Chapter 05 lecture - Chapter 5 Accounting Systems _ After...

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Chapter 5 Accounting Systems ______________________________________________ After studying the chapter, you should be able to: 1. Define an accounting system and describe its implementation. 2. Journalize and post transactions in a manual accounting system that uses subsidiary ledgers and special journals. 3. Describe and give examples of additional subsidiary ledgers and modified special journals. 4. Apply computerized accounting to the revenue and collection cycle. 5. Describe the basic features of e-commerce. KEY TERMS: Accounting System Internal Controls An accounting system is the methods and procedures used to collect, classify, summarize, and report financial data. This objective presents the basic principles that should be considered when designing an accounting system. Let’s say that you have decided to open a bookstore that sells textbooks and competes with the campus bookstore. You have chosen a location and have received a list of textbooks used by the college. What other decisions will you have to make regarding the operations of your business? Remember that an entrepreneur cannot simply operate a business by throwing every receipt in a box and hoping that at the end of the year, his or her accountant can figure out what happened. As your students call out operational concerns, list them on the board. An owner must consider how information needed to prepare financial statements and tax returns will be collected and processed. Therefore, the design of an accounting system is an important decision in the operation of the business. Likewise, whenever information must be changed within a company, management must review how the new information will be recorded and reported. For example, when the accounting pronouncement requiring companies to prepare a statement of cash flows was issued, one of the first concerns that many companies addressed was how to collect the information needed to prepare this financial statement. Management must design an accounting system that: 1. Balances costs with benefits 2. Produces effective (useful) reports 3. Is able to adapt to future needs 4. Has adequate internal controls Let's say that you called Office Depot and purchased $200 of merchandise on account. You knew that the Office Depot kept track of the fact that someone owed $200 as an
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This note was uploaded on 06/22/2009 for the course ACCOUNTING 1A taught by Professor Seyedin during the Fall '08 term at Foothill College.

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Chapter 05 lecture - Chapter 5 Accounting Systems _ After...

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