Exam 7: Accounting Information Systems

If a company maintains special journals, sales of merchandise on credit should be recorded in a _______________ whereas sales of merchandise for cash should be recorded in the _______________.

On September 30, after all monthly postings had been completed, the Accounts Receivable control account in the general ledger had a debit balance of $240,000; the Accounts Payable control account had a credit balance of $65,000. The October transactions recorded in the special journals are presented below. Instructions Compute the balances of the (1) Accounts Receivable and (2) Accounts Payable control accounts after the monthly postings on October 31.

Match the items below by entering the appropriate code letter in the space provided. A. Cost effectiveness B. Enterprise resource planning systems C. General ledger accounting system D. Manual accounting system E. Special journals F. Subsidiary ledger G. Control account H. Accounts receivable ledger I. Accounting information system J. Flexibility 1. A general ledger account which summarizes detailed information in a subsidiary ledger. 2. Benefits of information must exceed the cost of providing it. 3. The accounting system should accommodate a variety of users. 4. Software programs that integrate various accounting functions. 5. Group of accounts with a common characteristic which provides detailed information. 6. Collects and processes transaction data and communicates financial information. 7. Integrate all aspects of the organization, including accounting, sales, and manufacturing. 8. Used to record high volume, similar type transactions. 9. Transactions are journalized and posted by hand. 10. A subsidiary ledger that contains individual customer accounts.

Below are some typical transactions incurred by Farley Company. 1. Purchase of merchandise on account. 2. Collection on account from customers. 3. Payment of employee's wages. 4. Sales of merchandise for cash. 5. Close Income Summary to owner's capital. 6. Adjusting entry for depreciation on machinery. 7. Payment of creditors on account. 8. Purchase of office equipment on credit. 9. Sales discount taken on goods sold on credit. 10. Sales of merchandise on account. 11. Purchase of a delivery truck for cash. 12. Return of merchandise purchased on credit. 13. Payment of rent in advance. 14. Adjusting entry for accrued interest expense. 15. Purchase of office supplies for cash. For each transaction, indicate by the code letter the appropriate journal where the transaction would be journalized. CR - Cash Receipts Journal CP - Cash Payments Journal S - Sales Journal P - Single-Column Purchases Journal G - General Journal

The cash payments journal only has one column because all entries recorded in this journal require a credit to the Cash account.

An accounting system has flexibility if it is able to be used by many different companies at the same time.

Hiatt Company uses a sales journal, a cash receipts journal, and a general journal to record transactions with its customers. Record the following transactions in the appropriate journals. The cost of all merchandise sold was 70% of the sales price. July 2 Sold merchandise for $15,000 to B. Pine on account. Credit terms 2/10, n/30. Sales invoice No. 100. July 5 Received a check for $800 from R. Giger in payment of his account. July 8 Sold merchandise to F. Wenger for $900 cash. July 10 Received a check in payment of Sales invoice No. 100 from B. Pine minus the 2% discount. July 15 Sold merchandise for $9,000 to J. Long on account. Credit terms 2/10, n/30. Sales invoice No. 101. July 18 Borrowed $25,000 cash from United Bank signing a 6-month, 10% note. July 20 Sold merchandise for $12,000 to C. Judd on account. Credit terms 2/10, n/30. Sales invoice No. 102. July 25 Issued a credit (reduction) of $600 to C. Judd as an allowance for damaged merchandise previously sold on account. July 31 Received a check from J. Long for $5,000 as payment on account.

After Shaw Company had completed all posting for the month of December, the sum of the balances in the following accounts payable subsidiary ledger did not agree with the balance of the control account in the general ledger. The balance in the Accounts Payable control account of $37,180 has been verified as correct. Also assume that the journals references in the Post Ref. columns of the accounts payable subsidiary ledger have been verified as correct. Instructions Determine the errors in the preceding accounts payable subsidiary accounts and prepare a corrected schedule of accounts payable.

Postings are generally made more frequently to the general ledger control accounts than to the individual accounts in the subsidiary ledgers.

An accounting information system should be cost effective; that is, the benefits of the information must outweigh the cost of providing it.

Entries in a sales journal are

Transaction amounts recorded in the general journal are never posted to accounts in the subsidiary ledger.

Which of the following economic events would not be recorded in the cash receipts journal?

Listed below are various column headings that may appear in special journals. Using the following code letters, identify for each column heading (1) the special journal where the column heading would appear, and (2) whether the amounts entered under the column heading would be posted in total, individually, or both in total and individually. (Note: column headings may appear in more than one special journal)

A subsidiary ledger frees the general ledger from details of

The "Other Accounts" column in a cash receipts journal is also referred to as the

Only transactions that cannot be entered in a _______________ journal are recorded in the _______________ journal.

The one characteristic that all entries recorded in a cash payments journal have in common is

The composite balance of individual accounts in the accounts payable subsidiary ledger must

Match each of the principles and phases in the development of an accounting system with the statement that best describes them. a. Cost effectiveness b. Flexibility c. Useful output _____ 1. Information must be understandable, relevant, reliable, timely, and accurate. _____ 2. Benefits of information must outweigh the cost of providing it. _____ 3. The system should accommodate a variety of users and changing information needs. _____ 4. The accounting system must consider the needs and knowledge of various users. _____ 5. The system should be capable of meeting the changes in the demands made upon it.