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Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-1
CHAPTER 7
ACCOUNTING INFORMATION SYSTEMS
Related Assignment Materials
Student Learning Objectives
Questions
Quick
Studies*
Exercises*
Problems*
Beyond the
Numbers
Conceptual objectives:
C1. Identify the principles and
1, 2, 3, 4,
7-1, 7-2
7-3
C2. Explain the goals and uses of
special journals.
7, 9, 10, 11,
12
7-3, 7-4,
7-7, 7-10
7-2, 7-4, 7-7,
7-9
7-4
C3. Describe the use of controlling
accounts and subsidiary ledgers.
8, 9, 12
7-5
7-5
7-1, 7-2,
7-3, GL
7-4, 7-6
P1. Journalize and post transactions
using special journals.
7-6
7-1, 7-3, 7-6,
7-8, 7-9
7-1, 7-2, 7-3,
SP, GL
7-6, 7-7
P2. Prepare and prove the accuracy
of subsidiary ledgers.
7-8
7-10
7-1, 7-2,
7-3, GL
7-6
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-2
Additional Information on Related Assignment Material
Connect
Available on the instructor’s course-specific website) repeats all numerical Quick Studies, all Exercises
and Problems Set A. Connect also provides algorithmic versions for Quick Study, Exercises and
Problems. It allows instructors to monitor, promote, and assess student learning. It can be used in
practice, homework, or exam mode.
Connect Insight
The Serial Problem (SP) for Success Systems continues in this chapter.
General Ledger
Assignable within Connect, General Ledger (GL) problems offer students the ability to see how transactions post
from the general journal all the way through the financial statements. Critical thinking and analysis components are
added to each GL problem to ensure understanding of the entire process. GL problems are auto-graded and provide
instant feedback to the student.
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-3
Chapter Outline
Notes
I. System Principles—Accounting information systems (AIS) collect
and process data from transactions and events, organize them in
reports and communicate results to decision makers. The five
fundamental principles of accounting information systems are:
A. Control Principle
Prescribes that AIS has internal controls—methods and
D. Flexibility Principle
Prescribes that AIS be able to adapt to changes in the company,
business environment, and needs of decisions makers.
E. Cost-Benefit Principle
Requires that the benefits from an activity in AIS outweigh the
costs of that activity. Decisions regarding the other system
principles are affected by this principle.
II. System Components—Five components of accounting systems are:
A. Source Documents
C. Information Processors
Transform and summarize information for use in analysis and
reporting.
D. Information Storage
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-4
Chapter Outline
Notes
III. Special Journals in Accounting
A. Basics of Special Journals
2. Their use reduces recording and posting labor by grouping
similar transactions and periodically posting column totals.
B. Subsidiary Ledgers
List of individual accounts with a common characteristic. Contains
detailed information on specific general ledger accounts which are
referred to as the control account.
1. Two of the most important subsidiary ledgers are:
a. Accounts receivable ledger—stores transaction data of
2. Subsidiary ledgers are common for other general ledger
accounts such as equipment, inventory, and investments.
C. Sales Journal
Used to record sales of inventory on credit.
1. Contains an Accounts Receivable Dr. / Sales Cr. column.
2. Contains a Cost of Goods Sold Dr. / Inventory Cr. Column.
3. A schedule (list) of accounts receivable is used to prove the
accuracy of the subsidiary ledger. The total of this schedule
D. Cash Receipts Journal
Multicolumn journal used to record all receipts of cash.
1. Every transaction increases Cash and is recorded in special
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-5
Chapter Outline
Notes
2. Credit columns are usually established for Accounts
Receivable and Sales. A special debit column is used for Sales
3. A column titled "Other Accounts – Cr." is used to record all
4. Credits to the accounts of particular customers are individually
E. Purchases Journal
Multicolumn journal used to record all purchases on credit.
1. In addition to a special column for Inventory Dr. and Accounts
2. Only the totals of special columns are posted to the General
3. Credits to the accounts of particular creditors are individually
4. A schedule (list) of accounts payable is used to prove the
accuracy of the subsidiary ledger. The total of this schedule
F. Cash Disbursements (Cash Payments) Journal
Used to record all payments of cash.
1. A Check Register is a cash disbursements journal that includes
a column for entering the number of each check.
3. Special columns are usually established for Accounts Payable
4. A column titled "Other Accounts -Debit" is used to record all
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-6
Chapter Outline
Notes
5. Debits to the accounts of particular creditors are individually
G. General Journal Transactions
Used to record transactions that do not fit in any of the special
journals. Examples:
1. Adjusting entries.
3. Correcting entries.
4. Other transactions may include sales returns, purchases
IV. Technology-Based Accounting Systems
A. Computer Technology in Accounting—provides accuracy, speed,
efficiency, and convenience in performing accounting tasks.
1. Multipurpose off-the-shelf software programs are designed to
2. Some software can operate efficiently as an integrated
3. Technology has reduced recordkeeping time and thereby
allows more time for analysis and managerial decision
making.
B. Data Processing in Accounting—systems differ with regard to
how input is entered and processed.
1. Online processing—enters and processes data as soon as
2. Batch processing accumulates source documents for a period
of time and then processes them all at once such as daily,
weekly, or monthly.
C. Computer Networks in Accounting
Chapter Outline
Notes
D. Enterprise-Resource Planning (ERP) Software
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-7
E. Cloud Computing
1. Delivery of computing as a service rather than a product.
V. Decision Analysis—Segment Return on Assets
A. A segment is a part of a company that is separately identified by
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-8
Chapter 7 Alternate Demonstration Problem
Bedrock Company completed these transactions during February of the
current year:
Feb
1
Owner, F. Stone invested $100,000 cash in the business.
1
Sent Flint Company check No. 413 for a cash purchase of
inventory $ 75,000.
5
Purchased on credit from Best Company inventory, $1,855;
store supplies, $75; and office supplies, $35. Invoice dated
February 4, terms n/10, EOM.
7
Borrowed $5,000 by giving First National Bank a promissory
note payable.
9
Purchased office equipment on credit from More Company,
invoice dated February 6, terms n/10, EOM, $625.
Feb.
14
Issued Check No. 415, payable to Payroll, in payment of sales
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-9
salaries for the first half of the month, $855. Cashed the check
and paid the employees.
14
Cash sales for the first half of the month, $18,460. Cost of this
merchandise was $ 9,500. (Normally, cash sales are recorded
18
Received a credit memorandum from More Company for office
equipment received on February 9 and returned for credit,
$130.
21
Received payment from Carl Cole for the sale of February 11
less the discount.
21
Issued Check No. 416 to Old Company in payment of its
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-10
general ledger accounts.
Required:
1. Open the following general ledger accounts: Cash, Accounts
Receivable, Inventory, Store Supplies, Office Supplies, Office
2. Open the following accounts receivable ledger accounts: Carl Cole,
3. Open the following accounts payable ledger accounts: Able
Company, Best Company, More Company, and Old Company.
4. Enter the transactions in a Sales Journal, a Purchases Journal, a
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-11
Chapter 7 Solution: Alternate Demonstration Problem
SALES JOURNAL
Date
Account Debited
Invoice
Number
PR
Accts Rec Dr
Sales Cr
Cost of Goods Sold Debit
Inventory Credit
Feb.
2
Dale Dent
711
800.00
500.00
4
Gary Glen
712
1,250.00
850.00
PURCHASES JOURNAL
Date
Amount Credited
Date of
Invoice
Terms
P
R
Accounts
Payable
Credit
Inventory
Debit
Store
Supplies
Debit
Office
Supplies
Debit
Feb.
3
Able Company
1/30
2/10, n/60
1,750.00
1,750.00
. . . . .
. . . . .
5
Best Company
2/4
n/10, EOM
1,965.00
1,855.00
75.00
35.00
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-13
CASH RECEIPTS JOURNAL
Date
Account
Credited
Explanation
PR
Cash
Debit
Sales
Disc.
Debit
Accts.
Rec.
Credit
Sales
Credit
Other
Accts.
Credit
Cost of
Goods Sold
Debit
Inventory
Credit
Feb.1
F.Stone,
Capital
Investment
311
100,000.00
................
...............
...............
100,000.00
...............
7
Notes
Note to bank
211
5,000.00
................
...............
...............
5,000.00
...............
CASH DISBURSEMENTS JOURNAL
Date
Ch.
No.
Payee
Account Debited
PR
Cash
Credit
Inventory
Credit
Accts.
Pay
Debit
Other
Accts.
Debit
Feb.1
413
Flint Company
Inventory
113
75,000.00
................
...............
75,000.00
9
414
Able Company
Invoice of 1/30
1,715.00
35.00
1,750.00
...............
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-14
GENERAL JOURNAL
Feb 9
Office Equipment
133
625.00
Accounts Payable/ More Company
212/
625.00
GENERAL LEDGER
Cash Acct. No. 111
Date
Explanation
PR
Debit
Credit
Balance
Feb.
28
28
R2
D2
147,301
80,287
147,301
67,014
Accounts Receivable Acct. No. 112
Date
Explanation
PR
Debit
Credit
Balance
Feb.
28
28
S2
R2
5,310
3,700
5,310
1,610
Inventory Acct. No. 113
Date
Explanation
PR
Debit
Credit
Balance
Feb.
2
D2
75,000
75,000
Store Supplies Acct. No. 115
Date
Explanation
PR
Debit
Credit
Balance
Feb.
28
P2
120
120
Office Supplies Acct. No. 116
Date
Explanation
PR
Debit
Credit
Balance
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-15
Notes Payable Acct. No. 211
Date
Explanation
PR
Debit
Credit
Balance
Feb.
7
R2
5,000
5,000
Accounts Payable Acct. No. 212
Date
Explanation
PR
Debit
Credit
Balance
Feb.
9
G2
625
625
F. Stone, Capital Acct. No. 311
Date
Explanation
PR
Debit
Credit
Balance
Feb.
1
R2
100,000
100,000
Sales Acct. No. 411
Date
Explanation
PR
Debit
Credit
Balance
Feb.
28
28
S2
R2
5,310
38,675
5,310
43,985
Sales Discounts Acct. No. 413
Date
Explanation
PR
Debit
Credit
Balance
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-16
ACCOUNTS RECEIVABLE LEDGER
Carl Cole
Date
Explanation
PR
Debit
Credit
Balance
Gary Glen
Date
Explanation
PR
Debit
Credit
Balance
Feb.
4
14
26
S2
R2
S2
1,250
775
1,250
1,250
-0-
775
ACCOUNTS PAYABLE LEDGER
Able Company
Date
Explanation
PR
Debit
Credit
Balance
Feb.
3
P2
1,750
1,750
Wild, Shaw & Chiappetta: Fundamental Accounting Principles, 23rd Edition
7-17
BEDROCK COMPANY
Trial Balance
February 28, 2017
Cash ...........................................................................
$67,014
Accounts Receivable ................................................
1,610
Inventory ....................................................................
56,642
BEDROCK COMPANY
Schedule of Accounts Receivable
February 28, 2017
