Accounting Records and Reports

Our review would not be complete without mentioning the accounting records and reports.  Exhibit 5 presents the flow of transactions through the accounting process and the various reports (journals, ledgers and trial balance) that are part of the accounting system. 

I suggest that as you are reading the text and view the lessons that you stop and try to apply the concept as if you were recording the transaction. 

Exhibit 5. Flow of Accounting Transactions

Consider a simple sales transaction. 

Date	Account		Dr	Cr
	???????		$20,000.00
	Sales			$20,000.00

 

What account should be debited?  Cash (my favorite account) or accounts receivable.

This transaction is the same for any sale.  I am not saying that you did not know how to record the transaction.  I am suggesting that you will use this simple process when dealing with more complex issues.  Remember, keep it simple.  Think in terms of journal entries and “T” accounts.

A fictitious entry would be recorded the same way, only the perpetrator would not use the cash.  You cannot fake cash.  They may attempt to hide the entry in accounts receivables or debit some other asset account.

Which reports would you use to try and locate the fictitious entry?  Use Exhibit 5 to formulate your answer.  (sales journal, account receivable subsidiary ledger and accounts receivable aging report)  Oh, I forgot to tell you that the company is Amazon and they process about 13.3 sales transactions per second!

Never forget the mechanics of accounting.  It will always serve you well.