAL
Daily postings are made from the purchases journal to the accounts payable subsidiary
ledger.
At the end of the accounting period, the company posts totals to the general ledger.
D. CASH PAYMENTS 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.
ILLUSTRATIVE EXAMPLE OF SPECIAL JOURNAL