22. Unit # 9 Books of Accounts

Unit No. 9

“I have enough money to last me the rest of my life, unless I buy something” Jackie Mason

Unit 9

Roadmap

Subdivision of Journal

Books of Account

Return Inward Book

Return Outward Book

The Book of Original Entry

Purchase Day Book

Sales Day Book

General Journal

Cash Book

Unit 9Accounting

BOOKS OF ACCOUNT

There are two main books of account, Journal and Ledger

Journal used to record the economic transaction chronologically

Ledger used to classifying economic activities according to nature

9.1 Subdivision of Journal

In large business it is found inconvenient to journalize every transaction in one journal

Therefore, the journal is sub-divided into different journals known as the subsidiary books

The journal is divided in such a way that a separate book is used for each class of transactions

The important subsidiary books used in modern business world are the following

9.1.1 Purchases Day Book

Purchases book or purchases day book is a book of original entry maintained to record credit purchases

You must note that cash purchases will not be entered in purchases day book because entries in respect of cash

purchases must have been entered in the cash book

At the end of each month, the purchases book is totaled. The total shows the total amount of goods purchased on credit

Purchases book is written up daily from the invoices received

The invoices are consecutively numbered

The invoice of each number is noted in the purchases book

Work Book Foundation Level 204 Books of Account

Books of Account

Journal Accounts

Ledger

Purchase DayBook

Sales DayBook

Return InwardBook

General Journal

Return OutwardBook

CashBook

GeneralLedger

PersonalLedger

PrivateLedger

CashBook

Unit 9Accounting

Purchase Journal (Format)

Date Account Credited Invoice # Ref Amount

Total

Example # 9.1: From the following transactions of a trader prepare the Purchases day book (3 Minutes)

2011

January 5 Purchased goods from Qurat Ul Ain & Co Rs. 2,400

" 15 Purchased goods from Saba Sajjad 6,000

" 25 Purchased goods from Omer Nawaz & Co 1,500

" 30 Purchased goods from Maqbool & Co 3,000

Purchase Journal


2011

Januar

y5 Account Payable_ Qurat Ul Ain & Co 2,400

15 Account Payable_ Saba Sajjad 6,000

25 Account Payable_ Omer Nawaz & Co 1,500

30 Account Payable_ Maqbool & Co 3,000

Total Rs. 12,900

9.1.2 Sales Day Book

A sales book is also known as sales day book in which are recorded the details of credit sales made by a businessman

Total of sales book shows the total credit sales of goods during the period concerned

Usually the sales book is totaled every month. The sales day book is written up daily from the copies of invoices sent out

Sales Journal (Format)

Date Account Debited Invoice # Ref Amount

Total


Unit 9Accounting


Unit 9Accounting

Example # 9.2: From the following transactions of a trader prepare the sales day book of M. Amin (3 Minutes)

2011

March 5 Sold goods to Ideal College Rs. 200

" 10 Sold goods to Ahmad & Co 100

" 20 Credit sales to Ayesha Bibi 400

" 31 Sold goods to Gulbaz Khan 100

Sales Journal


2011

March 5 Account Receivable _ Ideal College 200

10 Account Receivable _ Ahmad & Co 100

20 Account Receivable _ Ayesha Bibi 400

31 Account Receivable _ Gulbaz Khan 100

Total Rs. 800

9.1.3 Return Inward Book

Sales returns book is also called returns inwards book. It is used for recording goods returned by credit customers

Customers who return goods should be sent a credit note. It is a statement sent by a business to customer showing the

amount credited to the account

Return Inward Journal (Format)

Date Account Credited Credit Note # Ref Amount

Total

Example # 9.3: From the following transactions of a trader prepare the sales returns book (2 Minutes)

2011

June 8 Goods returned by Sana Khalid & Co Rs. 40

" 20 Goods returned by Ideal Traders 52


Unit 9Accounting

Return Inward Journal


2011

June 8 Account Receivable _ Sana Khalid & Co 40

20 Account Receivable _ Ideal Traders 52

Total Rs. 92

9.1.4 Return Outward Book

Purchases returns book is a book in which the goods returned to credit suppliers are recorded. It is also called returns

outward book or purchases returns day book

Goods may be returned because they are of the wrong kind or not up to sample or because they are damaged etc.

When the goods are returned to the suppliers, intimation is sent to them through what is known as a debit note

These debit notes serve as vouchers for these entries. A debit note is a statement sent by a businessman to vendor,

showing the amount debited to the account

Return Outward Journal (Format)

Date Account Debited Debit Note # Ref Amount

Total

Example # 9.4: From the following transactions of a trader prepare the purchases returns day book (3 Minutes)

2011

July 14 Karim & Sons Rs. 135

" 27 Maria Waheed & Co 150

" 31 Saeed Bros 25


Unit 9Accounting

Return Outward Journal


2011

July 14 Account Payable _ Karim & Sons 135

27 Account Payable_ Maria Waheed & Co 150

31 Account Payable_ Saeed Bros 25

Total

Columnar Journal: This Journal is used when a business deals with more thanone line of goods. The journal is prepared with a column for each line of goods inwhich the business deals. The journal could be any of the ones mentioned above.

Illustration TwoBaba ‘Yargo & Sons, a wholesaler, divides his business into 3 departments:Clothing, Hardware and Sundries.Rule up a suitable columnar Purchases Book to record the following transactionsfor the month of September 2008.Sept. 1. Bought from K. Nwosu & Sons:240 Shirts @ N600 for twelve60 Singlets @ N350 for twelve48 Buckets @ N200 each.Sept. 7. Bought from Namu and Co. Ltd:22 Buckets @ N200 each1 carton ,Nescafe Coffee @ N1,800 a cartonSept. 16. Bought from Oodua Trading Company:40 tablets of Premier Soap @ N85 a tabletsLess 5% trade discounts.Sept. 24. Bought from Igwe Brothers:400 yards of Shaddah @ N250 a yard3 cartons, Nescafe Coffee @ N1,480 a carton.


Unit 9Accounting


Unit 9Accounting

9.1.5 Proper/ General Journal

Journal proper is book of original entry (simple journal) in which miscellaneous credit transactions which do not fit in

any other books. It is also called miscellaneous journal or General Journal

For example purchase assets on credit, Correcting Entries, Adjusting Entries and Closing Entries etc.

The Journal is meant for recording such transactions, which do not occur frequently in the business and, therefore, do not warrant setting-up of spe-

cial journals. The journal has columns for Date, Particulars and Amounts col-

umns, divided into Debit (DR.) and Credit (CR.). In General Journal, each entry is appended with an explanation of the trans-

action or narration. The explanation or narration enables one to ascertain the origin

of, and reason(s) for, the treatment given. The narration should, therefore, con-

tain full information as to the nature of the transactions and their dates of occur-

rence. Self-Assessment Exercises 1. Explain Date, Particulars and Amount Columns in Journal. 2. What is narration in journal? 3.6 Uses of General Journal Instances where a general journal could be used include: 1) Opening Entries: When a new set of books is started, the old accounts

have to be brought forward in the beginning of the year from last year’s books. The gen-

eral journal is meant for recording these transactions. 2) Closing Entries: At the end of the accounting year, the nominal ac-

counts are closed by transferring them to trading account or profit and loss account.

The entries passed for this purpose are termed as “Closing Entries”. 3) Adjustment Entries: At the end of the accounting year, adjustment en-

tries are to be passed for outstanding/ prepaid expenses, accrued/ outstanding income,

etc. Entries for all these adjustments are passed in the General Journal. 4) Rectification Entries: Rectification entries are passed for rectifying the

errors, which might have been committed in the books of accounts.


Unit 9Accounting

5) Transfer Entries: Transfer entries are required for transferring one ac-count to the

other. Entries for such transfers are passed in the General Journal. 6) Purchase of Fixed Assets: The entries for the purchase of fixed assets

such as Plant, Machinery, and Furniture etc. on credit are also passed in this Journal.

9.1.6 Single column cash book (cash column)

Single column cash book records only cash receipts and payments

It has only one money column on each of the debit and credit sides of the cash book

All the cash receipts are entered on the debit side and the cash payments on the credit side

Name of CompanyCash Book

For the month ended

Receipts Payments

Date Description Ref Amount Date Description Ref Amount

Example # 9.5: Write the following transactions in the simple cash book of AAA Company? (7 Minutes)

2011

July 1 Cash in hand 15,000" 6 Purchased goods for cash 2,000" 16 Received from Akbar 3,000" 18 Paid to Babar 1,000 " 20 Cash sales 4,000" 25 Paid for stationary 100" 30 Paid for salaries 500 " 31 Purchased office furniture 5,000

AAA Company Cash Book

For the month ended July, 2011

Receipts Payments


2011 2011

July 1 Balance b/d 15,000 July 6 Purchases 2,000

16 A/R_ Akbar 3,000 18 A/P_ Babar 1,000


Unit 9Accounting

20 Sales 4,000 25 Stationery 100

30 Salaries 500

31 Furniture 5,000

Balance c/d 13,400

Rs. 22,000 Rs. 22,000

Aug 1 Balance b/d 13,400

Example # 9.6: Record the following transactions in the appropriate journal? (20 Minutes)

2011

March 3 Purchased goods from Ali & Co for Rs. 4,500

“ 8 Sold merchandise to Naeem & Sons worth of Rs. 6,000

“ 12 Purchase merchandise from B & Brothers Rs. 3,000

“ 14 Credit sales of goods to Z & Co for Rs. 2,500

“ 15 Naeem & Sons returned goods Rs. 1,000

“ 18 Return merchandise to Ali & Co Rs. 500

“ 22 Purchase Furniture from Mr. Saeed of Rs. 3,200

“ 24 Returned goods to B & Brothers of Rs. 200

“ 27 Purchase Machinery on account from MMM Machines Rs. 7,000

“ 29 Z & Co returned merchandise of Rs. 300

Purchase Journal


2011

March 3 Account Payable_ Ali & Co 4,500

12 Account Payable_ B & Brothers 3,000

Total Rs. 7,500

Sales Journal


2011

March 8 Account Receivable_ Naeem & Sons 6,000

14 Account Receivable_ Z & Co 2,500


Unit 9Accounting

Total Rs. 8,500



2011

March 15 Account Receivable_ Naeem & Sons 1,000

29 Account Receivable_ Z & Co 300

Total Rs. 1,300



2011

March 18 Account Payable_ Ali & Co 500

24 Account Payable_ B & Brothers 200

Total Rs. 700

General Journal

Date Account Titles and Explanation Ref

Amount (Rs)

Debit Credit

2011

March 22 Furniture 3,200

Account Payable_ Mr. Saeed 3,200

(Being furniture purchased on credit)

27 Machinery 7,000

Account Payable_ MMM Machines 7,000

(Being furniture purchased on credit)

Total Rs. 10,200 Rs. 10,200


Unit 9Accounting


Unit 9Accounting

END-OF-UNIT ASSIGNMENT

TRUE-FALSE STATEMENTS

1. A subsidiary ledger is a listing of all journal entries related to a given general ledger account? (45Seconds Each)

(a) True (b) False

2. In the sales subsystem, the sales invoice is the source document used to record the journal entry for the sale in the sales

journal?

(a) True (b) False

3. In the sales subsystem, a sales order is an internal document that a customer’s credit has been approved and that other

appropriate approvals have been given?

(a) True (b) False

4. In the sales subsystem, once goods are shipped a shipping document, also known as a bill of lading is prepared?

(a) True (b) False

5. In the sales subsystem, the source document used to record the sales in the sales journal is the bill of lading?

(a) True (b) False

6. In the sales returns and allowances subsystem, when a customer’s request for a sales return or allowance is approved, a

debit memo is issued?

(a) True (b) False

7. In the purchases subsystem, the source document used to enter the purchase journal is the vendor invoice?

(a) True (b) False

8. In the purchases subsystem, a company orders goods or services by sending a purchase requisition to the supplier?

(a) True (b) False

9. A customer is offered a sales discount of 3/5, net 20. In this case, the customer is expected to pay within 20 days.

However, a three percent discount will be given if the customer pays within 5 days?

(a) True (b) False

10. In the purchase subsystem, if an internal department or function within a company wishes to purchase goods or services,

a purchase requisition is prepared?

(a) True (b) False

11. In the cash disbursements subsystem, the journal entry to record payment is prepared from the check or electronic funds

transfer sent to the vendor?

(a) True (b) False


Unit 9Accounting

A subsidiary ledger is a group of control accounts which provides information to the managers for controlling the operation of the company.

Answer: F, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

2. An accounts receivable subsidiary ledger has all the detailed information about the cash sales to individual customers.


3. The accounts payable subsidiary ledger provides detailed information about amounts owed to creditors.

Answer: T, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

4. The total of the individual account balances in the accounts receivable subsidiary ledger should agree with the total of the individual account balances in the accounts payable subsidiary ledger.

Answer: F, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

5. Control accounts are always located in the general ledger.


6. A control account and subsidiary ledger can be established for inventory.

Answer: T, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Decision Modeling, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

7. A subsidiary ledger provides up-to-date information on specific account balances.


Unit 9Accounting

Answer: T, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Reporting, AICPA-PC: Problem Solving/Decision Making, IMA: Reporting, Sector: General, IFRS: No

8. An advantage of using a subsidiary ledger is that one employee must post to both the subsidiary ledger and the general ledger.

Answer: F, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Risk Analysis, AICPA-PC: Project Management, IMA: Internal Controls, Sector: General, IFRS: No

9. Special journals are used to record unique transactions which do not occur very often.

Answer: F, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Decision Modeling, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

10. A cash receipts journal can be used to record all transactions involving cash coming into the business, regardless of the source.


11. The cash payments journal only has one column because all entries recorded in this journal require a credit to the Cash account.



Unit 9Accounting

12. A cash payments journal should not be used to record transactions which require payment by check.


13. If a transaction cannot be recorded in a special journal, it indicates that the company should adopt an electronic accounting system.

Answer: F, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Decision Modeling, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

14. A debit column for Sales Returns and Allowances may be found in the cash payments journal.


15. A single-column purchases journal is used to record purchases of merchandise on account.


16. Using special journals can save time in posting because column totals are often posted rather than individual entries.


17. The reference column in a sales journal is used to indicate the general ledger account number when the entry is posted.

Answer: F, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No


Unit 9Accounting

18. Postings are generally made more frequently to the general ledger control accounts than to the individual accounts in the subsidiary ledgers.

Answer: F, SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

19. The amounts appearing in the Merchandise Inventory column of the cash payments journal are posted individually to the accounts in the accounts payable subsidiary ledger.

Answer: F, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

20. Transaction amounts recorded in the general journal are never posted to accounts in the subsidiary ledger.

Answer: F, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

EXERCISES

Exercise # 9.1: State in which journal the following items will be recorded: (5 Minutes)

Transactions Amount Respective Journal

(a) Cash purchase of goods Rs. 25,000 Cash Payment Journal

(b) Cash purchase of furniture Rs. 30,000 Cash Payment Journal

(c) Credit sale of goods Rs. 56,000 Sales Day Book

(d) Credit sale of furniture Rs. 27,000 General Journal

(e) Interest accrued on investment Rs. 5,000 General Journal

(f) Bill accepted by a customer Rs. 7,500 General Journal

(g) Goods returned by a customer Rs. 3,500 Sales Return Book

(h) Cheque dishonored by bank Rs. 2,000 Cash Book

Exercise # 9.2: From the transactions given below prepare the Sales Book of Rahim for July 2011 (8 Minutes)

2011Work Book Foundation Level 220 Books of Account

Unit 9Accounting

July 5: Sold on credit to S.S. Traders

10 Chairs @ Rs. 250 Less 10%

10 Tables @ Rs. 850 Discount 10%

July 8: Sold to Raja for cash

15 Chairs @ Rs. 250

July 20: Sold to Mohsin & Co.

5 Almirah @ Rs. 2,200

10 Tables @ Rs. 850

July 23: Sold on credit to Ahmed & Co. old computer for Rs. 5,000

July 28: Sold to Kamaran for cash

15 Chairs @ Rs. 250

Sales Journal


2011

July 5 Account Receivable _ S. S. Traders* 9,900

20 Account Receivable _ Mohsin & Co** 19,500

Total Rs. 29,400

* (10 x 250) + (10 x 850) – (10% discount) = 9,900

** (5x 2200) + (10 x 850) = 19.500

Exercise # 9.3: Enter the following transactions in the purchases return book of Mr. Hamid (5 Minutes)

2012

Jan 5: Returned goods to Ahmed 5 chairs @ Rs.200 each, not in accordance with order

Jan 14: Returned goods to Ali 4 chairs @ Rs. 200 each and 10 tables @ Rs. 350 each, due to inferior quality

Jan 24: Return goods to Naeem and sons of Rs. 900



2012

January 18 Account Payable_ Ahmed 1,000

14 Account Payable_ Ali 4,300

24 Account Payable_ Naeem and sons 900

Total Rs. 6,200


Unit 9Accounting

Exercise # 9.4: Enter the following transactions in Returns Inward Book (5 Minutes)

2012

April 6: Returned by Sakandar 30 shirts each costing Rs. 550, due to inferior quality

April 8: Amar Tailors returned 10 ladies suits, each costing Rs. 1,900, on account of being not in accordance with

their order

April 21: T.N. Stores returned 12 male suits sets each costing Rs. 2,500, being not in accordance with order



2012

April 6 Account Receivable_ Sakandar 16,500

8 Account Receivable_ Amar Tailors 19,000

21 Account Receivable_ T.N. Stores 30,000

Total Rs. 65,500

Exercise # 9.5: Write up a Sharjeel Siraj Khan’s single column cash book for the month of April 2011, from the following?

(15 Minutes)

Rs. Rs. 1 Cash in hand …………………………..….1,650 17 Paid cash for repairing …………………… 360

2 Cash sales ………………………….……..16,000 19 Sales by cash ……………………………... 11,400

3 Paid check to creditors…………….…….. 4,000 21 Paid office expense ………………………. 180

4 Wages paid in cash ……………….……… 2,250 25 Paid rent

and rates ………………………... 3,600

4 Cash sales ………………………………...18,000 26 Credit sales ………..……………………… 19,200

9 Paid cash to TCP against Note Payable….. 420 27 Paid electricity bill .………………..……....900

11 Paid salaries by cash ……………….…... 2,850 28 Cash collected from debtor………………. 4,500

12 Credit Sales …………………………… 1,000 29 Goods Purchase ………..………………. 2,000

14 Note Receivable Realized ……………..3,000 30 Retire bank loan ………………………… 3,000

Requirement: Rull-off and balance the cash book at April 30, 2011.

Sharjeel Siraj Khan


Unit 9Accounting

Cash Book (Single Column)

For the month ended April, 2011

Receipts Payments


2011 2011

April 1 Balance b/d 1,650 April 4 Wages 2,250

2 Sales 16,000 9 Note Payable_ TCP 420

4 Sales 18,000 11 Salaries 2,850

14 Note Receivable 3,000 17 Repairing 360

19 Sales 11,400 21 Office Expenses 180

28 Debtor 4,500 25 Rent and Rates 3,600

27 Electricity Bill 900

29 Purchases 2,000

30 Bank Loan 3,000

Balance c/d 38,990

Total 54,550 Total 54,550

May 1 Balance b/d 38,990


Unit 9Accounting

Exercise # 9.6: Enter the following transactions in the single column cash book of Mr. Mobbushar Khan (15 Minutes)

2011 Transactions Rs.

Jan. 1 Mr. Mobbushar Khan stared business with cash 10,000

Jan. 3 Bought goods for cash 7,000

Jan. 7 Sold goods for cash 4,000

Jan. 10 Paid for trade expenses 1,000Jan. 11 Sold goods for cash 1,600

Jan. 12 Credit sales 400

Jan. 13 Received commission 300

Jan. 14 Received cash from Essa Khan 5,000

Jan. 15 Paid cash to Mr. Arifullah Khan 700

Jan. 16 Expenses incurred but not paid 1,800

Jan. 18 Withdrew cash for personal use 3,000Jan. 22 Bought machinery for cash 2,000

Jan. 23 Sold old furniture for cash 4,000

Jan. 24 Purchase on account 8,000

Jan. 25 Revenue earned but not received 1,900

Jan. 26 Paid for electricity bill 900

Jan. 31 Paid rent 1,500

Mobbushar Khan

Cash Book (Single Column)

For the month ended January, 2011

Receipts Payments


2011 2011

Jan 1 Capital b/d 10,000 Jan 3 Purchases 7,000

7 Sales 4,000 10 Trade expenses 1,000

11 Sales 1,600 15 A/P_ Arifullah Khan 700

13 Commission 300 18 Drawing 3,000

14 A/R_ Essa Khan 5,000 22 Machinery 2,000

23 Furniture 4,000 26 Electricity bill 900

31 Rent 1,500

Balance 8,800

Total 24,900 Total 24,900

Feb 1 Balance 8,800


Unit 9Accounting

Exercise # 9.7: Enter the following transactions in a single column cash book of Mr. Adeel Nawaz (20 Minutes)

2011

November 1. Started business with cash Rs. 70,000 and Land Rs. 30,000 3. Purchased merchandising for cash Rs. 5,000 4. Sold goods Rs. 1,700 on cash and Rs. 1,300 on account

5. Cash received from Manzoor Alam Rs. 200 12. Paid to Naima Kayani Rs. 150

14. Bought furniture worth of Rs. 200 15. Purchased goods from Muhammad Abid Tariq on credit Rs. 2,000

16. Purchase machinery of worth Rs. 20,000 cash down payment was 5,000 and remaining note payable 18. Company paid Rs. 2,400 for a one-year insurance policy 19. Received advance payment from customers Rs. 5,200, services will be provided in December 20. Paid electric charges Rs. 225 24. Paid salaries Rs. 250

25. Bought goods from Maria Muhammad Rs. 4,000 and by cash from Seemab Akhter Co. Rs 2,000 28. Received commission Rs. 750 28. Owner draws out Rs. 700 from the business for his own use 29. Accrued expenses Rs. 1,500 30. Sale of marketable securities that cost Rs. 6,000 for Rs. 7,500

Adeel Nawaz

Cash Book

For the month ended November, 2011

Receipts Payments


2011 2011

Nov 1 Balance b/d 70,000 Nov 3 Purchases 5,000

4 Sales 1,700 12 A/P_ Naima Kayani 150

5 A/R_ Manzoor Alam 200 14 Furniture 200

19 Unearned Services 5,200 16 Machinery 5,000

28 Commission 750 18 Prepaid insurance 2,400

30 Marketable securities 7,500 20 Electric charges 225

24 Salaries 250

25 Purchases 2,000

28 Drawing 700

Balance c/d 69,425

85,350 85,350

Dec 1 Balance c/d 69,425


Unit 9Accounting

Exercises

Ex. 66

After Artie Company had completed all posting for the month of December, the sum of the balances in the following

accounts payable subsidiary ledger did not agree with the balance of the control account in the general ledger.

Name Aston's

Address 286 Buck Avenue

——————————————————————————————————————————

Date Item Post. Ref. Debit Credit Balance

——————————————————————————————————————————

Dec. 2 P25 2,400 2,400

Name Carson Company

Address 818 Western Avenue

——————————————————————————————————————————


——————————————————————————————————————————

Dec. 1 Balance 7,600

10 CP23 7,600 —

20 P32 3,300 3,300

29 J15 200 3,500

Name Diana Fenn Company

Address 90210 Baker Boulevard

——————————————————————————————————————————


——————————————————————————————————————————


18 CP28 9,900 —

29 P34 13,600 3,700

Name Maria Lopez

Address 2720 Sommers AvenueWork Book Foundation Level 226 Books of Account

Unit 9Accounting

——————————————————————————————————————————


——————————————————————————————————————————

Dec. 8 P27 6,000 6,000

27 P33 8,000 14,000


Unit 9Accounting

Ex. 66 (cont.)

Name Oster Supplies

Address 1560 Puckett Street

——————————————————————————————————————————


——————————————————————————————————————————


7 P26 5,600 12,800

12 J11 420 12,380

20 CP29 5,000 17,380

The balance in the Accounts Payable control account of $41,480 has been verified as correct. Also assume that the journals

references in the Post Ref. columns of the accounts payable subsidiary ledger have been verified as correct.

Instructions

Determine the errors in the preceding accounts payable subsidiary accounts and prepare a corrected schedule of accounts

payable.

Answer: N/A, SO: 1, Bloom: AN, Difficulty: Hard, Min: 10, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,

AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,

IFRS: No

Solution 66 (10 min.)

IDENTIFICATION OF ERRORS:

Carson Company

The $200 represents merchandise returned and should be subtracted from the balance owed. Correct balance is $3,100.

Diana Fenn Company

The $13,600 represents new purchases on account and should be added to the previous balance of zero. The correct balance is

$13,600.

Oster Supplies

There is an addition error. Adding $5,600 to the beginning balance of $8,200 yields a balance of $13,800. Subtracting

merchandise returned of $420 leaves a balance of $13,380. The $5,000 is a payment on account, not an increase. The correct

balance is $8,380.Work Book Foundation Level 228 Books of Account

Unit 9Accounting

ACCOUNTS PAYABLE SUBSIDIARY LEDGER ACCOUNT BALANCES

Aston's $ 2,400

Carson Company 3,100

Diana Fenn Company 13,600

Maria Lopez 14,000

Oster Supplies 8,380

Total $41,480


Unit 9Accounting

Ex. 67

On December 1, the accounts receivable control account balance in the general ledger of Mitus Company was $9,000. The

accounts receivable subsidiary ledger contained the following detailed customer balances: Acme $1,500, Baker $2,100, Fare

$2,600, and Grote $2,800. The following information is available from the company's special journals for the month of

December:

Cash Receipts Journal: Cash received from Farr $1,900, from Acme $1,600, from Santos $1,700, and from Baker $1,800.

Sales Journal: Sales to Santos $2,300, to Fare $1,700, to Acme $2,300, and to Grote $2,400.

Additionally, Fare returned defective merchandise for credit for $900. Acme returned defective merchandise for $600 which

he had purchased for cash.

Instructions

(a) Using T-accounts for Accounts Receivable Control and the detail customer accounts, post the activity for the month

of December.

(b) Reconcile the accounts receivable control account with the subsidiary ledger by preparing a detail list of customer

balances at December 31.

Answer: N/A, SO: 1, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,


IFRS: No


(a) Control Account: Accounts Receivable

9,000 (CR) 7,000

(SJ) 8,700 (G) 900

Bal. 9,800

Subsidiary Accounts:

Acme Baker

1,500 (CR) 1,600 2,100 (CR) 1,800

(S) 2,300 Bal. 300

Bal. 2,200

Fare GroteWork Book Foundation Level 230 Books of Account

Unit 9Accounting

2,600 (CR) 1,900 2,800

(S) 1,700 (G) 900 (S) 2,400

Bal. 1,500 Bal. 5,200

Santos

(S) 2,300 (CR) 1,700

Bal. 600


Unit 9Accounting

Solution 67 (cont.)

(b) Listing of accounts receivable at end of the month:

Acme $2,200

Baker 300

Fare 1,500

Grote 5,200

Santos 600

Total $9,800 Accounts receivable balance

Ex. 68

Gates Company maintains four special journals and a general journal to record its transactions. Using the code below,

indicate in the space provided the appropriate journal for recording the transactions listed.

Code Journals

S Sales journal

CR Cash receipts journal

CP Cash payments journal

P Single-column purchases journal

G General journal

1. Shareholders invested cash in the business in exchange for ordinary shares.

2. Purchased store supplies on account.

3. Sold merchandise to customer on account.

4. Purchased a 2-year fire insurance policy for cash.

5. Received a check from a customer as payment on account.

6. Paid for store supplies purchased in transaction 2.

7. Purchased merchandise on account.

8. Issued a credit memorandum to a customer who returned defective merchandise previously sold

on account.

9. Purchased office equipment for cash.

10. Made an adjusting entry for store supplies used during the period.

Answer: N/A, SO: 2, Bloom: C, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,


IFRS: NoWork Book Foundation Level 232 Books of Account

Unit 9Accounting


1. CR 6. CP

2. G 7. P

3. S 8. G

4. CP 9. CP

5. CR 10. G


Unit 9Accounting

Ex. 69

Sasser Company uses a sales journal, a cash receipts journal, and a general journal to record transactions with its customers.

Record the following transactions in the appropriate journals. The cost of all merchandise sold was 70% of the sales price.

July 2 Sold merchandise for $18,000 to B. Stine on account. Credit terms 2/10, n/30. Sales invoice No. 100.

July 5 Received a check for $800 from R. Hyatt in payment of his account.

July 8 Sold merchandise to F. Wendel for $700 cash.

July 10 Received a check in payment of Sales invoice No. 100 from B. Stine minus the 2% discount.

July 15 Sold merchandise for $9,000 to J. Nott on account. Credit terms 2/10, n/30. Sales invoice No. 101.

July 18 Borrowed $25,000 cash from United Bank signing a 6-month, 10% note.

July 20 Sold merchandise for $15,000 to C. Karn on account. Credit terms 2/10, n/30. Sales invoice No. 102.

July 25 Issued a credit memorandum for $600 to C. Karn as an allowance for damaged merchandise previously

sold on account.

July 31 Received a check from J. Nott for $5,000 as payment on account.

SASSER COMPANY

Sales Journal

S1

——————————————————————————————————————————

Invoice Acct. Rec. Dr. COGS Dr.

Date Account Debited No. Ref. Sales Cr. Mer. Inv. Cr.

——————————————————————————————————————————

——————————————————————————————————————————

——————————————————————————————————————————

——————————————————————————————————————————

——————————————————————————————————————————

SASSER COMPANY

General Journal

G1

——————————————————————————————————————————

Date Explanations Ref. Debit Credit

——————————————————————————————————————————

——————————————————————————————————————————

——————————————————————————————————————————

——————————————————————————————————————————Work Book Foundation Level 234 Books of Account

Unit 9Accounting

——————————————————————————————————————————


Unit 9Accounting

Ex. 69 (cont.)

SASSER COMPANY

Cash Receipts Journal

CR1

———————————————————————————————————————————

Sales Accounts Other COGS Dr.

Accounts Cash Discounts Rec. Sales Accounts Mer. Inv. Cr.

Date Credited Ref. Dr. Dr. Cr. Cr. Cr.

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

Answer: N/A, SO: 2, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,


IFRS: No


SASSER COMPANY

Sales Journal

S1

———————————————————————————————————————————

Invoice Acct. Rec. Dr. COGS Dr.

Date Account Debited No. Ref. Sales Cr. Mer. Inv. Cr.

———————————————————————————————————————————

July 2 B. Stine 100 18,000 12,600

———————————————————————————————————————————

July 15 J. Nott 101 9,000 6,300

———————————————————————————————————————————

July 20 C. Karn 102 15,000 10,500

———————————————————————————————————————————

SASSER COMPANYWork Book Foundation Level 236 Books of Account

Unit 9Accounting

General Journal

G1

———————————————————————————————————————————

Date Explanation Ref. Debit Credit

———————————————————————————————————————————

July 25 Sales Returns and Allowances 600

———————————————————————————————————————————

Accounts Receivable—C. Karn 600

———————————————————————————————————————————


Unit 9Accounting

Solution 69 (cont.)

SASSER COMPANY

Cash Receipts Journal

CR1

———————————————————————————————————————————

Sales Accounts Other

Accounts Cash Discounts Rec. Sales Accounts COGS Dr.

Date Credited Ref. Dr. Dr. Cr. Cr. Cr. Mer. Inv. Cr.

———————————————————————————————————————————

July 5 R. Hyatt 800 800

———————————————————————————————————————————

July 8 Sales 700 700 490

———————————————————————————————————————————

July 10 B. Stine 17,640 360 18,000

———————————————————————————————————————————

July 18 Notes Pay. 25,000 25,000

———————————————————————————————————————————

July 31 J. Nott 5,000 5,000

———————————————————————————————————————————

Ex. 70

Ward Company uses a single-column purchases journal, a cash payments journal, and a general journal to record transactions

with its suppliers and others. Record the following transactions in the appropriate journals.

Transactions

Oct. 5 Purchased merchandise on account for $10,000 from Groton Company. Terms: 2/10, n/30; FOB shipping

point.

Oct. 6 Paid $7,200 to Federated Insurance Company for a two-year fire insurance policy.

Oct. 8 Purchased store supplies on account for $700 from Flynn Supply Company. Terms: 2/10, n/30.

Oct. 11 Purchased merchandise on account for $14,000 from Buehler Corporation. Terms: 2/10, n/30; FOB

shipping point.

Oct. 13 Issued a debit memorandum for $5,000 to Buehler Corporation for merchandise purchased on October 11

and returned because of damage.

Oct. 15 Paid Groton Company for merchandise purchased on October 5, less discount.

Oct. 16 Purchased merchandise for $8,000 cash from Clifford Company.

Oct. 21 Paid Buehler Corporation for merchandise purchased on October 11, less merchandise returned on October

13, less discount.Work Book Foundation Level 238 Books of Account

Unit 9Accounting

Oct. 25 Purchased merchandise on account for $22,000 from Dooley Company. Terms: 2/10, n/30; FOB shipping

point.

Oct. 31 Purchased office equipment for $30,000 cash from Paten Office Supply Company.


Unit 9Accounting

Ex. 70 (cont.)

WARD COMPANY

Purchases Journal

P1

———————————————————————————————————————————

Merchandise Inv. Dr.

Date Account Credited Ref. Accounts PayableCr.

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

WARD COMPANY

General Journal

G1

———————————————————————————————————————————


———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

WARD COMPANY

Cash Payments Journal

CP1

———————————————————————————————————————————

Other Accounts Merchandise

Accounts Accounts Payable Inventory Cash

Date Debited Ref. Dr. Dr. Cr. Cr.

———————————————————————————————————————————Work Book Foundation Level 240 Books of Account

Unit 9Accounting

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————

———————————————————————————————————————————


Unit 9Accounting

Answer: N/A, SO: 2, Bloom: AP, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,


IFRS: No


WARD COMPANY

Purchases Journal

P1

———————————————————————————————————————————

Merchandise Inv. Dr.

Date Account Credited Ref. Accounts Payable Cr.

———————————————————————————————————————————

Oct. 5 Groton Company 10,000

———————————————————————————————————————————

Oct. 11 Buehler Corporation 14,000

———————————————————————————————————————————

Oct. 25 Dooley Company22,000

———————————————————————————————————————————

WARD COMPANY

General Journal

G1

———————————————————————————————————————————


———————————————————————————————————————————

Oct. 8 Store Supplies 700

———————————————————————————————————————————

Accounts Payable—Flynn Supply Company 700

———————————————————————————————————————————

Oct. 13 Accounts Payable—Buehler Corp. 5,000

———————————————————————————————————————————

Merchandise Inventory 5,000

———————————————————————————————————————————

WARD COMPANY

Cash Payments Journal

CP1Work Book Foundation Level 242 Books of Account

Unit 9Accounting

———————————————————————————————————————————


Accounts Accounts Payable Inventory Cash

Date Debited Ref. Dr. Dr. Cr. Cr.

———————————————————————————————————————————

Oct. 6 Prepaid Insurance7,200 7,200

———————————————————————————————————————————

Oct. 15 Groton Company 10,000 200 9,800

———————————————————————————————————————————

Oct. 16 Merchandise Inventory 8,000 8,000

———————————————————————————————————————————

Oct. 21 Buehler Corp. 9,000 180 8,820

———————————————————————————————————————————

Oct. 31 Office Equipment30,000 30,000

———————————————————————————————————————————


Unit 9Accounting

Ex. 71

Sandy Company uses both special journals and a general journal. The company accountant made the following errors during

July.

1. Incorrectly added the credit entries in a customer's account in the accounts receivable subsidiary ledger.

The total was listed as $2,690; it should have been $2,790.

2. A remittance of $400 from Tom Short was correctly recorded in the cash receipts journal, but the amount

was posted incorrectly to the account of customer Will Short in the subsidiary ledger.

3. A purchase of merchandise on account from Easton Company for $1,000 was incorrectly entered in the

purchases journal at $10,000.

4. In the sales journal, the entries were incorrectly added for the month. The monthly total was listed as

$24,820; it should have been $24,280.

Instructions

Indicate how each of the above errors might be discovered.



IFRS: No


1. The subsidiary ledger will not agree with the general ledger control account. Refooting the subsidiary ledger should

locate the error.

2. The error will be discovered when the customer receives his statement. Mr. Tom Short's statement will indicate a

balance of $400 more than he owes.

3. The error may not be discovered until the payment is sent to the supplier. Then, hopefully Easton will send back the

excess payment. Additionally, analysis of gross profit may indicate it is inordinately out of line with prior periods.

4. When the accounts receivable control account is reconciled with the accounts receivable subsidiary ledger, it will be

$540 higher than the subsidiary ledger. Refooting the sales journal should then locate the error.


Unit 9Accounting

Ex. 72

Below are some typical transactions incurred by Harley Company.

1. Purchase of merchandise on account.

2. Collection on account from customers.

3. Payment of employee's wages.

4. Sales of merchandise for cash.

5. Close Income Summary to Retained Earnings.

6. Adjusting entry for depreciation on machinery.

7. Payment of creditors on account.

8. Purchase of office equipment on credit.

9. Sales discount taken on goods sold on credit.

10. Sales of merchandise on account.

11. Purchase of a delivery truck for cash.

12. Return of merchandise purchased on credit.

13. Payment of rent in advance.

14. Adjusting entry for accrued interest expense.

15. Purchase of office supplies for cash.

For each transaction, indicate by the code letter the appropriate journal where the transaction would be journalized.

CR — Cash Receipts Journal

CP — Cash Payments Journal

S — Sales Journal

P — Single-Column Purchases Journal

G — General Journal



IFRS: No


1. P 6. G 11. CP

2. CR 7. CP 12. G

3. CP 8. G 13. CP

4. CR 9. CR 14. G

5. G 10. S 15. CPWork Book Foundation Level 245 Books of Account

Unit 9Accounting


Unit 9Accounting

Ex. 73

Circle the correct answer to each situation.

(a) A sales journal will be used for:

Credit Sales Cash Sales Sales Discounts

Yes No Yes No Yes No

(b) A single-column purchases journal will be used for:

Purchase Returns

Cash Purchases Purchases on Account and Allowances


(c) A multiple-column purchases journal will be used for:

Supplies Purchased Equipment Purchases

Cash Purchases on Account on Account


(d) A cash payments journal will be used for:

Payments to Purchases Payment of

Creditors Discounts Dividends


(e) A cash receipts journal will be used for:

Sale of Shares Purchases Discounts Cash Sales




IFRS: No


(a) Yes, No, No (d) Yes, Yes, Yes

(b) No, Yes, No (e) Yes, No, Yes

(c) No, Yes, Yes


Unit 9Accounting

Ex. 74

Listed below are various column headings that may appear in special journals. Using the following code letters, identify for

each column heading (1) the special journal where the column heading would appear, and (2) whether the amounts entered

under the column heading would be posted in total, individually, or both in total and individually. (Note: column headings

may appear in more than one special journal)

Code: Special Journals Code: Posting

S = Sales journal I = Individual posting

P = Single-column purchases journal T = Total posting

CR = Cash receipts journal B = Both individual and total posting

CP = Cash payments journal

Heading Special Journal Posting

1. Accounts Payable—Cr.

2. Sales—Cr.

3. Sales Discounts—Dr.

4. Merchandise Inventory—Dr.

5. Cash—Cr.

6. Accounts Receivable—Dr.

7. Other Accounts—Cr.

8. Merchandise Inventory—Cr.

9. Accounts Receivable—Cr.

10. Accounts Payable—Dr.



IFRS: NoWork Book Foundation Level 248 Books of Account

Unit 9Accounting


Heading Special Journal Posting

1. Accounts Payable—Cr. P B

2. Sales—Cr. S, CR T

3. Sales Discounts—Dr. CR T

4. Merchandise Inventory—Dr. P, CP T

5. Cash—Cr. CP T

6. Accounts Receivable—Dr. S B

7. Other Accounts—Cr. CR I 8. Merchandise

Inventory—Cr. CP, CR, S T

9. Accounts Receivable—Cr. CR B

10. Accounts Payable—Dr. CP B


Unit 9Accounting

Ex. 75

Horton Company uses four special journals, (cash receipts, cash payments, sales, and purchases journal) in addition to a

general journal. On November 1, 2011, the control accounts in the general ledger had the following balances: Cash $12,000,

Accounts Receivable $200,000 and Accounts Payable $42,000. Selected information on the final line of the special journals

for the month of November is presented below:

Cash Receipts Journal:

Sales Accounts Other Accounts

Cash Discount Receivable Sales Cr. C. of G. S. Dr.

Dr. Dr. Cr. Cr. Acct. Ref. Amount Mer. Inv. Cr.

? $600 $6,400 $29,000 (X) $1,000 $17,400

Cash Payments Journal:

Other Accounts Accounts Office Store Merchandise

Dr. Payable Supplies Supplies Inventory Cash

Acct. Ref. Amount Dr. Dr. Dr. Cr. Cr.

(X) $1,600 ? $1,300 $1,100 $700 $18,600

Purchases Journal:

Accounts Merchandise Office Store Other Accounts

Payable Inventory Supplies Supplies Dr.

Cr. Dr. Dr. Dr. Acct. Ref. Amount

? $36,000 $800 $650 (X) $3,300

Additional Data:

The Sales Journal total was $45,000. A customer returned merchandise for credit for $360 and Norton Company returned

store supplies to a supplier for credit for $400.

Instructions

(a) Determine the missing amounts in the special journals.

(b) Determine the balances in the general ledger accounts (Cash, Accounts Receivable, and Accounts Payable) at the

end of November.


Unit 9Accounting



IFRS: No


Unit 9Accounting


(a) The missing amounts can be determined by crossfooting the journals.

Cash Receipts

Credits ($6,400 + $29,000 + $1,000) $36,400

Debits 600

Cash debit $35,800

Cash Payments

Credits ($700 + $18,600) $19,300

Debits ($1,600 + $1,300 + $1,100) 4,000

Accounts payable debit $15,300

Purchases

Debits ($36,000 + $800 + $650 + $3,300) $40,750

Credits -0-

Accounts payable credit $40,750

(b) Cash Accounts Receivable

12,000 (CP) 18,600 200,000 (CR) 6,400

(CR) 35,800 (S) 45,000 (G) 360

Bal. 29,200 Bal. 238,240

Accounts Payable

(CP) 15,300 42,000

(G) 400 (P) 40,750

Bal. 67,050

Ex. 76

Easton Company began business on October 1. The sales journal, as it appeared at the end of the month, follows:

SALES JOURNAL Page 1

———————————————————————————————————————————

Invoice Post.

Date Account Debited Number Ref. Amount

———————————————————————————————————————————

Oct. 5 Donna Miner 10001 275

11 Mike Barr 10002 335Work Book Foundation Level 252 Books of Account

Unit 9Accounting

16 Donna Miner 10003 818

19 Laura Cher 10004 147

26 Myron Silas 10005 1,184

2,759

1. Open general ledger T-accounts for Accounts Receivable (No. 112) and Sales (No. 401) and an accounts receivable

subsidiary T-account ledger with an account for each customer. Make the appropriate postings from the sales journal. Fill in

the appropriate posting references in the sales journal above.

2. Prove the accounts receivable subsidiary ledger by preparing a schedule of accounts receivable.


Unit 9Accounting

Answer: N/A, SO: 3, Bloom: AP, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,


IFRS: No


1. SALES JOURNAL Page 1

———————————————————————————————————————————

Invoice Post

Date Account Debited Number Ref. Amount

———————————————————————————————————————————

Oct. 5 Donna Miner 10001 275

11 Mike Barr 10002 335

16 Donna Miner 10003 818

19 Laura Cher 10004 147

26 Myron Silas 10005 1,184

2,759

(112)/(401)

GENERAL LEDGER SUBSIDIARY LEDGER

Accounts Receivable 112 Barr, Mike

10/31 (S1) 2,759 10/11 (S1) 335

Sales 401 Cher, Laura

10/31 (S1) 2,759 10/19 (S1) 147

Miner, Donna

10/5 (S1) 275

10/16 (S1) 818

1,093

Silas, Myron

10/26 (S1) 1,184


Unit 9Accounting

2. SCHEDULE OF ACCOUNTS RECEIVABLE

Mike Barr $ 335

Laura Cher 147

Donna Miner 1,093

Myron Silas 1,184

Total Accounts Receivable $2,759


Unit 9Accounting

Ex. 77

CASH PAYMENTS JOURNAL Page 45

———————————————————————————————————————————


Ck. Account Post. Accounts Payable Inventory Cash

Date No. Debited Ref. Dr. Dr. Cr. Cr.

———————————————————————————————————————————

2011

Jan. 4 659 M. Tate (a) 4,000 40 3,960

11 660 Prepaid Rent (b) 1,000 1,000

13 661 Merch. Inv. (c) 565 565

14 662 Cash Dividends (d) 2,000 2,000

18 663 Welch (e) 1,300 1,300

20 664 Merch. Inv. (f) 450 450

29 665 Equipment (g) 3,400 3,400

7,415 5,300 40 12,675

(h) (i) (j) (k)

Using the cash payments journal above, identify each of the posting references indicated by a letter, as representing:

(1) a posting to a general ledger account.

(2) a posting to a subsidiary ledger account.

(3) that no posting is required.



IFRS: No


a. 2 g. 1

b. 1 h. 3

c. 1 i. 1

d. 1 j. 1

e. 2 k. 1

f. 1


Unit 9Accounting

Ex. 78

Shown below is a page from a special journal.

1. What is the name of this journal?

2. Give an explanation for each of the transactions in this journal.

3. Explain the following:

(a) the numbers under the bottom lines.

(b) the checks entered into the Post. Ref. column.

(c) the numbers 113 and 416 in the Post. Ref. column.

(d) the (x) below the Other Accounts column.

———————————————————————————————————————————

Sales Accounts Other COGS Dr.

Accounts Post Cash Discounts Receivable Sales Accounts Mer. Inv. Cr.

Date Credited Ref. Dr. Dr. Cr. Cr. Cr.

———————————————————————————————————————————

May 27 Ted Roth 980 20 1,000

28 Notes Receivable 113 3,000

Interest Revenue 416 3,360 360

29 370 370 260

31 Don Calb 400 400

5,110 20 1,400 370 3,360 260

(111) (412) (114) (411) (x) (505)(120)



IFRS: No


1. Cash receipts journal.

2. May 27— Td Roth has paid for merchandise previously purchased on account. He is paying within the

discount period and taking the discount.

May 28— A note receivable has matured. Payment is received for the $3,000 face value and $360 of interest

revenue.

May 29— A cash sale of merchandise is made for $370. The cost of the merchandise sold was $260.

May 31— Don Calb has paid $400 on account.

3. (a) The numbers in parentheses under the bottom line of the journal indicate that these column totals have been

posted to the general ledger accounts with these account numbers.Work Book Foundation Level 257 Books of Account

Unit 9Accounting

(b) The checks in the posting reference column of the journal indicate that the accounts receivable subsidiary

account for that customer has been credited for the amount shown in the accounts receivable column of this journal.

(c) The 113 indicates that account No. 113 in the general ledger, Notes Receivable, has been credited for the

$4,000. The 416 indicates that account No. 416 in the general ledger, Interest Revenue, has been credited for $480.

(d) The (x) below the Other Accounts column indicates that this column total is not posted. All the amounts in

this column have already been posted individually to the appropriate general ledger account.


Unit 9Accounting

COMPLETION STATEMENTS

79. The accounts receivable _____________ provides detailed information about customer accounts which is

summarized in one ______________ account in the general ledger.

Answer: N/A, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector

Perspective, AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications,

Sector: General, IFRS: No

80. If a certain type of transaction occurs with great frequency, it is more efficient to create a ______________

to record that type of transaction.




81. If a company maintains special journals, sales of merchandise on credit should be recorded in a

_______________ whereas sales of merchandise for cash should be recorded in the _______________.




82. The use of special journals often saves time in the _______________ process.




83. The entries in the Accounts Receivable Credit column of the cash receipts journal must be posted

_______________ to the accounts in the accounts receivable subsidiary ledger and in _______________ to the control

account in the general ledger.





Unit 9Accounting

84. Transactions that cannot be entered in a special journal are recorded in the _______________, and if

control and subsidiary accounts are involved, there must be a _______________ posting.




Answers to Completion Statements

79. subsidiary ledger, control

80. special journal

81. sales journal, cash receipts journal

82. posting

83. individually, total

84. general journal, dual


Unit 9Accounting

MATCHING

85. Match the items below by entering the appropriate code letter in the space provided.

A. Accounts payable ledger D. Subsidiary ledger

B. Columnar journalE. Control account

C. Special journals

1. A general ledger account that summarizes detailed information in a subsidiary ledger.

2. A subsidiary ledger that contains accounts with individual creditors.

3. A special journal with more than one column.

4. Detailed information about a group of accounts with a common characteristic.

5. Used to record high volume, similar type transactions.




Answers to Matching

1. E

2. A

3. B

4. D

5. C


Unit 9Accounting

MULTIPLE-CHOICE QUESTIONS

1. Bill payable book is a?

(a) Journal (b) Principal book (c) Ledger (d) Memorandum book

2. The return of goods by a customer should be debited to?

(a) Return outward (b) Return inward account (c) Goods account (d) Accounts receivable

3. An alternative name for a sales journal is?

(a) Sales invoice (b) Sales ledger (c) Daily sales (d) Sales day book

4. Which of the following is not a book of prime or original entry?

(a) Sales daybook (b) Purchase daybook (c) Debtor’s account (d) Cashbook

5. X sends back Rs. 80 of faulty goods to Y. In which book of prime entry would Y record this transaction?

(a) General Journal (b) Purchase Return Journal

(c) Sales Journal (d) Sales Return Journal

6. A bookkeeper discovers that an amount paid to a supplier has been wrongly entered in another supplier’s account. Which

book of original entry will the bookkeeper use when correcting this error?

(a) Cash Book (b) General Journal (c) Purchase day book (d) Sales day book

7. There are two books of account they are?

(a) Journal & ledger (b) Journal & trail balance

(c) Trail Balance & Ledger (d) None of these

8. The basic principle of book-keeping ‘decrease is debit and increase is credit’ is applicable?

(a) Revenue (b) Expenses (c) Income (d) a and c

9. Which of the followings are books of prime entry?

(a) Sales day book and trial balance (b) Petty cash book and accounts receivable ledger

(c) Petty cash book and journal (d) Cash book and assets register

10. Transactions are initially recorded in the?

(a) Book of prime entry (b) Book of original entry (c) Journal (d) All of before

11. Record goods return inward?

(a) Debit sale account and credit payable account (b) Debit returns inward account and credit payable account

(c) Debit returns inward account and credit receivable account

(d) Debit receivables account and credit return inward account

12. Cash book is a part of?

(a) Voucher (b) General Journal (c) General Ledger (d) Dual Book


Unit 9Accounting

13. If a company uses special journals, purchase of supplies on account should be recorded in which journal?

(a) Cash receipts journal (b) Purchases journal

(c) Cash disbursements journal (d) General journal

14. Which of the following is the correct journal entry to record a credit note issued to a customer for goods returned?

(a) Debit Sales returns and Credit Cash (b) Debit Cash and Credit Sales returns

(c) Debit Trade receivables and Credit Sales returns (d) Debit Sales returns and Credit Trade receivables

15. Mr. Ali buys goods on credit from Star Co. but finds that some of them are faulty. What document would Mr. Ali return

to Star Co. with the faulty goods?

(a) Statement (b) Debit note (c) Sales invoice (d) Purchase invoice

16. Which of the following book(s) is (are) a part of Journal?

(a) Cash Book (b) Purchase Return Book (c) Purchase Book (d) All of the given options

17. Mr. Hussain sends a debit note to one of his suppliers. In which of Mr. Hussain’s books of prime entry would this be

recorded?

(a) Sales (b) Purchases (c) Purchase returns (d) Sales returns

18. If a company uses special journals, credit sales should be recorded in which journal?

(a) General journal (b) Purchases journal (c) Sales journal (d) Cash receipts journal

19. If a company uses special journals, purchase of a building financed by a mortgage payable should be recorded in which

journal?

(a) Sales journal (b) General journal (c) Cash receipts journal (d) Purchases journal

20. In a firm that uses special journals, a sale of merchandise on credit is recorded in the?

(a) Cash payments journal (b) Cash receipts journal

(c) Sales journal (d) Purchases journal

21. In a firm that uses special journals, the sale of merchandise for cash is recorded in the?

(a) Cash payments journal (b) Cash receipts journal

(c) Sales journal (d) Purchases journal

22. If a firm does not have a sales returns and allowances journal, the entries for these transactions are made in?

(a) Sales journal (b) General journal (c) Cash receipts journal (d) Cash payments journal

23. Sales returns refer to?

(a) Merchandise that customers return to the seller after the sale

(b) Reductions in the selling price of merchandise sold to customers

(c) Cash discounts taken by customers (d) Merchandise inventory that is marked down

24. Bill receivable book is a part of the?


Unit 9Accounting

(a) Profit and Loss account (b) Ledger (c) Journal (d) Trial Balance

25. At the end of accounting period, after all postings have been made, equality should exist between the balance of the Ac-

count Receivable control account and ___________?

(a) Purchases Journal (b) Cash Receipts Journal

(c) Sum of all the customer balances in the Accounts Receivable Subsidiary Ledger

(d) Sum of all the creditor balances in the Accounts Payable Subsidiary Ledger

26. If a company uses special journals, the general ledger sales revenue account will receive postings from the _________?

(a) Sales journal and cash receipts journal (b) Purchases journal and cash disbursements journal

(c) Cash receipts journal and cash disbursements journal (d) None of the above are correct

27. At the end of accounting period, after all postings have been made, equality should exist between the balance of the Ac-

count Payable control account and __________________?

(a) Sum of all the customer balances in the Accounts Receivable Subsidiary Ledger (b) Cash Receipts Journal

(c) Purchases Journal (d) Sum of all the creditor balances in the Accounts Payable Subsidiary Ledger

28. _________________ for ABC business, when a commercial bank advances a fixed sum of money for a definite period of

time on some agreed interest rate?

(a) Advance (b) Bank loan (c) Saving account (d) Overdraft account

29. Adjustment to record accrued salaries at the end of the year?

(a) Cash Payments Journal (b) Cash Receipts Journal

(c) Revenue Journal (d) General Journal

30. Receipt of cash from sale of office equipment recorded in?


(c) Purchases Journal (d) General Journal

31. Adjustment is to record depreciation at the end of the month in?


(c) General Journal (d) Purchases Journal

32. Provided legal services on account will record?


(c) Purchases Journal (d) Revenue Journal

33. Corrected the balance in the prepaid insurance at the end of the month in?

(a) Cash Payments Journal (b) General Journal

(c) Cash Receipts Journal (d) Purchases Journal

34. Purchase of an office equipment on account?


Unit 9Accounting



35. Providing accounting services for cash?



36. Closing of drawing account at the end of the year in?


(c) General Journal (d) Purchases Journal

37. Purchase of office equipment for cash?



38. Receipt of cash of rent from an office building is?



39. Billed a customer for landscaping work performed recorded in?

(a) Cash Receipts Journal (b) Purchases Journal


40. Purchase of office Supplies on account is?



41. Receipt of cash refund from overpayment of taxes is?



42. Purchase of repair services on account?



43. Advance payment of a one-year fire insurance policy on the office?


(c) Purchases Journal (d) General Journal

44. Receipt of cash on account from a customer is?




Unit 9Accounting

45. Purchase of office supplies for cash?



46. Investment of additional cash in the business by the owner is?



47. Sale of office supplies on account, at cost, to a neighboring business?



48. An exchange of supplies from one company to another company?

(a) General Journal (b) Purchases Journal

(c) Revenue Journal (d) Cash Receipts Journal

49. Purpose of Sales Book is?

(a) To record all sales made by the firm (b) To record payment due to creditors

(c) To record credit sales of goods made by the firm (d) None of above

50. Which of the following is not true regarding the use of special journals?

(a) Special journals are used to record repetitive, frequent transactions

(b) The use of the General Journal is eliminated by the use of special journals

(c) The Purchases Journal is used to record purchases or expenses on account

(d) The Revenue Journal is used only for recording revenues earned on account

51. Transactions involving customers’ payments are often recorded in prime entry in?

(a) General Journal (b) Cash Receipts Journal

(c) T-account (d) Revenue Journal

52. Chaman's Ice Cream purchased Rs. 500 worth of supplies on account from ICEE Inc. In which special journal

should this transaction be recorded?

(a) Purchases Journal (b) Cash receipts Journal

(c) Cash payments Journal (d) General Journal

53. Expenses are?

(a) Incurred only when cash is paid (b) Costs incurred to generate revenues

(c) Increases to owner's equity (d) Recorded as credits in journal entries

54. Merchandise is sold on credit for Rs. 600 plus 5 percent sales tax. The entry in the sales journal will include a debit

to Accounts Receivable for?


Unit 9Accounting

(a) Rs. 600.00 (b) Rs. 603.50 (c) Rs. 605.50 (d) Rs. 630.00

55. Accrued rent is recorded at the end of the period?

(a) Cash Payments Journal (b) Purchases Journal

(b) Revenue Journal (d) General Journal

The balance of a control account in the general ledger

a. must always be zero.

b. must equal the amount of total assets.

c. is always greater than the composite balance of individual accounts in a related subsidiary ledger.

d. must equal the composite balance of individual accounts in a related subsidiary ledger.

Answer: d, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

22. A subsidiary ledger is

a. used in place of the general ledger if the general ledger is destroyed or stolen.

b. a group of accounts used by branches and subsidiaries of a corporate business.

c. a group of accounts with a common characteristic that provides detailed information about a control account in the general ledger.

d. used to post excess transactions if a general ledger account becomes full during an accounting period.

Answer: c, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

23. A subsidiary ledger frees the general ledger from details of

a. individual balances.

b. external transactions.

c. internal transactions.


Unit 9Accounting

d. the control account.

Answer: a, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Reporting, AICPA-PC: Project Management, IMA: Reporting, Sector: General, IFRS: No

24. A company would not likely use subsidiary ledgers for

a. inventory.

b. retained earnings.

c. equipment.

d. accounts receivable.

Answer: b, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

25. Postings are made daily to subsidiary ledgers so that

a. employees are kept busy.

b. debits equal credits.

c. individual account information is kept current.

d. the control account will balance to the subsidiary ledger.

Answer: c, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

26. A sales journal is used to record

a. only cash sales of merchandise.

b. sales of all assets on credit and for cash.

c. only credit sales of merchandise.

d. credit sales of merchandise, sales returns and allowances, and sales discounts.


Unit 9Accounting



Unit 9Accounting

27. If a transaction cannot be recorded in a special journal

a. the company must refuse to enter into the transaction.

b. it is recorded in the general journal.

c. it is recorded directly in the accounts in the general ledger.

d. it is recorded as an adjustment on the work sheet.

Answer: b, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

28. The one characteristic that all entries recorded in a cash receipts journal have in common is

a. a credit to the Cash account.

b. that they all represent collections from customers.

c. that they originate from the sales of merchandise.

d. a debit to the Cash account.

Answer: d, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

29. A single-column purchases journal indicates that

a. only purchases of merchandise on account can be recorded.

b. all purchases of merchandise can be recorded.

c. all acquisitions on account can be recorded.

d. another column must be added so that debits and credits can be recorded.

Answer: a, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

30. The one characteristic that all entries recorded in a multiple-column purchases journal have in common is a


Unit 9Accounting

a. credit to the Cash account.

b. debit to the Cash account.

c. debit to the Accounts Payable account.

d. credit to the Accounts Payable account.

Answer: d, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

31. A company which uses special journals should record a transaction involving the purchase of merchandise for cash in a

a. single-column purchases journal.

b. multiple-column purchases journal.

c. cash payments journal.

d. general journal.


32. If merchandise from a cash sale is returned by a customer for a refund, the sales return is recorded in the

a. general journal.

b. cash receipts journal.


d. sales journal.

Answer: c, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No


Unit 9Accounting

33. Which of the following is not a special journal?

a. Sales journal

b. Purchases journal

c. General journal

d. Cash receipts journal


34. Correcting entries are journalized in

a. a special journal.

b. the general journal.

c. the general ledger.

d. a correcting journal.

Answer: b, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

35. Adjusting entries are recorded

a. only on the worksheet.

b. only in the general ledger.

c. in the general journal.

d. in the special journals.


36. If a transaction cannot be recorded in a special journal, it is

a. not recorded.


Unit 9Accounting

b. a correcting entry.

c. recorded in the general journal.

d. an error.


37. A company uses a sales journal, cash receipts journal, purchases journal, cash payments journal, and a general journal. A cash sales return would be recorded in the

a. sales journal.



d. general journal.


38. The entries in a sales journal will show

a. all sales of merchandise.

b. the cash sales of the company.

c. the credit sales of merchandise.

d. all sales of the company.



Unit 9Accounting

39. Entries in a sales journal

a. are made from sales invoices.

b. will indicate the invoice number in the reference column of the sales journal.

c. will occupy two lines of the sales journal.

d. indicate either a cash debit or accounts receivable debit.

Answer: a, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

40. Journalizing in a sales journal will not

a. require a debit to Accounts Receivable.

b. show a sales invoice number.

c. affect the reference column of the journal.

d. include a credit to the Sales account.

Answer: c, SO: 2, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

41. If a company purchases merchandise for cash, the transaction should be recorded in the

a. purchases journal.

b. general journal.


d. sales journal.

Answer: c, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: Retail, IFRS: No

42. Cash from sales of merchandise will be recorded in the

a. purchases journal.


Unit 9Accounting

b. sales journal.

c. cash receipts journal.

d. general journal.

Answer: c, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: Retail, IFRS: No

43. Debit postings to the individual accounts in an accounts receivable subsidiary ledger generally come from the

a. sales journal.


c. purchases journal.

d. cash payments journal.

Answer: a, SO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

44. Entries in a sales journal are

a. posted only to accounts in an accounts receivable subsidiary ledger.

b. posted only to accounts in the general ledger.

c. posted to accounts in an accounts receivable subsidiary ledger and to accounts in the general ledger.

d. never posted.



Unit 9Accounting

45. Which one of the following columns in a cash receipts journal is not posted in total to an account in the general ledger?

a. Cash column

b. Sales Discounts column

c. Accounts Receivable column

d. Other Accounts column

Answer: d, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

46. The use of special journals to record transactions

a. eliminates the need for a general ledger.

b. can save time in the posting process.

c. eliminates the need for a general journal.

d. should only be used if the volume of transactions is small.


47. Posting a sales journal to the accounts in the general ledger requires a

a. debit to Cash and a credit to Sales.

b. debit to Sales and a credit to Inventory.

c. debit to Accounts Receivable and a credit to Merchandise Inventory.

d. debit to Accounts Receivable and a credit to Sales.

Answer: d, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

48. The entries recorded in the Other Accounts column of a cash payments journal

a. are posted to the accounts payable subsidiary ledger daily.


Unit 9Accounting

b. are posted individually to accounts in the general ledger.

c. are not posted individually but are posted as a column total to the general ledger.

d. do not require posting.

Answer: b, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

49. Proving the equality of the totals in the columns of multiple-column special journals is called

a. posting to the subsidiary.

b. debiting and crediting.

c. footing and crossfooting.

d. updating the master file.


50. If a company records merchandise it returns to suppliers in the general journal, then

a. a posting must be made only to the accounts payable control account.

b. a posting must be made only to the accounts payable subsidiary ledger account.

c. a dual posting must be made.

d. there will be a debit to Merchandise Inventory.



Unit 9Accounting

51. Gable's Wholesale uses a sales journal. An entry in this journal represents a

a. debit to Cash; credit to Sales.

b. debit to Accounts Receivable; credit to Sales.

c. debit to Sales Discounts; credit to Cash.

d. debit to Accounts Payable; credit to Sales Returns and Allowances.

Answer: b, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

52. Which accounts in the general ledger are affected when the monthly posting is made from the sales journal?

a. Accounts Receivable; accounts receivable subsidiary accounts

b. Accounts receivable subsidiary accounts; Sales

c. Accounts Receivable; Sales

d. Accounts Receivable; Merchandise Inventory


53. Which of the following is not a true statement about the daily posting of the sales journal?

a. There is a debit posting to accounts in the accounts receivable subsidiary ledger.

b. There is no credit posting.

c. The reference column in the sales journal is checked when the posting is complete for each entry in the journal.

d. The invoice number supporting the sales transaction is posted to the reference column in the subsidiary ledger.

Answer: d, SO: 3, Bloom: K, Difficulty: Medium, Min: 2, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

54. Evidence that the monthly posting of the sales journal total has been accomplished is indicated by


Unit 9Accounting

a. a signature of the accountant doing the posting.

b. a date under the double-line total.

c. the general ledger account numbers under the double-lined total.

d. inspecting the postings in the accounts payable subsidiary ledger.


55. Which of the following economic events would not be recorded in the cash receipts journal?

a. Cash sales of merchandise

b. Collections of accounts receivable

c. Cash from sale of land

d. Cash purchases of merchandise

Answer: d, SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

56. The "Other Accounts" column in a cash receipts journal is also referred to as the

a. miscellaneous column.

b. excess column.

c. sundry accounts column.

d. compound-entry column.



Unit 9Accounting

57. The process of totaling the columns of a journal is termed

a. ruling.

b. columnizing.

c. sizing.

d. footing.


58. An (x) below the "Other Accounts" column in a cash receipts journal indicates the

a. total has been posted to the general ledger.

b. total is not posted to the general ledger.

c. column has been footed.

d. column has been cross-footed.


59. Crossfooting a cash receipts journal means

a. the equality of debits and credits in the journal has been proved.

b. each line of the journal has a horizontal total.

c. the columns of the journal have been cross-referenced.

d. all necessary postings have been completed.

Answer: a, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

60. Which of the following would not be an appropriate heading for a column in the cash receipts journal?

a. Cash


Unit 9Accounting

b. Accounts Payable

c. Sales Discounts

d. Sales

Answer: b, SO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

61. Proving the postings of a single-column purchases journal would involve comparing the

a. general ledger posting to Accounts Payable to the debit postings of the accounts receivable subsidiary ledger.

b. general ledger posting to Accounts Payable to the general ledger posting to Merchandise Inventory.

c. general ledger credit posting to Accounts Payable to the general ledger debit posting to Merchandise Inventory.

d. debit postings to the accounts receivable subsidiary ledger to the credit postings to the accounts payable subsidiary ledger.


62. If a company uses a multiple-column purchases journal, which of the following possible headings for debit columns of the journal would not be appropriate?

a. Accounts Payable

b. Merchandise Inventory

c. Store Supplies

d. Office Supplies

Answer: a, SO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No


Unit 9Accounting

63. Entries in the cash payments journal are made from

a. sales invoices.

b. purchase invoices.

c. prenumbered checks.

d. canceled checks.


64. The reference column of a multiple-column cash payments journal after posting

a. will only contain check marks.

b. will be blank.

c. will only contain account numbers.

d. may contain either account numbers or check marks.


65. The reference column of the accounts in the accounts payable subsidiary ledger after posting may show

a. only P references.

b. CP, P, or G references.

c. G, P, or S references.

d. only CP references.

Answer: b, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No


Unit 9Accounting

PROBLEMS

Illustration OneThe following transactions were obtained from the records of Alhaji Ado Travelerfor the month of January, 2008:35Jan.1 Assets: Machinery N94, 000; Motor Vehicles N129, 000; Stock N82, 250;Debtors N2, 975; Cash N385.Liabilities: Creditors N4, 450; Bank overdraft N17, 250.Jan. 3 Bought from Alh. Yusuf Isa & Sons Ltd:50 bags of Millet @ N2,500 a bag25 bags of Wheat @ N4,000 a bag10 bags of Maize @ N3,000 a bagInvoice subject to 20% trade discount.Jan.8 Sold to B.B Jafaar & Co.15 bags of Wheat @ N5,000 a bagJan.10 Returned to Alh. Yusuf Isa & Sons Ltd3 bags of Millet1 bag of MaizeAll damaged in transitJan.12 B.B Jafaar & Co. returned2 bags of WheatJan.15 Bought from Idi Trader60 bags of Maize @ N2,900 a bag40 bags of Wheat @ N4,100 a bag50 bags of Millet @ N2,450 a bagInvoice subject to 15% trade discountJan.22 Sold to Musa Minjibir40 bags of Millet @ N3,000 a bag20 bags of Maize @ N3,500 a bagWhole transaction subject to 20% trade discountJan.30 Musa Minjibir returned2 bags of Maize4 bags of MilletAll defective.You are required to prepare the various journals to record the above transactionsfor the month of January, 2008.


Unit 9Accounting


Unit 9Accounting

The following transactions were obtained from the books of KANDE &SONS for the month of August, 2008.Aug. 5 Bought from D. Usman & Sons:5 dining tables @ N3,200 each


Unit 9Accounting

20 armless chairs @ N4,000 eachInvoice subject to 25% trade discount.Aug. 7 Returned by D. Usman & Sons:One dining table which was damaged in transitAug. 13 Sold to F. Johnson & Sons:10 bags of Dangote Cement @ N1,800 per bag80 bags of Dangote Flour @ N2,200 per bagInvoice subject to 15% trade discount.Aug. 25 F. Johnson returned 4 bags of Cement which coagulated.Required:You are required to prepare the purchases, sales and returns day books forthe month of August, 2008.

Alangubro is in business as a dealer in building materials. Histransactions in January, 2009 were as follows:January 3 Bought on credit from Emmanson Trading Co.:3960 bags of cement @ N450 a bag.January 6 Bought from Wuru-Wuru & Sons on credit:6 pairs of louver frames @ N100 a pair100 piece of louver blades @ N20 a piece.January 10 Sold on credit to P. Paulinus:10 bags of cement @ N550 a bag.January 15 Sold to H. Hamzat on credit:20 bags of cement @ N550 a bag6 pairs of louver frames @ N120 a pair50 pieces of louver blades @ N30 a pieceThe whole transaction is subject to 15% trade discount.January 20 Bought on credit from Deluxe Paints Ltd.:100 tins of gloss star paints @ N85 a tin20 tins of emulsion star paints @ N69 a tin, less 10% tradediscounts.January 21 Returned to Deluxe Paints Ltd.:2 tins of gloss star paints2 tins of emulsion star paints.January 25 Sold to M. Umar:80 tins of gloss star paints @ N100 a tinJanuary 29 M. Umar returned:2 tins of gloss star paints.You are required to prepare:(a) Purchases Journal;(b) Sales Journal;(c) Returns Outward Journal; and(d) Returns Inward Journal.


Unit 9Accounting

FILL IN THE BLACKS

1. An account Payable is a liability created by buying goods or services on credit?

2. An account Receivable is an asset created by selling products or services on credit?

3. A BALANCE SHEET is a financial statement providing information that helps users understand a company's financial

status.

DIVIDENDS are distributions of assets by a corporation to its owners.

The statement of OWNER'S EQUITY reports the changes in equity over the reporting period.

A business with many customers would set up the general ledger Accounts Receivable account for all credit

customers and a separate account for each credit customer.

17. The term has long been used in accounting literature to describe all types of plant and equipment.

18. A journal may be a journal or it may be a group of special journals.

19. The advantages of ledger are as following：（1）reduces ledger detail；（2）permits better division of

labor；（3）permits a different sequence of accounts；（4）permits better internal control.

20. In a western accounting system, the information about each business transaction is initially recorded in an accounting

record called a .

.

.

The balance in Accounts Payable is decreased with a _______debit__________ entry.

PO is the abbreviation for _____purchase order____________ _________________.

A form or record sometimes used to assemble the documentation and approvals necessary for paying a vendor's invoice is a

______voucher___________.

A Rs. 1,000 invoice from a supplier has terms of 2/10, n/30. The amount that should be remitted to the supplier if the amount

is paid within the discount period isRs. ____980_____________.

The seller of goods that is offering credit terms of net 30 days will likely be one of its customer's ____unsecured_________

creditors until it receives payment.


Unit 9Accounting

3. A journal entry can consist of no more than one account to be debited and one account to be credited.

True False

5. Transactions are recorded in either a journal or a ledger, but not in both.

True False

6. An amount debited to Cash in a journal entry should be posted as a credit to the Cash account in the ledger.

True False

10. The normal balance of a contra asset account is a debit.

True False


22. Unit # 9 Books of Accounts

Documents

sales day book

credit purchases book

cash book

separate book

inwards book

total credit sales of

purchased goods

book of original entry