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1. The individual accounts receivable ledger accounts provide business managers infor-mation on the status of individual customer accounts, which is necessary for managing collections. Managers need to know which customers owe money, how much they owe, and how long the amount owed has been outstanding.
2. The major advantages of the use of special journals are substantial savings in record-keeping expenses and a reduction of record-keeping errors.
3. a. 400 b. None
4. a. 250 b. 1
5. a. Sometime following the end of the current month, one of two things may happen: (1) an overdue notice will be received from Kelly Co., and/or (2) a let-ter will be received from Kelley Co., in-forming the buyer of the overpayment. (It is also possible that the error will be discovered at the time of making pay-ment if the original invoice is inspected at the time the check is being written.)
b. The schedule of accounts payable would not agree with the balance of the accounts payable account. The error might also be discovered at the time the invoice is paid.
c. The creditor will call the attention of the debtor to the unpaid balance of $800.
d. The error will become evident during the verification process at the end of the month. The total debits in the purchases journal will be less than the total credits by $3,600.
6. a. Purchases journal b. Cash payments journal
c. Purchases journal d. Cash payments journal e. Cash payments journal
7. An electronic form is a software window that provides the inputs for a particular transac-tion. For example, a check form provides the inputs (payee, amount, date) for a cash payment transaction. An electronic invoice provides the inputs (customer, amount sold, item sold) for recording revenues earned on account.
8. The use of controlling accounts to verify the accuracy of subsidiary accounts is used in a manual system. In a computerized system, it is assumed that the computer will accurately sum the individual transactions in the sub-sidiary accounts in determining the aggre-gate balance.
9. For automated systems that use electronic forms, the special journals are not used to record original transactions. Rather, elec-tronic forms capture the original transaction detail from an invoice, for example, and au-tomatically post the transaction details to the appropriate ledger accounts.
10. E-commerce can be used by a business to conduct transactions directly with custom-ers. Thus, an order can be received directly from the customer’s Internet input and cash can be received from the credit card. Many times, the cash is received prior to actually shipping the product, resulting in a faster revenue/collection cycle. Reducing paper-work throughout the cycle also improves the efficiency of the process. For example, all of the accounting transactions can be fed au-tomatically from the initial Internet-based inputs.
REVENUE JOURNAL Invoice Post. Accounts Rec. Dr. Date No. Account Debited Ref. Fees Earned Cr.
Oct. 7 121 Darcy Co. ............................... 320 17 122 Triple A Inc. ........................... 470 21 123 Whaley Co. ............................ 530
PE 5–1B
REVENUE JOURNAL Invoice Post. Accounts Rec. Dr. Date No. Account Debited Ref. Fees Earned Cr.
May 6 78 Lemon Co. ............................. 1,240 9 79 Hitchcock Inc. ....................... 3,420 19 80 Conrad Inc. ............................ 1,470
PE 5–2A
June 20. Collected cash of $95 from Signal Communications Inc. (Invoice No. 579). Amount posted from page 106 of the cash receipts journal.
28. Provided $75 of services on account to Signal Communications Inc., itemized on Invoice No. 527. Amount posted from page 92 of the reve-nue journal.
PE 5–2B
Sept. 8. Provided $840 services on account to Mobility Products Inc., itemized on Invoice No. 119. Amount posted from page 24 of the revenue jour-nal.
17. Collected cash of $590 from Mobility Products Inc. (Invoice No. 106). Amount posted from page 46 of the cash receipts journal.
PURCHASES JOURNAL Accounts Party Other Post. Payable Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Aug. 11 Party Zone Supplies Inc. ....... 390 390 ............................ ............ 14 Fun 4 All Supplies Inc. ........... 290 290 ............................ ............ 29 Office Space Inc. .................... 3,560 ............. Office Furniture 3,560
PE 5–3B
PURCHASES JOURNAL Accounts Office Other Post. Payable Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Ref. Amount
Dec. 6 Supply Hut Inc. ....................... 415 415 ............................ ............ 14 Zell Computer Inc. .................. 1,950 ............. Office Equipment 1,950 19 Supply Hut Inc. ....................... 450 450 ............................ ............
Ex. 5–3 a. General journal (not a revenue transaction) b. Cash receipts journal c. General journal d. Cash receipts journal e. Cash receipts journal
f. General journal g. Cash receipts journal h. Cash receipts journal i. Revenue journal j. Cash receipts journal
Ex. 5–4
a. Purchases journal b. Purchases journal c. Purchases journal d. General journal e. General journal f. Cash payments journal
g. Cash payments journal h. Cash payments journal i. General journal j. General journal k. Cash payments journal
Ex. 5–5
Feb. 3. Provided service on account; posted from revenue journal page 44.
6. Granted an invoice adjustment or corrected an error related to sale of February 3; posted from general journal page 11. This does not repre-sent a collection of cash since the credit was not posted from the cash receipts journal.
16. Received cash for balance due; posted from cash receipts journal page 81.
Astro Star Co. Borman Co. July 1 Bal. 805 July 4 1,960 14 1,490 22 2,650 Bal. 2,295 Bal. 4,610
Life Star Inc. July 9 3,220
Bal. 3,220
c.
Accounts Receivable Fees Earned July 1 Bal. 805 July 31 9,320 31 9,320 Bal. 9,320 Bal. 10,125
d. TECH-AID CONSULTING INC.
Accounts Receivable Subsidiary Ledger Balances July 31, 2012
Astro Star Co. .............................................................................. $ 2,295 Borman Co. .................................................................................. 4,610 Life Star Inc. ................................................................................. 3,220 Total accounts receivable............................................................ $10,125
The total in the schedule above agrees with the T account balance for the ac-counts receivable control account in part (c).
e. A computerized system would likely use an electronic form specially de-
signed for recording sales transactions, such as an electronic invoice form. The transaction details would be input into the form fields and submitted. Once submitted, the transaction would be saved and automatically posted as a debit to the individual customer accounts receivable account and a credit to the revenue account. There would be no control totals posted to a control ac-count.
AMAZON PRODUCTIONS INC. Accounts Receivable Subsidiary Ledger Balances
May 31, 2012
Amber Communications Inc. .................................................................... $2,040 Bishop Studios Inc. ................................................................................... 1,250 Chandler Broadcasting Co. ...................................................................... 2,200 Gold Coast Media Inc. ............................................................................... 0 Total accounts receivable ......................................................................... $5,490
Accounts Receivable (Control)
Balance, May 1, 2012.................................................................................. $ 3,910 Total debits (from revenue journal) .......................................................... 12,440 Total credits (from cash receipts journal)................................................ (10,860) Balance, May 31, 2012................................................................................ $ 5,490
Ex. 5–9
REVENUE JOURNAL PAGE 8 Invoice Post. Accounts Rec. Dr. Date No. Account Debited Ref. Fees Earned Cr.
2012 Aug. 2 512 Boston Co. ............................ 780 8 513 Gabriel Co. ............................ 275 12 514 Dockers Inc. ......................... 690 22 515 Electronic Central Inc. .......... 150 31 Total ....................................... 1,895 CASH RECEIPTS JOURNAL PAGE 12 Fees Accts. Post. Earned Rec. Cash Date Account Credited Ref. Cr. Cr. Dr.
ESSENTIAL PARIS, INC. Accounts Receivable Subsidiary Ledger Balances
December 31, 2012
Amex Services Inc. ............................................................................. $2,600 Sunstream Aviation Inc. .................................................................... 3,450 Venus Co. ............................................................................................ 2,190 Total accounts receivable .................................................................. $8,240 The total of the customer accounts on December 31, 2012, $8,240, equals the bal-ance of the accounts receivable control account, shown as follows: Accounts Receivable Dec. 1 Bal. 2,290 Dec. 31 4,210 31 10,160 _____ Dec. 31 Bal. 8,240
c. The accounts receivable subsidiary ledger is needed to track customer ser-vices provided on account and customer collections. Without the subsidiary ledger, it would not be possible for Essential Paris to know who owes how much for services rendered. Furthermore, without the subsidiary ledger, it would be impossible to manage collections from individual customers.
Mar. 6. Purchased services, supplies, equipment, or other commodities on ac-count; posted from purchases journal page 44.
11. Received an invoice adjustment or corrected an error related to pur-chase of March 6; posted from general journal page 12. (A payment would be recorded in the cash payments journal.)
Jan. 4 Office Universe Inc. ............. 550 550 ............................................... ......... 9 Tek Village, Inc. .................... 2,300 ....... Office Equipment 2,300
16 Office Universe Inc. ............. 90 90 ............................................... .........
21 Paper-to-Go Inc. ................... 170 170 ............................................... .........
30 Total ....................................... 3,110 810 ............................................... 2,300
b. $3,110 Credit to Accounts Payable [from purchases journal column total in (a)]. $810 Debit to Office Supplies [from purchases journal column total in (a)].
CRYSTAL VIEW WINDOW CLEANERS INC. Accounts Payable Subsidiary Ledger Balances
January 31, 2012
Kleen-Mate Supplies Inc. ............................................................ $ 900 Little Co. ....................................................................................... 615 Office Mate Inc. ............................................................................ 2,700 Total supplier account balances ................................................. $4,215
The total in the schedule above agrees with the T account balance for the ac-counts payable control account in (c).
e. A computerized system would likely use an electronic form specially de-
signed for recording purchase transactions. The transaction details would be input into the form fields and submitted. Once submitted, the transaction would be saved and automatically posted as a debit to an appropriate asset account and a credit to the individual creditor accounts payable account. There would be no control totals posted to a control account.
Accounts Payable Subsidiary Ledger Balances September 30, 2012
Meow Mart Inc. ............................................................................. $ 350 Poodle Pals Inc. ........................................................................... 660 Office Helper Inc. ......................................................................... 2,250 Total supplier (creditor) accounts............................................... $3,260
The total of the creditor accounts on September 30, 2012, $3,260, equals the
balance of the accounts payable control account, shown as follows:
Accounts Payable Sept. 31 755 Sept. 1 Bal. 525 ___ 31 3,490 Bal. 3,260 c. Happy Tails uses a subsidiary for accounts payable to track its credit pur-
chases and payments to the individual supplier. This is needed so that it knows how much it owes to each individual supplier. Without the subsidiary ledger, it would be difficult for it to accurately pay suppliers for the amount owed in a timely manner.
Ex. 5–19
a. Two errors were made in balancing the accounts in the subsidiary ledger: (1) The Chester Chemical Supplies Inc. transaction of March 9 should have
resulted in a balance of $14,500 instead of $14,000, and the account bal-ance at March 12 should have been $14,200 instead of $13,700. The ac-count balance at March 20 should have been $8,400 instead of $7,900.
(2) The Montana Minerals Co. transaction of March 25 should have resulted in a balance of $2,800 instead of $1,800.
Accounts Payable Subsidiary Ledger Balances March 31, 2012
C. D. Greer and Son............................................................................. $ 15,750 Chester Chemical Supplies Inc. ......................................................... 8,400 Cutler and Powell ................................................................................ 7,800 Montana Minerals Co. ......................................................................... 2,800 Valley Power ........................................................................................ 3,150 Total accounts payable....................................................................... $ 37,900
1. The Cash column is for debits (not credits). 2. The Other Accounts column is for credits (not debits). 3. A better order of columns would be to place the Other Accounts Cr. column
to the left of the Fees Earned Cr. column. A recommended and corrected cash receipts journal is as follows: CASH RECEIPTS JOURNAL PAGE 12 Other Fees Accts. Post. Accounts Earned Rec. Cash Date Account Credited Ref. Cr. Cr. Cr. Dr.
a. In the electronic invoice form from QuickBooks® shown above, typical fields for data input can be identified as follows:
1. Customer name and address 2. Date and invoice number 3. Description of item sold 4. Amount of revenue b. The customer Accounts Receivable is debited, and Fees Earned is credited. A
computerized accounting system does not require posting to a separate ac-counts receivable control account. In this case, the total accounts receivable reported on the balance sheet is merely the sum of the balances of the indi-vidual customer account balances. That is, the accounts receivable account summarizes the customer accounts automatically.
c. Controlling accounts are not posted at the end of the month in a computer-ized accounting system. In addition, special journals are not normally used to accumulate transactions. Transactions are recorded through data input into electronic forms (or for infrequent transactions, by an electronic general journal). Balances of affected accounts are automatically posted and updated from the information recorded on the form. If desired, the computer can pro-vide a printout of the monthly transaction history for a particular account, which provides the same information as a journal. In addition, the controlling account is not separately posted. In a manual system, separate posting to the controlling account provides additional control by reconciling the controlling account balance against the sum of the individual customer account bal-ances. However, in a computerized accounting system, there are no separate postings to a controlling account because the computer is not going to make posting or mathematical errors. Therefore, there is no need for the additional control provided by posting a journal total to a controlling account.
Ex. 5–23
a. iTunes is an example of a B2C, or business-to-consumer e-commerce appli-cation. The B, or business, is Apple. The C, or consumers, would mostly be individuals who purchase digital products from the download store.
b. Cash..................................................................... 12 Fees Earned ................................................... 12 c. The cash receipts journal is used to record debits to cash from cash sales or
collections on account. d. The electronic invoice form can be used for either transactions on account,
as illustrated in the chapter, or for cash sales. The invoice form used for sales on account is different from the one used for cash sales. The latter invoice form makes a debit to Cash, rather than a debit to a customer account.
e. Sales made on B2C e-commerce transactions are computerized transactions so a special journal is inappropriate. On an e-commerce site, the consumer inputs the transaction information on the Web page; thus, there is no need for a separate electronic form for re-entering the same information to record the sale. Essentially, the e-commerce application is the form that originates the sales transaction inside the accounting system. Accounting transactions flow directly from the shopping cart information directly into the accounting sys-tem.
c. The horizontal analysis indicates that the total revenues of Starbucks declined by nearly 6%, (5.7%) from fiscal year 2008 to 2009. This decline is explained by the worldwide economic contraction experienced during this time. Starbucks was particularly impacted because its product is both pre-mium priced and discretionary. Thus, in difficult economic times, consumers reduced consumption and/or chose less expensive options. Revenues declined by 8.7% internationally, versus 5.7% in the United States. Thus, the impact of the economy appeared to be more severe for the international op-erations than the U.S. operations. Global consumer products (segment that sells Starbucks-licensed products) made little change between the two years. The vertical analysis indicates that the percent of U.S. revenues to total reve-nues increased from 72.5% in 2008 to 72.7% in 2009. In this same period, the percent of international revenues to total revenues declined from 20.3% in 2008 to 19.6% in 2009. Both analyses indicate that Starbucks’ international operations suffered during the economic decline more than did the U.S. op-erations. In addition, during the economic decline, Starbucks reduced its expansion efforts overseas in order to conserve capital.
Ex. 5–26
a. For the Year Ended June 30, 2009 Major Product Segments (in millions) Percent Filmed Entertainment....................................... $ 5,936 19.5%Television.......................................................... 4,602 15.1 Cable Network Programming .......................... 5,580 18.3 Direct Broadcast Satellite Television.............. 3,760 12.4 Magazines and Inserts ..................................... 1,168 3.8 Newspapers and Information Services........... 5,858 19.3 Book Publishing ............................................... 1,141 3.8 Other.................................................................. 2,378 7.8 Total revenues .................................................. $30,423 100.0%
b. News Corporation is very diversified. The Filmed Entertainment segment has the largest percent of revenues to total revenues at 19.5%. This is a low per-cent for a single segment, suggesting little concentration. In addition, four additional segments have a percent of revenues to total revenues in excess of 10% (Television, Cable Network Programming, Direct Broadcast Satellite Television, and Newspapers and Information Services). The three smallest segments total 15.4% (3.8% + 3.8% + 7.8%) of revenues to total revenues. Overall, News Corporation is a highly diversified entertainment company, deriving significant revenues from multiple sources.
2009 2008 Increase (Decrease) (in millions) (in millions) Amount Percent United States......................... $ 7,943.8 $ 8,078.3 $(134.5) –1.7% Europe ................................... 9,273.8 9,922.9 (649.1) –6.5 APMEA................................... 4,337.0 4,230.8 106.2 2.5 Other Countries & Corporate 1,190.1 1,290.4 (100.3) –7.8 Total revenues ...................... $22,744.7 $23,522.4 $(777.7) –3.3
b. Vertical analysis:
2009 2008 Amount Amount (in millions) Percent (in millions) Percent United States ......................... $ 7,943.8 34.9% $ 8,078.3 34.3%Europe.................................... 9,273.8 40.8 9,922.9 42.2 APMEA ................................... 4,337.0 19.1 4,230.8 18.0 Other Countries & Corporate 1,190.1 5.2 1,290.4 5.5 Total revenues....................... $22,744.7 100.0% $23,522.4 100.0%
c. The United States segment revenues declined 1.7% from 2008 to 2009, while
Europe and Other countries declined 6.5% and 7.8%, respectively. Only the APMEA increased. This indicates that the recession of 2008–2009 generally had a negative impact on McDonald’s revenue. The vertical analysis indicates that Europe declined from 42.2% to 40.8% of total revenues, while APMEA increased from 18.0% to 19.1% of total revenues. The vertical analysis is con-sistent with the horizontal analysis showing steep revenue declines in Europe and modest increases in APMEA. The growth in APMEA is likely due to restaurant unit growth in this part of the world.
2012 Oct. 25 .......................................... J1 .......... 100 .......... 100 31 .......................................... R1 .......... 830 .......... 930 3. a. $830 ($135 + $60 + $150 + $125 + $360) b. $830 4. The computerized system is much more efficient. Each sales transaction
would be entered into an electronic invoice form. The postings to the ac-counts receivable subsidiary and fees earned ledgers would be automatic. Also, all sums and totals in the subsidiary ledgers are calculated automati-cally. There would be no separate postings to an accounts receivable control account, because there would be no need to verify the accuracy of account totals. There would not be a math or posting error. The computerized system would also provide management current customer account balance informa-tion, since the postings are automatic.
The subsidiary account of Shilo Co. must also be posted for a $2,000 credit. 6. The subsidiary ledger is in agreement with the controlling account. Both have
7. In an automated system, individual sales transactions are posted automati-cally to the general ledger at the time of the original transaction. Thus, there is no need to post summary totals to the general ledger accounts. The ac-counts receivable account reported on the balance sheet is often merely the sum of the individual customer accounts.
3. and 4. PURCHASES JOURNAL PAGE 30 Accounts Field Office Other Post. Payable Supplies Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Dr. Ref. Amount
1., 2., and 3. PURCHASES JOURNAL PAGE 1 Accounts Field Office Other Post. Payable Supplies Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Dr. Ref. Amount
GREEN MOUTAIN WATER TESTING SERVICE Accounts Payable Subsidiary Ledger Balances
November 30, 2012
Best Office Supply Co. ....................................................................... $ 580 Hydro Supply Co. ............................................................................... 5,900 Test-Rite Equipment Co. .................................................................... 4,600 Total accounts payable....................................................................... $11,080* *The total of the schedule of accounts payable is equal to the balance of the accounts payable control account.
5. A subsidiary ledger for the field equipment would allow the company to track each individual piece of equipment with respect to cost, location, useful life, and other data. Such information would be useful for safeguarding equipment and determining depreciation.
2. and 4. PURCHASES JOURNAL PAGE 37 Accounts Maintenance Office Other Post. Payable Supplies Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Dr. Ref. Amount
2012 Mar. 28 .......................................... J1 .......... 90 .......... 90 31 .......................................... R1 .......... 2,320 .......... 2,410 3. a. $2,320 ($100 + $510 + $870 + $410 + $430) b. $2,320 4. The computerized system is much more efficient. Each sales transaction
would be entered into an electronic invoice form. The postings to the accounts receivable subsidiary and fees earned ledgers would be automatic. Also, all sums and totals in the subsidiary ledgers are calculated automati-cally. There would be no separate postings to an accounts receivable control account, because there would be no need to verify the accuracy of account totals. There would not be a math or posting error. The computerized system would also provide management current customer account balance informa-tion, since the postings are automatic.
The subsidiary account for Ridge Communities must also be posted for a $1,500 credit. 6. The subsidiary ledger is in agreement with the controlling account. Both have
7. In an automated system, individual sales transactions are posted automati-cally to the general ledger at the time of the original transaction. Thus, there is no need to post summary totals to the general ledger accounts. The ac-counts receivable account reported on the balance sheet is often merely the sum of the individual customer accounts.
Field Supplies 14 Post. Balance Date Item Ref. Dr. Cr. Dr. Cr. 2012 Aug. 1 Balance............................. .......... .......... 6,200 .......... 31 .......................................... P30 14,410 .......... 20,610 .......... Office Supplies 15
3. and 4. PURCHASES JOURNAL PAGE 30 Accounts Field Office Other Post. Payable Supplies Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Dr. Ref. Amount
1., 2., and 3. PURCHASES JOURNAL PAGE 1 Accounts Field Office Other Post. Payable Supplies Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Dr. Ref. Amount
2012 July 31 Prepaid Rent ........................................... 16 14,000 Field Equipment................................. 17 14,000 1., 2., and 3. CASH PAYMENTS JOURNAL PAGE 1 Other Accounts Ck. Post. Accounts Payable Cash Date No. Account Debited Ref. Dr. Dr. Cr.
A-One Office Supply Co. ............................................................. $ 2,970 Culver Supply Co.......................................................................... 10,200 Petro Services Inc. ...................................................................... 27,180 Total accounts payable................................................................ $40,350* *The total of the schedule of accounts payable is equal to the balance of the accounts payable control account.
5. A subsidiary ledger for the field equipment would allow the company to track each individual piece of equipment with respect to cost, location, useful life, and other data. Such information would be useful for safeguarding equipment and determining depreciation.
2. and 4. PURCHASES JOURNAL PAGE 37 Accounts Maintenance Office Other Post. Payable Supplies Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Dr. Ref. Amount
a. The half-price offer is a normal business practice, so long as it is not the result of price collusion with other competitors or considered “unfair pricing” ac-cording to federal statutes. Many businesses will offer low initial offers to en-tice customers to a subscription service. For example, cable and satellite companies will often offer premium channels, such as HBO, for free for the first several months of service. The business objective of low initial pricing is to demonstrate the value of the service so that customers will elect to con-tinue the service at the full subscription price. Thus, there is nothing inher-ently unethical about such a practice, and it would be considered a fairly typi-cal business practice.
b. Customer “lock in” can be unethical if it is the result of price fixing or acquir-ing competitors in order to achieve monopolistic concentration within an industry. However, in this case, the customer lock in is a function and nature of the product. Namely, the data that are created by the product cannot be eas-ily migrated to another application. Note, E-Biz Financial is not denying the customer ownership of the data, rather it is making it costly to switch. Such lock in is not considered an unethical business practice. Indeed, we see such lock in characteristics in many settings. For example:
Razor blades are designed to be used only by the handle of the manufacturer.
Thus, customers become locked in to the razor blades of the handle manufac-turer. This is such a common strategy in many arenas that it has been termed the “razor blade strategy.”
Movie theaters prevent customers from walking in with refreshments, thus
locking theater goers in to the popcorn and refreshment stand of the theater. Theater pricing of refreshments reflects this lock in.
Sony designs video games so that they only work on its Play Station® equip-
ment. Therefore, the games are locked in to the consoles. This allows Sony and its licensees to limit and control competition for games.
Many manufacturers control replacement parts for equipment by custom
designing the parts. Customers then become locked into the original manufac-turer for replacement parts.
Apple Computer’s iTunes can only be played on an iTunes compatible player.
Thus, Apple reduces competition for songs for its player and locks customers into its music platform. Apple employs the same lock in strategy for its Mac operating system.
Dan is missing some of the principal benefits of the computerized system. There are three primary advantages of a computerized system. First, the computerized system is much more efficient and accurate at transaction processing. In the computerized system, once the transaction data have been input, the information is simultaneously recorded in the electronic journal (file) and posted to the ledger accounts. This saves a significant amount of time in recording and posting trans-actions. Second, the computerized environment is less prone to mathematical, posting, and recording errors. The computer does not make these types of mis-takes. Thus, the computerized environment should require less time correcting errors. Third, the computerized system provides more timely information to man-agement because account balances are always kept current. Under the manual system, ledger accounts will only be as current as the latest posting date, but the computerized system posts every transaction when it is journalized or recorded on a form. Thus, management has more current information with which to make decisions.
As an additional note, Dan may be reacting out of some fear of the unknown. This is a common reaction to change. Thus, Dan may be overreacting to the new com-puter environment because it will require significant change in the way the job is done as compared to the manual approach.
CP 5–3
a. The accounts receivable and accounts payable accounts consist of transac-tions made to individual customers and vendors. In both cases, the subsidiary ledger tracks what is collectible from customers or owed to suppliers. Thus, the subsidiary ledger is required for tracking the collection and payment proc-ess to individual customers and vendors, respectively.
b. The equipment account could use a subsidiary ledger. The subsidiary ledger
for equipment would track individual items of equipment, including their cost, location, and useful lives. The subsidiary ledger would be useful to determin-ing equipment depreciation and safeguarding equipment assets.
1. Special journals are used to reduce the processing time and expense to re-cord transactions. A special journal is usually created when a specific type of transaction occurs frequently enough so that the use of the traditional two-column journal becomes cumbersome. The frequency of transactions for PHS would probably justify the following special journals:
Note to Instructors: The number and nature of the special journals to be es-tablished for PHS involve judgment. Differences of opinion may exist as to whether all the preceding special journals are necessary or cost-efficient. You may wish to use this time to comment further on the costs of establishing special journals and the potential benefits of reducing the processing time to record transactions.
2. PURCHASES JOURNAL PAGE 1 Accounts Medical Office Other Post. Payable Supplies Supplies Accounts Post. Date Account Credited Ref. Cr. Dr. Dr. Dr. Ref. Amount REVENUE JOURNAL PAGE 1 Invoice Post. Accounts Rec. Dr. Date No. Account Debited Ref. Fees Earned Cr. 3. The business should maintain subsidiary ledgers for customer accounts receivable, supplier accounts pay-
A new approach to automating our accounting requirements is now available. It is called Internet-based accounting using an application service provider (ASP). Ra-ther than purchasing our accounting software and loading it on our own com-puters, Internet-based accounting software is rented and resides on the pro-vider’s computers. Our data, along with the accounting software, stay with the provider. There are several advantages to this approach.
1. We don’t need to administer the application or data on our own computers. This becomes the job of the service provider, thus saving us computer sys-tem personnel costs. All we need is a desktop computer and browser to use the software.
2. Our people can work with our data anytime or anyplace. We don’t need to rely on our own internal computer network for accounting-related work. Instead, the Internet-based product is available on the Internet. This means that we can enter transactions and access our accounting data from anywhere in the world, rather than having to be plugged into our corporate network. This also will save us network support costs.
3. We never need to purchase and load software upgrades. All upgrades are provided on the provider’s server when they are available. Thus, we are al-ways using the latest version.
4. Providers promise a highly secure environment for our data. 5. An Internet-based accounting system should help us when passing data,
such as orders, between ourselves and our customers and suppliers. There are also a number of disadvantages we need to consider.
1. The cost of the software is recurring. Thus, we are trading off the recurring costs of maintaining our system infrastructure for the recurring cost of the service. A financial analysis should be conducted to determine if the service is cost effective.
2. The Internet can be slow. During busy times, we may experience slow re-sponse times.
3. Our data physically reside with the service provider. Thus, we don’t control the security of our own data; the provider does. Our data are our lifeblood, so confidence in the provider’s controls is paramount.
4. Once we begin, we will become “locked in” to the provider. It will be hard to change our mind at a later date. However, this is also true for purchased software to some extent.
Note to Instructors: While the list of functions can be quite large, the key func-tions are identified below. The purpose of these functions will be fairly advanced for most students. The activity asks for a listing rather than an explanation be-cause most students would have very limited experience by which to provide much explanation. Use this case to demonstrate the scope and basic nature of these application tools. Selected I2 Technologies Supply Chain Management Solutions
• Provide the sales force with real-time information about all customer contacts with the firm in order to improve the effectiveness of the sales call.
• Provide real-time forecast estimation and accumulation tools. • Support promotion plans and integrate the plans with forecasting and manu-
facturing. • Decision tools for evaluating marketing campaign effectiveness. • Tools to support call center responsiveness.