ACC 100 Lecture Notes - Lecture 7: Subledger, General Ledger, Accounts Payable

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30 Apr 2015

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Subsidiary ledger detail for a number of individual items that collectively make up a single general ledger account. Control account general ledger account that is supported by a subsidiary ledger. Two other common accounts supported by subsidiary ledgers are plant and equipment" and accounts payable". Subsidiary ledger does not take the place of the control account in the general ledger. Two methods to account for bad debts: bad debts are unpaid customer accounts that a company gives up trying to collect. Direct write-off method recognition of bad debts expense at the point an account is written off as uncollectable. Matching principle requires that all costs associated with making sales in a period should be matched with the sales of that period. Allowance method method of estimating bad debts on the basis of either the net credit sales of the period of the accounts receivable at the end of the period.

Related Questions

1. Self-balancing is a system of
(a) keeping ledgers ;
(b) preparing trial balance ;
(c) preparing final accounts;
(d) recording journl entries.
2. The monthly total of purchases day book is posted to the debitside of the purchases account in the
(a) debtors ledger;
(b) creditors ledger ;
(c) general ledger;
(d) sales ledger.

3. No self-balancing entry is required
(a) for bad debts written off recovered;
(b) for discounts allowed;
(c) for bills receivable dishonoured;
(d) none of the three options.
4. The main advantage of self-balancing system is that itfacilitates the quick preparation of
(a) debtors and creditors ledgers only ;
(b) final accounts ;
(c) bank reconciliation statement ;
(d) none of the three options.
5. Under sectional balancing the ledger which is usually made tobalance is -
(a) debtors ledger;
(b) creditors ledger
(c) general ledger;
(d) sales ledger.
6. General Ledger adjustment account is opened in :
(a) bought ledger ;
(b) sold ledger ;
(c) general ledger ,
(d) both sold ledger and bought ledger
7. Provision for doubtful debts is opened in:
(a) debtors ledger ,
(b) sold ledger,
(c) general ledger,
(d) both sold ledger and bought ledger.
8. Sold ledger adjustment account is opened in:
(a) sold ledger;
(b) bought ledger;

ochremole72

Purchases and Cash Payments Journals; Accounts Payable Subsidiary and General Ledgers

AquaFresh Water Testing Service was established on April 16. AquaFresh uses field equipment and field supplies (chemicals and other supplies) to analyze water for unsafe contaminants in streams, lakes, and ponds. Transactions related to purchases and cash payments during the remainder of April are as follows:

April 16.		Issued Check No. 1 in payment of rent for the remainder of April, $3,500.
April 16.		Purchased field supplies on account from Hydro Supply Co., $5,340.
April 16.		Purchased field equipment on account from Pure Equipment Co., $21,450.
April 17.		Purchased office supplies on account from Best Office Supply Co., $510.
April 19.		Issued Check No. 2 in payment of field supplies, $3,340, and office supplies, $400.
		Post the journals to the accounts payable subsidiary ledger.
April 23.		Purchased office supplies on account from Best Office Supply Co., $660.
April 23.		Issued Check No. 3 to purchase land, $140,000.
April 24.		Issued Check No. 4 to Hydro Supply Co. in payment of April 16 invoice, $5,340.
April 26.		Issued Check No. 5 to Pure Equipment Co. in payment of April 16 invoice, $21,450.
		Post the journals to the accounts payable subsidiary ledger.
April 30.		Acquired land in exchange for field equipment having a cost of $12,000.
April 30.		Purchased field supplies on account from Hydro Supply Co., $7,650.
April 30.		Issued Check No. 6 to Best Office Supply Co. in payment of April 17 invoice, $510.
April 30.		Purchased the following from Pure Equipment Co. on account: field supplies, $1,340, and field equipment, $4,700.
April 30.		Issued Check No. 7 in payment of salaries, $29,400.
		Post the journals to the accounts payable subsidiary ledger.

Required:

1. Journalize the transactions (in chronological order as presented in the data) for April. Use a purchases journal and a cash payments journal, and a two-column general journal. Use debit columns for Field Supplies, Office Supplies, and Other Accounts in the purchases journal. Refer to the following partial chart of accounts:

11	Cash	19	Land
14	Field Supplies	21	Accounts Payable
15	Office Supplies	61	Salary Expense
17	Field Equipment	71	Rent Expense

At the points indicated in the narrative of transactions, post to the following accounts in chronological order in the accounts payable subsidiary ledger:

Best Office Supply Co.

Hydro Supply Co.

Pure Equipment Co.

For those boxes in which no entry is required, leave the box blank. If no other account is needed in the "Other Accounts Dr." column select "No Entry Required".

PURCHASES JOURNAL								PAGE 1
Date	Account Credited	Post. Ref.	Accounts Payable Cr.	Field Supplies Dr.	Office Supplies Dr.	Other Accounts Dr.	Post. Ref.	Amount
April 16	Hydro Supply Co.	?				No Entry Required
April 16	Pure Equipment Co.	?				Field Equipment
April 17	Best Office Supply Co.	?				No Entry Required
April 23	Best Office Supply Co.	?				No Entry Required
April 30	Hydro Supply Co.	?				No Entry Required
April 30	Pure Equipment Co.	?				Field Equipment
April 30

CASH PAYMENTS JOURNAL						PAGE 1
Date	Ck. No.	Account Debited	Post. Ref.	Other Accounts Dr.	Accounts Payable Dr.	Cash Cr.
April 16		Rent Expense
April 19		Field Supplies
		Office Supplies
April 23		Land
April 24		Hydro Supply Co.	?
April 26		Pure Equipment Co.	?
April 30		Best Office Supply Co.	?
April 30		Salary Expense
April 30		Total

JOURNAL				PAGE 1
Date	Description	Post. Ref.	Debit	Credit
April 30	Land
	Field Equipment

2. Post the individual entries in chronological order (Other Accounts columns of the purchases journal and the cash payments journal and both columns of the general journal) to the appropriate general ledger accounts. Post to the subsidiary ledger in chronological order. When posting to the general ledger, post in chronological order. However, if there is more than one entry on the same date, post transactions from the purchases journal first, then the cash payments journal before posting from the general journal.

3. Total each of the columns of the purchases journal and the cash payments journal, and post the appropriate totals to the general ledger.

For those boxes in which no entry is required, leave the box blank.

ACCOUNTS PAYABLE SUBSIDIARY LEDGER
Date	Item	Post. Ref.	Debit	Credit	Balance
Account: Best Office Supply Co.
April 17
April 23
April 30
Account: Hydro Supply Co.
April 16
April 24
April 30
Account: Pure Equipment Co.
April 16
April 26
April 30

Post transactions in chronological order. However, if there is more that one transaction on the same date, post from the purchases journal first, then from the cash payments journal before posting from the general journal. (Because the problem does not include transactions related to cash receipts, the cash account in the ledger will have a credit balance.)

GENERAL LEDGER
					Balance
Date	Item	Post. Ref.	Debit	Credit	Dr.	Cr.
Account: Cash #11
April 30
Account: Field Supplies #14
April 19
April 30
Account: Office Supplies #15
April 19
April 30
Account: Field Equipment #17
April 16
April 30
April 30
Account: Land #19
April 23
April 30
Account: Accounts Payable #21
April 30
April 30
Account: Salary Expense #61
April 30
Account: Rent Expense #71
April 16

4. Prepare a schedule of the accounts payable creditor balances.

AQUAFRESH WATER TESTING SERVICE Accounts Payable Creditor Balances April 30
Best Office Supply Co.	$
Hydro Supply Co.
Pure Equipment Co.
Total accounts payable	$

5. All are reasons why AquaFresh might consider using a subsidiary ledger for the field equipment EXCEPT:

To secure lower pricing on equipment purchases

lemonwasp608

Calculate cost of goods available for sale and cost of goodssold for the month.

5. Principles of an efficient and effectiveaccounting information system include all of the followingexcept

a. cost effectiveness.

b. flexibility.

c. useful output.

d. All of these options are principles.

6. Which of the following statements isincorrect?

a. A major consideration in developing an accountingsystem is cost effectiveness.

b. When an accounting system is designed, noconsideration needs to be given to the needs and knowledge of thevarious users.

c. The accounting system should be able toaccommodate a variety of users and changing information needs.

d. To be useful, information must be understandable,relevant, reliable, timely, and accurate.

7. All of the following are advantages ofusing subsidiary ledgers except they

a. eliminate errors in individual accounts.

b. free the general ledger of excessive details.

c. show, in a single account, transactions affectingone customer or one creditor.

d. make possible a division of labor.

8. Which of the following is notan advantage of a subsidiary ledger?

a. Shows transactions affecting one customer or onecreditor in a single account.

b. Helps locate errors in individual accounts.

c. Puts greater detail in the general ledger.

d. Makes possible a division of labor.

9. Credit sales of assets other thanmerchandise are recorded in the

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. sales journal.

10. When the totals of the sales journal are posted at the end of themonth, there will be credits to

a. Sales and Merchandise Inventory and debits toAccounts Receivable and Cost of Goods Sold.

b. Accounts Receivable and Cost of Goods Sold anddebits to Sales and Merchandise Inventory.

c. Sales and debits to each individual customeraccount.

d. the Sales account only, and no debits.

11. TheOther Accounts column of a multi-column journal is often referredto as the

a. Sundry Accounts column.

b. Controlling Account column.

c. Credit Account column.

d. Debit Account column.

12. Companies record credit purchases of equipment or supplies inthe

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. one-column purchases journal.

13. Inthe expanded purchases journal, debits are made in whichcolumns?

a. Accounts Payable, Merchandise Inventory, andOffice Supplies

b. Merchandise Inventory, Office Supplies, and StoreSupplies

c. Cash, Office Supplies, and Store Supplies

d. Accounts Payable, Cash, and MerchandiseInventory

14. Ifa customer takes a sales discount, an entry is made in the

a. cash receipts journal.

b. sales journal.

c. cash payments journal.

d. general journal.

15. Claimsfor which formal instruments of credit are issued as proof of thedebt are

a. accounts receivable.

b. interest receivable.

c. notes receivable.

d. other receivables.

16. Interestis usually associated with

a. accounts receivable.

b. notes receivable.

c. doubtful accounts.

d. bad debts.

17. Thereceivable that is usually evidenced by a formal instrument ofcredit is a(n)

a. trade receivable.

b. note receivable.

c. accounts receivable.

d. income tax receivable.

18. Which ofthe following receivables would not be classified as an"other receivable"?

a. Advance to an employee

b. Refundable income tax

c. Notes receivable

d. Interest receivable

19. Notes oraccounts receivables that result from sales transactions are oftencalled

a. sales receivables.

b. non-trade receivables.

c. trade receivables.

d. merchandise receivables.

20. LarsonCompany on July 15 sells merchandise on account to Stuart Co. for$1,000, terms 2/10, n/30. On July 20 Stuart Co. returns merchandiseworth $400 to Larson Company. On July 24 payment is received fromStuart Co. for the balance due. What is the amount of cashreceived?

a. $600

b. $588

c. $580

d. $1,000

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ACC 100 Lecture Notes - Lecture 7: Subledger, General Ledger, Accounts Payable

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