Appendix E-1 Appendix E Subsidiary Ledgers and Special Journals Financial Accounting, IFRS Edition Weygandt Kimmel Kieso.

Appendix E-1

Appendix E

Subsidiary Ledgers and Special Journals

Financial Accounting, IFRS EditionWeygandt Kimmel Kieso

Appendix E-2

1. Describe the nature and purpose of a subsidiary ledger.

2. Explain how companies use special journals in journalizing.

3. Indicate how companies post a multi-column journal.

Study ObjectivesStudy ObjectivesStudy ObjectivesStudy Objectives

Appendix E-3

Used to keep track of individual balances.

Two common subsidiary ledgers are:

1. Accounts receivable (customers’)

2. Accounts payable (creditors’)

Nature and Purpose of Subsidiary LedgersNature and Purpose of Subsidiary LedgersNature and Purpose of Subsidiary LedgersNature and Purpose of Subsidiary Ledgers

SO 1 Describe the nature and purpose of a subsidiary ledger.SO 1 Describe the nature and purpose of a subsidiary ledger.

Each general ledger control account balance must equal the composite balance of the individual accounts in the related subsidiary ledger.

Appendix E-4

Illustration E-2Relationship between general and subsidiary ledgers

Subsidiary LedgersSubsidiary LedgersSubsidiary LedgersSubsidiary Ledgers

Subsidiary Ledger Example

Appendix E-5

1. Show in a single account transactions affecting one customer or one creditor.

2. Free the general ledger of excessive details.

3. Help locate errors in individual accounts.

4. Make possible a division of labor.

Advantages of Subsidiary Ledgers

Appendix E-6

SO 2 Explain how companies use special journals in journalizing.SO 2 Explain how companies use special journals in journalizing.

Used to record similar types of transactions.

If a transaction cannot be recorded in a special journal, the company records it in the general journal.

Illustration E-4

Appendix E-7

Each of the following is a subsidiary ledger except the:

a. accounts receivable ledger.

b. accounts payable ledger.

c. customers’ ledger.

d. general ledger.

Review QuestionReview Question

Appendix E-8

Sales JournalSales JournalSales JournalSales Journal

Illustration E-5

Under a perpetual inventory system, one entry at selling price in Sales Journal results in a debit to Accounts Receivable and a credit to Sales.

Another entry at cost results in a debit to Cost of Goods Sold and a credit to Merchandise Inventory.

Appendix E-9

Companies make daily postings from the sales journal to the

individual accounts receivable in the subsidiary ledger.

Posting

Illustration E-6

Appendix E-10

Illustration E-6

Posting

Posting to the general ledger is done monthly.

Appendix E-11

One-line entry for each sales transaction saves time.

Only totals, rather than individual entries, are posted to the general ledger.

A division of labor results.

Advantages of Sales Journal

Appendix E-12

Cash Receipts JournalCash Receipts JournalCash Receipts JournalCash Receipts Journal

In the cash receipts journal, companies record all

receipts of cash.

The posting of the cash receipts journal is similar to the

posting of the sales journal.

Appendix E-13

Illustration: May transactions of Karns Wholesale Supply. Collections from customers relate to the entries recorded in the sales journal in Illustration E-5.The entries in the cash receipts journal are based on the following cash receipts.

May 1 Shareholders invested $5,000 in the business.

7 Cash sales of merchandise total $1,900 (cost, $1,240).

10 Received a check for $10,388 from Abbot Sisters in payment of invoice No. 101 for $10,600 less a 2% discount.

12 Cash sales of merchandise total $2,600 (cost, $1,690).

17 Received a check for $11,123 from Babson Co. in payment of invoice No. 102 for $11,350 less a 2% discount.

22 Received cash by signing a note for $6,000.

23 Received a check for $7,644 from Carson Bros. in full for invoice No. 103 for $7,800 less a 2% discount.

28 Received a check for $9,114 from Deli Co. in full for invoice No. 104 for $9,300 less a 2% discount.

Appendix E-14

Illustration E-8

Appendix E-15

Cash Receipts Cash Receipts JournalJournalCash Receipts Cash Receipts JournalJournal

SO 2SO 2

Illustration E-8

Posting

Appendix E-16

Illustration E-10Proving the Ledgers

Appendix E-17

Cash sales of merchandise are recorded in the:

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. sales journal.

Appendix E-18

Which of the following is not one of the credit columns in the cash receipts journal:

a. Other accounts.

b. Accounts payable.

c. Accounts receivable.

d. Sales.

Appendix E-19

Purchases JournalPurchases JournalPurchases JournalPurchases Journal

SO 3 Indicate how companies post a multi-column journal.SO 3 Indicate how companies post a multi-column journal.

Illustration E-11

In the purchases journal, companies record all purchases of

merchandise on account.

Appendix E-20

Illustration E-11

In the purchases journal, companies record all purchases of

merchandise on account.

Appendix E-21

All of the following are advantages of using subsidiary ledgers except they:

a. show transactions affecting one customer or one creditor in a single account.

b. free the general ledger of excessive details.

c. eliminate errors in individual accounts.

d. make possible a division of labor.

Appendix E-22

Cash Payments JournalCash Payments JournalCash Payments JournalCash Payments Journal

In a cash payments journal, companies record all disbursements

of cash.

Illustration E-15

Appendix E-23

SO 3SO 3

Illustration E-15

In a cash payments journal, companies record all disbursements

of cash.

Appendix E-24

Credit purchases of equipment or supplies other than merchandise are recorded in the:

c. general journal.

d. purchases journal.

Appendix E-25

Cash payments of merchandise are recorded in the:

c. general journal.

d. purchases journal.

Appendix E-26

Special journals substantially reduce the number of entries that companies make in the general journal.

Only transactions that cannot be entered in a special journal are recorded in the general journal.

Also, correcting, adjusting, and closing entries are made in the general journal.

Effects of Special Journals on the General Effects of Special Journals on the General JournalJournalEffects of Special Journals on the General Effects of Special Journals on the General JournalJournal

Appendix E-27

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express written permission of the copyright owner is unlawful.

Request for further information should be addressed to the

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Appendix E-1 Appendix E Subsidiary Ledgers and Special Journals Financial Accounting, IFRS Edition Weygandt Kimmel Kieso.

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