Accounting Systems

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Chapter 4

• Accounting Systems
• (Closing the Books. . . . . . . .)
• J. Paquette/Bellevue community College

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Chapter 4 Accounting Systems

• Steps in the accounting cycle.
• Closing Entries
• Purpose
• Journal entries
• Prepare the post-closing trial balance
• Identify the principles of accounting systems
  design

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Chapter 4 Accounting Systems

• Describe how General Ledger software and
  spreadsheet software are used in accounting
• Identify the basic elements of computer systems,
  and describe microcomputer accounting systems -
  read
• Explain how accountants use the Internet - read

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The Accounting Cycle
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Required Steps in the Accounting Cycle

• 1. Analyze business transactions (source
  documents).
• 2. Journalize the transactions.
• 3. Post to ledger accounts, Prepare a trial
  balance.
• 4. Journalize and post adjusting
  entries--prepayments and accruals. Prepare an
  adjusted trial balance.
• PREPARE FINANCIAL STATEMENTS!!!
• 5. Make closing entries, prepare a post-closing
  TB
• 6. PREPARE (POST CLOSING) FINANCIAL STATEMENTS!!!

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Bob Brown, DDS Trial Balance September 30, 2001
Illustration 4-4

Debit Credit
Cash

8,000 Advertising Supplies
14,000 Prepaid
Insurance
2,800 Office Equipment

30,000 Accounts Payable

7,000 Common Stock

30,000 Retained Earnings

12,000 Dividends

6,000 Service Revenue

25,000 Salaries Expense
7,000 Dental
Supplies Expense
3,500 Rent Expense

2,000 Utilities expense
700

74,000 74,000

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Closing the Books
Closing entries transfer the temporary account
balances to the stockholders equity
account... and reduce the balances in the
temporary accounts to zero.
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Close all Revenue Accts
GENERAL JOURNAL
Debit Credit

Sep 30
Service Revenue 25,000 Income Summary
25,000
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Close all Expense Accts
GENERAL JOURNAL
Debit Credit

Sep 30
Income Summary 13,200 Salary Expense
7,000 Supplies
Expense 3,500 Rent Expense
2,000 Utilities Expense
700
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Close Income Summary
GENERAL JOURNAL
Debit Credit

Sep 30
Income Summary 11,800 Retained Earnings
11,800

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Close Dividends Acct
GENERAL JOURNAL
Debit Credit

Sep 30
Retained Earnings 6,000 Dividends
6,000
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Bob Brown, DDS (Post Closing) Trial
Balance October 1, 2001
Illustration 4-4

Debit Credit
Cash

8,000 Advertising Supplies
14,000 Prepaid
Insurance
2,800 Office Equipment

30,000 Accounts Payable

7,000 Common Stock

30,000 Retained Earnings

17,800 Dividends
Service
Revenue
Salaries Expense

Dental Supplies Expense
Rent Expense

Utilities expense


54,800 54,800

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Illustration 4-22
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(No Transcript)
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Principles of Accounting System Design

• Cost-benefit
• Control
• Compatibility
• Flexibility

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General Ledger software

• A group of programs that an accountant uses
• Sales
• Accounts Receivable
• Purchases
• Accounts payable
• Payroll
• And more. . . .
• GUI. . . .

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Popular Business Systems, Solutions, GL Systems

• Small business
• Quickbooks, Peachtree
• Midrange
• Great Plains, ACCPAC, Siebel
• Large
• Great Plains, Oracle, SAP, BAN

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Accountants on Systems

• Beyond studying Accounting, have a solid
  knowledge of systems. Its not enough just to
  study Accounting anymore.
• Question Where do you see the future in
  Accounting Careers
• Systems specialists. Accountants who can
  understand how systems work and can successfully
  communicate accounting needs and goals with IT
  professionals.
• Source Fall 2001, Shaughn Moore Huck, Asst.
  Controller, Western Wireless Corporation

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Accountants on Systems

• The number one TOPIC rated by Accounting
  Practitioners is Information Systems.
• Question What do students need as they prepare
  for careers in the fast-paced business world?
• Information Systems WHICH AID IN MAKING
  CRITICAL, STRATEGIC DECISIONS.
• Source Albrecht-Sacks 2000 Report on the Future
  of Accounting Education

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What Else?

• Knowledge of Business Process cycles. . . .
• For more than 1 industry!
• Insurance
• Retail
• Wholesale
• Banking
• Manufacturing
• Telecommunications
• Transportation
• High Tech

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Spreadsheet software

• Like Excel, Lotus, Quattro
• Application Analysis
• Double keying
• Better General Ledger systems will talk to
  Excel (or Lotus, etc.)

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Trends in Accounting Systems

• How fast can you close the books and publish
  financials?
• How fast can you respond to changing reporting
  needs in your business?
• Can you go global easily seamlessly?
• Can you take on new business models in your
  business seamlessly?
• Can you adapt to changing technology demands
  (e.g., e-commerce?)

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• STOP HERE!