Transcript Two Main Types of Accounting Software

Premium 2011
The
COMPANY Module
(G/L)
Contents
The COMPANY Module - 2
More Sage Simply Accounting Basics
Date Information – 4
Transaction Date - 5
Types of Transactions in the COMPANY Module
The COMPANY Module Window
6
7
Journalizing Transactions in the GENERAL Module
Viewing the Journal Entry
Recurring Entries
10
9
Correcting an Entry After Posting
11
ADJUST ENTRY Method - 11
The REVERSE ENTRY Method
12
Verifying the Results of ADJUST or REVERSE Entry
Displaying Reports
8
13
14
Converting Reports to Excel
15
Financial Statements
Income Statement
16
Balance Sheet
17
Other Financial Reports
Accountant’s Copy 19
18
Generally Accepted Accounting Principles (GAAP)
Why are Adjustments Necessary?
? - 26
30
21
Slideshow 1B
The COMPANY Module
The GENERAL LEDGER in the
COMPANY Module contains
company information and the
company Chart of Accounts.
When transactions are entered in
the various modules, the accounts
in the GENERAL JOURNAL are
automatically updated.
Click.
At any time, you can print financial
statements in the COMPANY
module.
Click to continue.
Receivables
Projects
Payables
COMPANY
G/L
Inventory
Payroll
Financial
Statements
More Sage Simply Accounting
Basics:
Date Information
Date format in Simply is consistent
with the conventions used in
Windows.
Click.
You may select any of the Short
Date format, or one of the Long
Date format.
Click.
You can also specify the day the
company’s week begins.
It does not matter which date
format you use, as long as you are
consistent.
Study the available formats on the
screen and in reports.
The text uses the MMM dd yyyy
long date format.
Click to continue.
Transaction Date
Transaction Date and Session date
must not be confused with each other.
Session Date is the date when you are
recording transactions (work session);
Transaction Date is the date when a
transaction actually occurred, which is
usually before or on the Session Date.
Click.
When you open a company file, Simply
asks you for the date of the work
session.
Click.
When you open a journal, the current
session date automatically appears in
the Transaction Date field; however, you
can change it to an earlier date.
Click.
Future dates (e.g., on post-dated
cheques) can be used if Allow
transactions in future has been
checked in the System Settings.
Always use the proper transaction
date, as calculation of sales or
purchase discounts, aging of accounts,
etc. are based on the Transaction Date.
Click to continue.
Types of Transactions in
the COMPANY Module
In Simply, you would enter the
following types of transactions in
the General Ledger:
Types of Transactions entered
in the COMPANY module:
Click and study the list of transactions.
You will learn how to process some
of these types of transactions in
this chapter, and the others when
you do the exercises for the
various modules.
Click to continue.

Transactions pertaining to BANK
accounts
 Bank Reconciliation adjustments

Equity Items




Owner investment by bank transfer
Owner drawing(s) of non-cash items
Retained earnings (for corporations)
Period-End Adjustments


Accruals and reversals
INVENTORY adjustments (periodic
inventory system)
The COMPANY Module Window
This is a typical COMPANY Module window. Click the numbered items below in proper sequence for more
information on the basic parts of the module. You will learn more about this window later in this slideshow.
When you click the
arrowhead beside CHART
OF ACCOUNTS, you will be
When you click GENERAL
able to do the following
tasks:
JOURNAL, a General
Journal window appears
Where you can enter
and post a transaction.
You will learn more
about using the
General Journal
later in this slideshow.
The Report Centre allows you to view, print,
and/or modify related financial reports. You
will be using the Report Centre quite a bit in
this course.
Click to continue.



Journalizing Transactions
in the COMPANY Module
Simple Entry
Transactions are entered in the
General Ledger using doubleentry accounting. In this method,
at least two accounts are
entered…
Click.
Debit
…and debit entries should equal
credit entries.
= Credit
Click.
When there are only two accounts
in the entry, it is referred to as a
simple entry.
Click.
When there are more than two
accounts, it is called a compound
entry. Make sure debit(s) =
credit(s); otherwise, Simply will
not allow you to post the
transaction.
Click to continue.
Debit
Compound
Entry
= Credit
Journalizing Transactions in the
COMPANY Module (continued)
Viewing the Journal Entry
After you have entered a
transaction in any module, it is
best to view the resulting journal
entry before posting by clicking
Report,
Click REPORT on the Main Menu (see
red arrow).
…then click Display General
Journal Entry.
Click Display General Journal entry.
Study the resulting General
Journal Entry. Notice where the
Comment would appear.
After verifying that the entry is
correct, you can then click the
POST button.
Clicking POST would update the
corresponding ledgers and
subledgers.
Click to continue.
Journalizing Transactions in the
COMPANY Module (continued)
Entering Comments
Your journal entries should
provide a means for tracing items
of data back to the original source
data. This is particularly important
to an audit trail or audit log
required in specific financial
matters that require evidence
directly pertaining to and resulting
from the execution of business
transactions of a company. It is
therefore important to enter notes
or comments when making journal
entries.
Click and study where the comments
on the General Journal entry will
display on the General Journal Entry
Report.
If relevant, you may also enter
Additional Date or Additional Field
by clicking the Additional
Information icon.
Click.
Click again to continue.
Recurring Entries
When you enter a transaction
repeatedly, Simply allows you to
create an entry and store it by
clicking on the Store Recurring
Transaction button.
This type of entry is called a
recurring transaction. This
feature not only saves time but also
helps minimize keystroking errors.
Click OK.
At a later time, you can recall the
entry using the Recall Recurring
Transaction button.
Click the RECALL button now.
You can select the particular
recurring entry you wish, which
generates a copy of the original
journal entry. You may then make
necessary changes, and then post.
If you wish to remove a recurring
entry, you would recall the entries
and delete the unwanted entry.
You can use this feature in most
Simply transactions.
Click to continue.
Correcting an Entry after
Posting (continued)
If after you have posted a transaction
you realize you have made an error,
you can adjust the entry using one of
two methods:
1.The ADJUST ENTRY method.
2.The REVERSE ENTRY method.
ADJUST ENTRY METHOD
Study the case scenario (right).
Click.
On a blank General Journal you
would click the ADJUST button.
Click the ADJUST button.
Study the SEARCH criteria. Since
you know the exact amount, you can
enter it in the search criteria to
narrow down the search.
Click OK.
The original entry appears on edit
mode. You can then make necessary
corrections, then POST.
You will learn how to check if proper
adjustment is made later on this
slideshow.
Click to continue.
Case scenario: On April 23, Mrs. Chikowski, the proprietor,
advised you by phone that she is making a $2,000 additional
investment to the business the following day. On April 24, you
recorded the additional investment.
On April 25, you received a bank transfer document from Mrs.
Chikowski regarding her additional investment of $3,000
instead of the $2,000 she said she would deposit in the bank.
Correcting an Entry after Posting
The Reverse Entry Method
Study the scenario at right.
Click.
To start using the Reverse Entry
method, you would click the LOOKUP
icon on a blank General Journal.
Click the LOOKUP icon now.
Study the SEARCH criteria (top right).
It will display the relevant entry (bottom
right). If there is more than one entry,
you would double-click on the desired
entry.
When the G/L entry displays, click the
REVERSE ENTRY icon.
Click the Reverse Entry icon (bottom right).
If you Click YES on the Confirmation
box, a blank General Journal appears,
which means that the entry has been
reversed. You can then make a new
correct entry if necessary.
In the next slide. You will be shown
how to confirm that the entry is
reversed.
Click to continue.
Case scenario: On April 23, Mrs. Chikowski, the proprietor, advised
you by phone that she is making a $2,000 additional investment to the
business the following day. On April 24, you recorded the additional
investment.
On April 25, you received another call from Mrs. Chikowski that she
was not able to make the additional investment after all. You will then
have to reverse your entry made on April 24.
Correcting an Entry after Posting
(continued)
Verifying Results of ADJUST
or REVERSE ENTRY
Procedure
To confirm that the correction of an
error is properly done, use the
REPORT CENTRE to display All
Journal Entries.
Click ALL Journal Entries.
When the report appears, you would
then click Modify Report (see right),
then select Report Options.
Click REPORT OPTIONS now.
Be sure to click the CORRECTIONS
box (see arrow).
Click.
Study the report. This is the result
for the ADJUST entry method. J3 is
the original entry; J4 is the reversal;
J5 is the correct entry.
Click
Study the result for the REVERSE
entry method in the red frame.
Click to continue.
Displaying Reports
The quickest way to display reports
is through the REPORT CENTRE
(see right).
If you click the drop-down arrow for
the Reports field,
Click drop-down arrow for REPORTS
now.
…you can choose from the list of
reports by clicking on it
Click INCOME STATEMENT.
…and then clicking DISPLAY.
Click DISPLAY.
It will then display the current
Income Statement.
Click.
If you wish to change the date(s) of
the statement, you can do so by
using the CALENDAR(s) beside
the date field(s).
Click to continue.
Financial Statements:
Income Statement
When someone refers to financial
statements, it usually means two
main documents:
• Income Statement, and
• Balance Sheet
Other financial statements are
available in Simply.
Click and study the Income Statement
at the right.
The Income Statement shows
whether or not the company
earned a profit (also referred to as
net income).
Click.
The Income Statement heading
indicates the relevant range of
dates.
You will learn more about income
statements later.
Click to continue.
Financial Statements:
Balance Sheet
The Balance Sheet heading, on the
other hand, indicates the as at date
to which the statement refers.
The purpose of the Balance Sheet
is to provide information that helps
users understand a company’s
financial status as of a given date.
It is also referred to as a
Statement of Financial Position.
Click.
The Balance Sheet is divided into
Assets, Liabilities and Equity.
Click.
As per the Accounting Equation,
Assets = Liabilities + Equity.
Study the Balance Sheet.
Click to continue.
Other Financial
Reports in the
COMPANY Module
There are several reports
available under various
categories in Simply. You
can access them by clicking
REPORTS on the Main
Menu.
Note the list of report
categories that are available
under FINANCIALS.
Study the other report
categories
Click to continue.
Converting Reports to
Excel Format
There might be times when you
need to convert Sage Simply
Accounting reports to Excel.
To start, click OPEN IN EXCEL on
the toolbar (see red arrow).
Click.
The Export Selection window
allows you to save the report in
Excel format .
Click SAVE.
The report in Excel format will then
display. If necessary, you can
“clean up” the report by fixing the
columns, formatting numbers, etc.,
then re-save.
Click to continue.
Accountant’s Copy
An accountant's copy is a copy of your
company data that you create and give
to your accountant to make General
Journal entries while you continue to
work with your original company data.
Your accountant must be using Sage
Simply Accounting Accountants' Edition
in order for you to be able to continue
working.
It is a good idea to back up your
company data before creating an
accountant's copy.
Study the screen shown at the right.
You would be able to create then import
entries from your accountant through
the Accountant’s Copy icon.
Click to continue.
Accountant’s Copy
(continued)
While your accountant has a copy of
your company data, there are no
restrictions on what you can do, but do
not change anything in your account
structure, codes or options. Performing
any of these actions may prevent some
of your accountant's entries from
importing into your company data. Read
the Warning screen at bottom right.
When your accountant finishes working
with the accountant's copy, you can
import the file into Sage Simply
Accounting.
Important: You can only have one
accountant's copy at any given time. If
you create another accountant's copy,
the existing copy will be cancelled. If
you cancel an accountant's copy that
your accountant is working on, you will
not be able to import any entries made
by your accountant using that copy.
Click to continue.
Read
You would specify the
location where your
Accountant’s Copy
will be saved.
Generally Accepted
Accounting Principles
(GAAP)
How would you know how to
interpret and record a business
transaction? Processing
transactions in Simply is no
different from what you have
already learned in your
Accounting course using
Generally Accepted Accounting
Principles (GAAP).
GAAP
A set of policies, procedures and
guidelines that direct accounting
practitioners to record and report
financial information.
Click and study the definition.
GAAP not only guides you in
determining how to treat
transactions and communicate
financial information but it can
also help interpret financial
statements between companies.
Click to continue.
GAAP is published in a handbook by
the Canadian Institute of Chartered
Accountants (CICA).
GAAP:
Representational
Faithfulness
Click and study the Represenational
Faithfulness principle, then read the
example below.
Example: A company should use
and file relevant source
documents (invoices, cheques,
memos, etc.) that can be verified
and are free of any personal bias
and judgment. These source
documents should be part of the
audit trail.
Click to continue.
Representational Faithfulness
Accounting information must be
complete, neutral (truthful,
factual, unbiased), and it must be
reliable (without material
errors/supported by objective
evidence).
GAAP:
Historical Cost Principle
You will apply GAAP when you
complete the exercises in the
various modules. The slides that
follow discuss the principles that
apply to ALL types of transactions.
First is the Historical Cost
Principle.
Click and study the principle, then
read the example below.
Example: A computer bought for
$3,000 is recorded as an asset at
the time of purchase. If the value
of that same computer decreased
in price to $2,500 shortly after
purchasing it, the value in the
accounting records remains the
same. Any change in the market
value of the asset does not get
reflected in the accounting
records.
This principle is followed even
when the value of the asset
increases.
Click to continue.
Historical Cost Principle
Items are recorded at their
acquisition cost transacted
with an outside party.
GAAP:
Full Disclosure Principle
Next is the Full Disclosure
Principle.
Click.
Example: A firm may report an
unusually high amount of a
particular expense on the Income
Statement. To avoid confusion or
misunderstanding, the entry
should include a note explaining
the high expenditure item, thus
following the Full Disclosure
Principle.
Click to continue.
Full Disclosure Principle
Full disclosure requires that all
relevant information pertaining to
the firm that may be important to
the users of the information must
be revealed on the financial
statements.
GAAP:
Business Entity Concept
Click and study the concept of
Business Entity, then read the example
below.
Example: The company’s
financial records should not
include information about the
owner’s personal belongings,
such as a house or a personal car.
The owner should also have his or
her own bank account separate
from the company’s bank account.
If the owner wants to invest more
money into the business, a
cheque or money transfer should
be made to the company and
recorded in the company books as
additional investment.
If the owner takes any item that
belongs to the business(e.g.,
computer equipment) for personal
use, it should be recorded as a
withdrawal.
Click to continue.
Business Entity Concept
A company’s financial information
is recorded and reported
separately from the owner’s
personal financial information.
GAAP:
Time Period Concept
Click and study the principle.
According to this principle, an
organization’s activities are
identified with specific time
periods; e.g., a month, threemonth quarters, or a year.
Most companies prepare monthly
(month-end) reports and use one
year (year-end) as their primary
accounting period.
The annual reporting period
(referred to as fiscal year) is not
always the same as the calendar
year ending December 31. A fiscal
year can consist of any 12
consecutive months.
Click to continue.
Time Period Concept
The economic life of a business
can be divided into time
periods.
GAAP:
Comparability
(Consistency) Principle
Click and study the Consistent
Reporting Principle, then read the
example below.
Example: Owners and managers
use information reported on
financial statements when making
decisions. Information from one
year is often compared to
previous years’. If accounting
information is recorded and
reported differently from one year
to the next, the information cannot
be compared.
Click to continue.
Comparability (Consistency)
Principle
In the preparation of financial
statements, the same accounting
concepts are applied in the same way in
each accounting period.
GAAP:
Matching Principle
Click and study the principle and
example below.
Example:
An accounting consultant, Faye
Anderson, bought $600.00 worth of
paper and printing supplies in
December. In the same month, she
collected $2,800.00 consulting fees
from her clients.
Faye entered $600.00 for paper
and printing supplies as prepaid
asset at the time of purchase.
At the end of the month, she
calculated that she used up
$285.00 worth of the supplies she
purchased earlier. When Faye
prepares her monthly financial
statement for December, she
should report the $2,800.00
revenue and her expenses to earn
the revenue, including $285.00 (not
$600.00) for supplies.
Click to continue.
Matching Principle
Expenses are matched with
revenues in the period when
efforts are made to generate
the revenue.
GAAP Related to Accounts
Receivable (Review):
Revenue Recognition and
Realization Principle
Click and review the principle and read
the example below.
Example:
Some businesses sell goods or
services for cash only; other
businesses sell goods or services
on one date and receive payment
from customers on a later date.
If a customer buys merchandise on
June 1 and pays on July 15, the
seller records the sale on June 1,
not on July 15 when payment is
received.
Click to continue.
Revenue Recognition and
Realization Principle
Revenue from business
transactions is recorded at
the time goods or services
are sold for cash or on credit.
Why are adjustments
necessary?
Most adjustments are entered in
the General Journal. Why would
you need to do adjustments?
During an accounting period
(GAAP: Time Period Concept), the
company records the financial
events during that time and
produces financial statements.
At the end of the accounting
period, adjustments are necessary
before producing financial reports
for a number of reasons. For
example, if services are performed
before the end of one month and
would not be completed until the
following month, fees earned until
the end of the current month
should be recorded (GAAP:
Revenue Recognition and
Realization Principle). Similarly,
office supplies used up for the
month should result in a reduction
in PREPAID OFFICE SUPPLIES
(GAAP: Matching Principle).
You will learn more about
adjustments later in your course.
Click to continue.
Time Period Concept
The economic life of a business
can be divided into time periods.
Revenue Recognition and
Realization Principle
Revenue should be recognized
in the period in which it is
earned.
Matching Principle
Expenses are matched with
revenues in the period when
efforts are made to generate
the revenue.
More…
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