110: Chapter 05

When do you post from the journals to: 1) general ledger 2) subsidiary ledgers

1) monthly (or more often, if needed) 2) daily

Where do you record: 1) sales on credit 2) cash receipts 3) purchases on credit 4) cash payments 5) all other transactions

1) sales journal 2) cash receipts journal 3) purchases journal 4) cash payments journal 5) general journal

Amounts from the cash receipts journal are posted to the ________ daily to keep ________.

Amounts from the cash receipts journal are posted to the subsidiary accounts receivable ledger daily to keep the individual balances up to date.

What is the equality between the general ledger and accounts receivable subsidiary ledger?

Balance of accounts receivable control account = sum of indidivual customer account balances in the accounts receivable ledger

Businesses cope with high numbers of transactions in what two ways?

Computerisation: to do accounting faster & more reliably Specialisation: combines similiar transactions in order to speed up the process

What is accounts receivable in the general ledger called?

a control account

What is a debit note, or debit memo?

a document stating that the buyer no longer owes the seller for the amount of the returned purchases. When a business returns goods to the seller, it may also sends a business document known as a debit note

What do even the most sophisticated accounting systems need?

a general journal

What 2 basic components does an accounting information system consist of?

a journal and a ledger

What is a subsidiary ledger?

a record of accounts that provides supporting details on individual balances, the total of which appears in the general ledger account. The customer accounts are arranged in alphabetical order

What is the purpose journal designed to account for?

all purchases of inventory, supplies and other assets on credit

What is the equality between the general ledger and accounts payable subsidiary ledger?

balance of accounts payable control account = sum of indidivual creditor account balances in the accounts payable subsidiary ledger

Accounts have traditionally used what journal to record repetitive cash receipt transactions?

cash receipts journal

Explain cost-benefit relationship.

control, compatibility, and flexibility cost money. Managers strive for a system that offers maximum benefits at a minimum cost - that is, a favourable cost-benefit relationship.

Good accounting systems include four essential elements..

control, compatibility, flexibility and a favourable cost-benefit relationship

The document issued by the seller for a credit to the customer's Account Receivable is called a...

credit note, or credit memo

How often are amounts in the sales journal posted to the subsidiary ledger?

daily, to keep a current record of the amount receivable from each customer

What do inputs represent?

data from source documents, such as sales receipts, bank deposit slips, and fax orders and other telecommunications.

What accounts are affected when a seller issues a credit note?

debit Sales Returns and Allowances and GST Clearing, and credits Accounts Receivable

After posting, the sum of the individual balances in the accounts receivable ledger equals...

general ledger balance in Accounts Receivable

What does processing include?

journalising transactions, posting to the accounts and preparing the financial statements

What is a special journal designed to record?

one specific type of transaction

What defines a compatible system?

one that works smoothly with the business's operations, personnel and organisational structure.

What does flexibility mean?

organisations evolve: they develop new products, sell off unprofitable operations and acquire new ones, and adjust employee pay scales

What does a general journal include?

records adjustments and non-routine transactions that don't fit one of the special journals

What does an accounting system begin with?

the chart of accounts

What is an accounting information system?

the combination of personnel, records and procedures that a business uses to provide financial data

What does the accounts payable subsidiary ledger list?

the creditors in alphabetical order, along with the amount owed to them

Managers need control over operations. What are internal controls?

the methods and procedures used to authorise transactions and safeguard assets

What are outputs?

the reports used for decision making, including the financial statements

What is the equality of the general ledger?

total debits = total credits of all balances

What are spreadsheets usually used for?

used to support analysis of accounting data