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What is a paper-based or manual accounting system?

A system that maintains accounting records on paper and involves significant human processing.

What class project is an example of a paper-based accounting system?

The Systems Understanding Aid, or SUA.

What are the main components of a paper-based accounting system?

Source documents, accounts, chart of accounts, journals, subsidiary and general ledgers, and output reports.

What is a chart of accounts?

A listing of account numbers, account names, and brief descriptions.

What are the four basic steps in a paper-based accounting system?

Complete source documents; record transactions in the appropriate journal and applicable subsidiary ledger; post to the general ledger at period end; prepare outputs.

What is a source document?

An input document capturing transaction details that support an accounting entry when applicable.

When should source documents be completed?

Before the transaction is processed further.

Can source documents be prepared both internally and externally?

Yes. The company can prepare them internally, or customers and vendors can prepare them externally.

Which source documents are internal examples in the slides?

Sales invoice, purchase order, and receiving report.

Which source documents are external examples in the slides?

Vendor invoice, customer purchase order, and customer check.

Why is your company's purchase order internal but a customer's purchase order external?

The classification depends on who prepares it: your company versus an outside customer.

Where do you find SUA document numbers and document listings?

The Documents Folder index.

Where do you find explanations of SUA document fields and completed examples?

The SUA Reference book.

What is the purpose of a journal?

To record individual transactions.

What is a specialized journal?

A journal used for transactions of a particular nature or type.

What is the purpose of the general journal?

To record transactions that do not fit into a specialized journal.

Where is a transaction initially recorded before being posted to the general ledger?

In the appropriate specialized journal or general journal.

Which journal records credit sales?

The sales journal.

Which journal records incoming cash?

The cash receipts journal.

Which journal records outgoing cash?

The cash disbursements journal.

How are general-journal entries posted to the general ledger?

Each entry is posted separately.

How can specialized-journal transactions be posted to the general ledger?

Transactions affecting a particular account can be totaled and the total posted.

What is a subsidiary ledger?

Individual account detail that supports and totals to a general ledger control account.

What are common examples of subsidiary ledgers?

Accounts receivable, accounts payable, fixed assets, and employee earnings.

What does the A/R subsidiary ledger show that the GL A/R control account does not?

Which individual customers owe money and how much each owes.

A/R subsidiary balances are $500, $300, and $200. What should the GL A/R control balance be?

$1,000, because the subsidiary balances should total the control account.

When a credit sale is recorded, when should the customer's subsidiary account be updated?

At the time the transaction is recorded in the journal.

What two records are updated initially for a credit sale in the slides' example?

The sales journal and the specific customer's A/R subsidiary account.

What is the revenue-side journal entry for a sale on credit?

Debit Accounts Receivable and credit Sales Revenue.

When are journal transactions posted to the GL in the manual process described in the slides?

At period end, such as month-end, quarter-end, or year-end.

What is the general ledger?

A permanent, ongoing record of account activity and balances used to prepare financial statements.

Which account balances carry forward in the general ledger from prior periods?

Asset, liability, and equity account balances.

What are examples of accounting system outputs?

Financial statements, aged A/R, aged A/P, payroll reports, and other internal reports.

What is a computerized or automated accounting system?

A system that maintains accounting records in computer files with less human processing than a manual system.

What can remain identical or similar between manual and computerized systems?

Source documents and outputs.

What is source document automation?

Electronic capture of data.

What are examples of electronic source-data capture?

Online ordering, ATM transactions, point-of-sale systems, and OCR scanning.

What does an OCR scanner do in the example from the slides?

Reads data from a scanned check, such as its dollar amount.

What is a reference file?

A file repeatedly consulted during processing, such as a product price list or sales tax table.

What is an open file?

A file containing transactions started but not fully processed.

What is a transaction file?

A file recording transactions of a particular type; it replaces a special or general journal.

What is a master file?

A file storing account balances at a point in time that can be used to generate reports.

What is a scratch file?

A temporary file created during processing and later discarded.

What is a backup file?

A duplicate copy used for recovery after corruption, security problems, or other issues.

What is an archive file?

A permanent record of historical transactions for a particular period, usually read-only.

What is a program file?

Instructions telling the computer how to process.

What happens after transaction input in a computerized system?

The program calculates amounts, consults reference files, records data in applicable files, and updates outputs.

How does batch processing differ from real-time processing?

Batch groups transactions for processing together; real-time processes each transaction individually and immediately.

What are the timing and benefit of batch processing?

It occurs at a scheduled time, frequency, or quantity and can improve processing efficiency.

What are the benefits, examples, and tradeoffs of manual versus computerized systems?

Manual: easily followed paper trail and operation without electricity, but more human errors, cumbersome reports, and on-site access. Computerized: consistent processing when correctly programmed, easier reports, remote access, and integration, but technology dependence and a less easily followed trail.