Chapter 9: Cash Receipts, Cash Payments, and Banking Procedures
Chapter Opener: Thinking CriticallyOffice expenditures may include petty cash disbursements for office supplies and postage. Cash expenditures might also include payments for rent and utilities. Receipts might include cash sales for services or payments for services on account.
Fast Facts
• H&R Block worked with the IRS to file the first electronic tax returns in 1986, 22,000 in all. In 2005, over 55 million (63%) of all tax returns were filed electronically.
• The company employs 15,300 full-time employees, but these numbers swell to 96,000 during tax season. • In 2005 H&R Block generated $4.2 billion in revenues.
• The company operates over 9,500 offices.
Computers in Accounting: Thinking Critically
Answers will vary. Students may express concerns about security of funds or access to account balances. Benefits include 24-hour access to bank accounts and convenience, while disadvantages may include security concerns and increased account costs.
Computers in Accounting: Internet Application
Banking services will vary, but may include electronic bill payment, account transfers and deposits, wire transfers, monitoring of mortgage payments and balance, online application for loans.
Managerial Implications: Thinking Critically
Answers will vary, but should include a recognition of need to weigh the earning power (interest income) and the need for liquidity (access to the cash).
Discussion Questions
These questions are designed to check students’ understanding of new terms, concepts, and procedures presented in the chapter.
1. Access to checkbook is restricted; use of prenumbered check forms; checks examined by someone who did not prepare them before they are signed; bank statement reconciled by someone other than employees who handle cash.
2. To record items that have not yet been entered in firm’s records. 3. Outstanding checks, deposits in transit, service charges. 4. Balance of Cash account in the general ledger.
5. To reconcile any difference between depositor’s checkbook, Cash account, and bank statement. 6. Day-by-day checking account activity, as well as beginning and ending balances.
7. Date, amount, payee, current balance, purpose of check. Stub should be prepared before the check so that it will not be forgotten.
8. Signed, authorized written order instructing a bank to pay a specific sum of money to a designated person.
9. Electronic processing of documents. 10. Restrictive endorsement.
11. Shortages are debited and overages are credited to the Cash Short or Over account
12. Use only for minor payments; establishment check made out to person to be in charge of funds; keep funds locked; payments made from funds should be documented with signatures of recipient.
13. At month-end or when petty cash is replenished. 14. Contra cost account, deduction from Purchases.
15. Cash Payments Journal: total amount of purchase is a debit to Accounts Payable. Discount is recorded as a credit to Purchases Discounts. Amount of cash paid is recorded as a credit to Cash.
16. Cash Receipts Journal: Original sale was recorded as a Credit to Accounts Receivable; amount of the discount is recorded as a debit to Sales Discounts. Amount of cash received is recorded as a debit to Cash.
17. Encourages fast payment.
18. Written promise to pay amount on specific date. Cr. Notes Rec., Cr. Int. Inc., Dr. Cash. Cash receipts journal.
19. Payments made by check and issued only with approved invoice; invoices approved only by designated personnel; checks prepared and recorded in the checkbook or check register by someone different from the person who approves the payments; use prenumbered checks.
20. Employees are investigated by an insurance company, and, if their backgrounds are satisfactory, their employer is insured against losses that may occur because of employee theft or mishandling of funds. 21. Only approved employees can handle cash; keep cash in locked location; record cash receipts as they
arrive; check funds against receipt log before deposits to bank made; make deposits promptly; separation of cash deposits, recording, reconciliation duties.
Ex
er
cises
Ex er cise 9.1CASH RECEIPTS JOURNAL
P AGE 12 Accounts Sales T a x Other Accounts Credit Post. Receivable Payable Sales Post. Cash Date Description Ref Credit Credit Credit Account Name Ref. Amount Debit 2007 Sept. 1 Cash Sales 448 5,600
Cash Short or Over
16 6,064 2 James Floyd 720 720 3 Cash Sales 420 5,250 5,670 4 Investment by Owner Susan Anderson, Capital 17,000 17,000 5 Cash Sales 512 6,400
Cash Short or Over
(30) 6,882 Ex er cise 9.2 CASH P A YMENTS JOURNAL P AGE 15 Accounts Other Accounts Debit Purchases Ck. Post Payable Post Discounts Cash Date No. Description Ref. Debit Account Name Ref. Amount Credit Credit 2007 Sept. 1 3850 September rent Rent Expense 2,400 2,400 1 3851 Carter Company 2,950 2,950 2 3852 Bought equipment Equipment 10,250 10,250 2 3853
Paid sales tax
Sales T ax Payable 1,380 1,380 3 3854 W aller Company 1,500 30 1,470 4 3855 Cash purchase Purchases 2,675 2,675 5 3856 Withdrawal by owner Susan Anderson, Drawing 1,800 1,800
Ex er cise 9.3 CASH P A YMENTS JOURNAL P AGE 1 Accounts Other Accounts Debit Purchases Ck. Post Payable Post Discounts Cash Date No. Description Ref. Debit Account Name Ref. Amount Credit Credit 2007 Jan. 2 2108
Established petty cash fund
Petty Cash 175 175 Ex er cise 9.4 CASH P A YMENTS JOURNAL P AGE Accounts Other Accounts Debit Purchases Ck. Post Payable Post Discounts Cash Date No. Description Ref. Debit Account Name Ref. Amount Credit Credit 2007 Jan. 31 3144
Replenished petty cash fund
Supplies 42 Delivery Expense 36 Misc. Expense 30 108
Exercise 9.5
CHENG CORPORATION Bank Reconciliation
October 31, 2007
Balance on bank statement . . . 14,920 Additions:
Deposit in transit . . . 857 15,777 Deductions for outstanding checks:
Check 7017 . . . 129 Check 7098 . . . 65 Check 7107 . . . 1,533
Total outstanding checks . . . 1,727 Adjusted bank balance . . . 14,050 Balance in books . . . 14,362 Deductions:
Bank service charge . . . 12
NSF charge . . . 300 312 Adjusted book balance . . . 14,050
GENERAL JOURNAL PAGE 14
Post.
Date Description Ref. Debit Credit
2007
Nov. 5 Misc. Expense . . . 12
Cash . . . 12 Bank service charge for October
5 Accounts Receivable/James Dear . . . 300
Cash . . . 300 To record NSF check returned by bank
Exercise 9.6
Bank Balance Book Balance Accounting Entry
1. X 2. X X 3. X X 4. X X 5. X 6. X X 7. X
Exercise 9.7
CANTU OFFICE SUPPLY COMPANY Bank Reconciliation Statement
March 31, 2007
Balance on bank statement . . . 67,905 Additions:
Deposit in transit . . . 3,720
Check incorrectly charged . . . 267 3,987 71,892 Deduction for outstanding checks:
Check 3782 . . . 2,130 Check 3840 . . . 171
Total outstanding checks . . . 2,301 Adjusted bank balance . . . 69,591 Balance in books . . . 69,387 Additions:
Noninterest-bearing note collected by bank . . 6,000 75,387 Deductions:
Bank collection fee for note . . . 21
NSF check . . . 5,775 5,796 Adjusted book balance . . . 69,591
GENERAL JOURNAL PAGE 8
Post.
Date Description Ref. Debit Credit
2007
April 3 Cash . . . 6,000
Notes Receivable . . . 6,000 To record receipt of note collected by bank
3 Misc. Expense . . . 21
Cash . . . 21 To record bank collection fee
3 Accounts Receivable/Wilson Construction Company . . 5,775
Cash . . . 5,775 To record NSF check returned by bank
Pr
oblems
Pr
oblem 9.1A
CASH RECEIPTS JOURNAL
P AGE 4 Accounts Sales T a x Other Accounts Credit Post. Receivable Payable Sales Post. Cash Date Description Ref Credit Credit Credit Account Name Ref. Amount Debit 2007 Feb. 3 Danielle Pelzel 500 500 5
Refund for damaged
goods Supplies 129 120 120 7 Cash Sales 384 4,800
Cash Short or Over
620
(60)
5,124
9
Additional Investment
Jason Wilson, Capital
301 15,000 15,000 12 Kyela Jones 380 380 14 Cash Sales 324 4,050
Cash Short or Over
620 28 4,402 16 Sadie Nelson 450 450 19 Collected promissory Notes Receivable 109 800
note and interest
Interest Income 491 32 832 21 Cash Sales 364 4,550 4,914 25 Alfred Herron 580 580 28 Cash Sales 328 4,100
Cash Short or Over
620 (36) 4,392 28 T otals 1,910 1,400 17,500 15,884 36,694 (1 1 1 ) (231) (401) (X) (101)
GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 101
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Feb. 1 Balance ✓ 4,960
28 CR4 36,694 41,654
ACCOUNT Notes Receivable ACCOUNT NO. 109
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Feb. 1 Balance ✓ 800
19 CR4 800
-0-ACCOUNT Accounts Receivable ACCOUNT NO. 111
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Feb. 1 Balance ✓ 4,075
28 CR4 1,910 2,165
ACCOUNT Supplies ACCOUNT NO. 129
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Feb. 1 Balance ✓ 610
5 CR4 120 490
ACCOUNT Sales Tax Payable ACCOUNT NO. 231
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Feb. 1 Balance ✓ 295
28 CR4 1,400 1,695
ACCOUNT Jason Wilson, Capital ACCOUNT NO. 301
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Feb. 1 Balance ✓ 34,000
GENERAL LEDGER
ACCOUNT Sales ACCOUNT NO. 401
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Feb. 28 CR4 17,500 17,500
ACCOUNT Interest Income ACCOUNT NO. 491
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Feb. 19 CR4 32 32
ACCOUNT Cash Short or Over ACCOUNT NO. 620
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Feb. 7 CR4 60 60
14 CR4 28 32
28 CR4 36 68
Pr oblem 9.2A CASH P A YMENTS JOURNAL P AGE 8 Accounts Other Accounts Debit Purchases Ck. Post Payable Post Discounts Cash Date No. Description Ref. Debit Account Name Ref. Amount Credit Credit 2007 June 1 4121 Monthly rent Rent Expense 620 2,500 2,500 2 4122 T ax remittance Sales T ax Payable 231 4,200 4,200 3 4123 Perfect T iming W atch Co. 2,780 2,780 4 4124
Established petty cash fund
Petty Cash Fund
105
200
200
7
4125
Paid promissory note &
Notes Payable
201
3,200
interest to Perry Corp.
Interest Expense 634 128 3,328 10 4126 Cash refund
Sales Returns &
Allowances 451 594 594 12 4127
Monthly telephone bill
T elephone Expense 626 276 276 14 4128
International Jewelry Co.
6,000 120 5,880 17 4129 Store supplies Supplies 129 860 860 20 4130 Nelson’ s Jewelry & Accessories 3,500 70 3,430 27 4131 Classy Creations 3,650 3,650 30 4132 Monthly salaries Salaries Expense 623 7,675 7,675 30 4133 Withdrawal by owner
Larry Jennings, Drawing
302
5,000
5,000
30
4134
Replenish petty cash fund
Supplies 129 30 Delivery Expense 61 1 4 2 Misc Expense 635 50
Larry Jennings, Drawing
302 24 146 30 T otals 15,930 24,779 190 40,519 (205) (X)
PETTY CASH ANAL YSIS SHEET P AGE 8 Distribution of Payments Delivery Miscellaneous V ou. Supplies Expense Expense Date No. Description Receipts Payments Debit Debit Debit Account Name Amount 2007 June 4 — Establish fund 200 5 1 Of fice Supplies 30 30 8 2 Postage stamps 20 20 15 3 Delivery service 18 18 22 4 Personal withdrawal 24
Larry Jennings, Drawing
24
25
5
Store windows washed
30 30 30 6 Delivery service 24 24 30 — T otals 200 146 30 42 50 24 30 — Balance on hand 54 200 200 30 — Balance on hand 54 30 — Replenish fund 146 30 — Carried forward 200 Other Accounts Debit
GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 101
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 42,840
30 CP8 40,519 2,321
ACCOUNT Petty Cash Fund ACCOUNT NO. 105
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 4 CP8 200 200
ACCOUNT Supplies ACCOUNT NO. 129
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 1,060
17 CP8 860 1,920
30 CP8 30 1,950
ACCOUNT Notes Payable ACCOUNT NO. 201
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 3,200
7 CP8 3,200
-0-ACCOUNT Accounts Payable ACCOUNT NO. 205
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 18,880
30 CP8 15,930 2,950
ACCOUNT Sales Tax Payable ACCOUNT NO. 231
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 4,200
-0-GENERAL LEDGER
ACCOUNT Larry Jennings, Drawing ACCOUNT NO. 302
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 30 CP8 5,000 5,000
30 CP8 24 5,024
ACCOUNT Sales Returns & Allowances ACCOUNT NO. 451
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 10 CP8 594 594
ACCOUNT Purchases Discounts ACCOUNT NO. 504
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 30 CP8 190 190
ACCOUNT Delivery Expense ACCOUNT NO. 611
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June CP8 42 42
ACCOUNT Rent Expense ACCOUNT NO. 620
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 CP8 2,500 2,500
ACCOUNT Salaries Expense ACCOUNT NO. 623
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
GENERAL LEDGER
ACCOUNT Telephone Expense ACCOUNT NO. 626
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 12 CP8 276 276
ACCOUNT Interest Expense ACCOUNT NO. 634
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 7 CP8 128 128
ACCOUNT Misc. Expense ACCOUNT NO. 635
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 30 CP8 50 50
Analyze:Total payments from the Petty Cash Fund for the month were $146.
Problem 9.3A
SALES JOURNAL PAGE 7
Invoice Post. Accounts Receivable Dr./
Date No. Customer’s Name Ref. Sales Cr.
2007
April 1 9312 Soprano Music Center . . . 3,900 8 9313 Music Warehouse . . . 4,500 19 9314 Eagleton Music Center . . . 10,500
30 9315 Contemporary Sounds, Inc. . . . 9,800
30 Total . . . 28,700 (111/401)
CASH RECEIPTS JOURNAL P AGE 7 Accounts Other Accouns Credit Sales Post Receivable Sales Post Discounts Cash Date Description Ref. Credit Credit Account Name Ref. Amount Debit Debit 2007 April 3
Music Supply Store
1,500 30 1,470 5 Cash Sales 1,575 1,575 10
Soprano Music Center
3,900 78 3,822 23 Sounds From Y esterday 2,975 2,975 28
Eagleton Music Center
10,500 210 10,290 31 T otals 18,875 1,575 318 20,132 (1 1 1 ) (401) (452) (101)
GENERAL JOURNAL PAGE 17 Post.
Date Description Ref. Debit Credit
2007
April 15 Sales Returns & Allowances . . . 451 800
Accounts Receivable/Music Warehouse . . . 111/ 800 Accepted a return of damaged merchandise,
Credit Memo 105, sale originally made on Inv. 9313, April 8
26 Notes Receivable . . . 109 5,500
Accounts Receivable/Country Music Store . . . 111/ 5,500 Received a 2-month, 12% note from
Country Music Store to replace open account
GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 101
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
April 1 Balance ✓ 16,400
30 CR7 20,132 36,532
ACCOUNT Notes Receivable ACCOUNT NO. 109
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
April 26 J17 5,500 5,500
ACCOUNT Accounts Receivable ACCOUNT NO. 111
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007 April 1 Balance ✓ 21,000 15 J17 800 20,200 26 J17 5,500 14,700 30 S7 28,700 43,400 30 CR7 18,875 24,525
ACCOUNT Sales ACCOUNT NO. 401
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
April 30 S7 28,700 28,700
GENERAL LEDGER
ACCOUNT Sales Returns and Allowances ACCOUNT NO. 451
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
April 15 J17 800 800
ACCOUNT Sales Discounts ACCOUNT NO. 452
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
April 30 CR7 318 318
UNLIMITED SOUNDS Partial Income Statement Month Ended April 30, 2007 Revenue
Sales . . . 30,275 Less: Sales Returns and Allowances . . . 800
Sales Discount . . . 318 1,118 Net Sales . . . 29,157
Problem 9.4A
PURCHASES JOURNAL PAGE 8
Invoice Inv. Post Purchases Dr./
Date Purchased From Number Date Terms Ref. Accounts Payable Credit 2007
June 3 Perfect Fit Shoe Shop 746 5/30 2/10, n/30 2,600
12 Juanda’s Coat Shop 9922 6/9 n/30 2,050
23 Motor Speedway 1927 6/20 2/10, n/30 5,400
30 Jogging Shoes Store 4713 6/26 1/10, n/30 1,980
30 Total 12,030
(501/205)
GENERAL JOURNAL PAGE 20
Post.
Date Description Ref. Debit Credit
2007
June 5 Equipment . . . 131 4,500
Accounts Payable/Middleton Company . . . 205/ 4,500 Purchased new store equipment, Inv. 9067
dated June 4, payable in 30 days
18 Accounts Payable/Juanda’s Coat Shop . . . 205/ 550
Purchases Returns & Allowances . . . 503 550 Returned defective goods, receiving CM 203,
original purchase made on Inv. 9922, June 9
21 Equipment . . . 131 9,500
Notes Payable . . . 201 9,500 Issued 3-month, 12% note to Warren Company to .
CASH P A YMENTS JOURNAL P AGE 8 Accounts Other Accounts Debit Purchases Ck. Post Payable Post Discounts Cash Date No. Description Ref. Debit Account Name Ref. Amount Credit Credit 2007 June 1 1 101 Monthly rent Rent Expense 61 1 2 ,400 2,400 7 1 102 Leisure W
ear Clothing Co.
1,470
1,470
8
1
103
Perfect Fit Shoe Shop
2,600 52 2,548 15 1 104
Monthly telephone bill
T elephone Expense 617 228 228 25 1 105 Juanda’ s Coat Shop 1,250 1,250 28 1 106 Motor Speedway 5,400 108 5,292 30 1 107 Monthly salaries Salaries Expense 614 4,800 4,800 30 T otals 10,720 7,428 160 17,988 (205) (X) (504) (101)
GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 101
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 18,500
30 CP8 17,988 512
ACCOUNT Equipment ACCOUNT NO. 131
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 56,000
5 J20 4,500 60,500
21 J20 9,500 70,000
ACCOUNT Notes Payable ACCOUNT NO. 201
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 21 J20 9,500 9,500
ACCOUNT Accounts Payable ACCOUNT NO. 205
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007 June 1 Balance ✓ 4,880 5 J20 4,500 9,380 18 J20 550 8,830 30 P8 12,030 20,860 30 CP8 10,720 10,140
ACCOUNT Purchases ACCOUNT NO. 501
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 30 P8 12,030 12,030
ACCOUNT Purchases Returns & Allowances ACCOUNT NO. 503
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
GENERAL LEDGER
ACCOUNT Purchases Discounts ACCOUNT NO. 504
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 30 CP8 160 160
ACCOUNT Rent Expense ACCOUNT NO. 611
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 CP8 2,400 2,400
ACCOUNT Salaries Expense ACCOUNT NO. 614
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 30 CP8 4,800 4,800
ACCOUNT Telephone Expense ACCOUNT NO. 617
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 15 CP8 228 228
HIKER AND BIKER OUTLET CENTER Partial Income Statement Month Ended June 30, 2007
Purchases . . . 12,030 Less: Purchases Returns & Allowances . 550
Purchases Discount . . . 160 710 Net Purchases . . . 11,320
Problem 9.5A
VACATION PARADISE Bank Reconciliation Statement
April 30, 2007
Balance on bank statement . . . 3,639 Additions:
Deposit of April 30 in transit . . . 200 3,839 Deductions for outstanding checks:
Check 1214 of April 28 . . . 18 Check 1215 of April 30 . . . 15
Total outstanding checks . . . 33 Adjusted bank balance . . . 3,806 Balance in books . . . 3,972 Deductions:
NSF check . . . 160
Bank service charge . . . 6 166 Adjusted book balance . . . 3,806
GENERAL JOURNAL PAGE 1
Post.
Date Description Ref. Debit Credit
2007
May 2 Accounts Receivable/Doris Fisher . . . 160
Cash . . . 160 To record NSF check returned by bank
2 Miscellaneous Expense . . . 6
Cash . . . 6 To record bank service charge for April
Problem 9.6A
HAMPTON INN Bank Reconciliation Statement
August 31, 2007
Balance on bank statement . . . 13,097 Additions:
Deposit of August 30 in transit . . . 880
Deposit of August 31 in transit . . . 477 1,357 14,454 Deductions for outstanding checks:
Check 712 . . . 110 Check 713 . . . 25 Check 716 . . . 238 Check 736 . . . 577 Check 739 . . . 78 Check 741 . . . 145
Total outstanding checks . . . 1,173 Adjusted bank balance . . . 13,281 Balance in books . . . 11,549 Additions:
Note receivable collected by bank . . . 2,000
Interest on note receivable . . . 60 2,060 . . . 13,609 Deductions:
NSF check . . . 320
Bank service charge . . . 8 328 Adjusted bank balance . . . 13,281
GENERAL JOURNAL PAGE 10
Post.
Date Description Ref. Debit Credit
2007
Sept. 4 Cash . . . 2,060
Notes Receivable . . . 2,000 Interest Income . . . 60
To record receipt of amount due on note plus interest collected by bank in August
4 Accounts Receivable/Neal Woodson . . . 320
Cash . . . 320 To record NSF check returned by bank
4 Misc. Expense . . . 8
Cash . . . 8 To record bank service charge for August
Analyze:Net effect on the accounting equation of the journal entries recorded as a result of the bank
Problem 9.7A
BAXTER COMPANY Bank Reconciliation Statement
April 30, 2007
Balance in books . . . 20,275 Additions:
Check 2104 dated April 15 was recorded
as $800; check was actually written for $80 . . . 720 20,995 Deductions:
Check 2147 dated April 20 was recorded
as $308; check was actually written for $388 . . . 80 Adjusted bank balance . . . 20,915
GENERAL JOURNAL PAGE 11
Post.
Date Description Ref. Debit Credit
2007
May 2 Cash . . . 720
Supplies Expense . . . 720 To correct error in entry for check 2104 of
April 15
2 Utilities Expense . . . 80
Cash . . . 80 To correct error in entry for check 2147 of
April 20
Pr
oblem 9.1B
CASH RECEIPTS JOURNAL
P AGE 14 Accounts Sales T a x Other Accounts Credit Post. Receivable Payable Sales Post. Cash Date Description Ref Credit Credit Credit Account Name Ref. Amount Debit 2007 June 3
Clear Images Copy Center
400
400
4
Collected note and
Notes Receivable 1 1 5 1,600 interest Interest Income 791 102 1,702 5
Refund for damaged supplies
Of fice Supplies 129 360 360 7 Cash sales 136 1,700 1,836 10 Linda James 1,400 1,400 13 Additional investment
Sergio Guzman, Capital
302 10,000 10,000 14 Cash sales 128 1,600 1,728 18 Karen Carter 1,060 1,060 19 Nelsy Marroquin 1,200 1,200 21 Cash sales 144 1,800 1,944 27 Alexander Neal 800 800 30 T otals 4,860 408 5,100 12,062 22,430 (1 1 1 ) (231) (401) (X) (102)
GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 102
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 1,200
30 CR14 22,430 23,630
ACCOUNT Accounts Receivable ACCOUNT NO. 111
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 8,400
30 CR14 4,860 3,540
ACCOUNT Notes Receivable ACCOUNT NO. 115
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 1,600
4 CR14 1,600
-0-ACCOUNT Office Supplies ACCOUNT NO. 129
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 1,000
5 CR14 360 640
ACCOUNT Sales Tax Payable ACCOUNT NO. 231
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 400
GENERAL LEDGER
ACCOUNT Sergio Guzman, Capital ACCOUNT NO. 302
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 1 Balance ✓ 7,600
13 CR14 10,000 17,600
ACCOUNT Sales ACCOUNT NO. 401
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 30 CR14 5,100 5,100
ACCOUNT Interest Income ACCOUNT NO. 791
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
June 4 CR14 102 102
Pr oblem 9.2B CASH P A YMENTS JOURNAL P AGE 12 Accounts Other Accounts Debit Purchases Ck. Post Payable Post Discounts Cash Date No. Description Ref. Debit Account Name Ref. Amount Credit Credit 2007 Sept 1 401 T ax remittance Sales T ax Payable 231 1,344 1,344 2 402 Monthly rent Rent Expense 620 1,700 1,700 4 403
Established petty cash
Petty Cash Fund
105 100 100 5 404 Elegant Glassware 1,500 30 1,470 9 405 Store equipment Equipment 141 1,000 1,000 13 406 T aylor Company 970
Sales Returns &
Allowances 970 14 407 Cash refund 451 425 425 18 408
Monthly telephone bill
T elephone Expense 626 187 187 21 409 African Imports 850 17 833 24 410
Paid promissory note
Notes Payable 201 1,000 and interest Interest Expense 61 1 4 0 1,040 26 41 1 Atlantic Ceramics 1,240 1,240 28 412 Personal withdrawal
Fred Lin, Drawing
302 1,500 1,500 30 413 Monthly salaries Salaries Expense 623 2,500 2,500 30 414
Replenish petty cash
Delivery Expense 51 1 2 2 Miscellaneous Expense 614 29
Fred Lin, Drawing
302 10 61 30 4,560 9,857 47 14,370 (205) (X) (504) (101)
PETTY CASH ANAL YSIS SHEET P AGE 12 Distribution of Payments Delivery Miscellaneous V ou. Supplies Expense Expense Date No. Description Receipts Payments Debit Debit Debit Account Name Amount 2007 Sept 4 — Establish fund 100 6 1 Delivery service 12 12 1 1 2 Bought of fice supplies 16 16 16 3 Personal withdrawal 10
Fred Lin, Drawing
10 23 4 Bought stamps 13 13 27 5 Delivery service 10 10 30 — T otals 100 61 22 29 10 30 — Balance on hand 39 100 100 30 — Balance on hand 39 30 — Replenish fund 61 30 — Carried forward 100 Other Accounts Debit
GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 101
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 1 Balance ✓ 21,530
30 CP12 14,370 7,160
ACCOUNT Petty Cash Fund ACCOUNT NO. 105
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 4 CP12 100 100
ACCOUNT Equipment ACCOUNT NO. 141
Post. Balance
Date Description Ref. Debit Credit Debit Credit
Sept. 1 Balance ✓ 43,000
9 CP12 1,000 44,000
ACCOUNT Notes Payable ACCOUNT NO. 201
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 1 Balance ✓ 1,000
24 CP12 1,000
-0-ACCOUNT Accounts Payable ACCOUNT NO. 205
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 1 Balance ✓ 9,800
30 CP12 4,560 5,240
ACCOUNT Sales Tax Payable ACCOUNT NO. 231
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 1 Balance ✓ 1,344
-0-GENERAL LEDGER
ACCOUNT Fred Lin, Drawing ACCOUNT NO. 302
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 28 CP12 1,500 1,500
30 CP12 10 1,510
ACCOUNT Sales Returns and Allowances ACCOUNT NO. 451
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 14 CP12 425 425
ACCOUNT Purchases Discounts ACCOUNT NO. 504
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 30 CP12 47 47
ACCOUNT Delivery Expense ACCOUNT NO. 511
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 30 CP12 22 22
ACCOUNT Interest Expense ACCOUNT NO. 611
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
GENERAL LEDGER
ACCOUNT Miscellaneous Expense ACCOUNT NO. 614
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 30 CP12 29 29
ACCOUNT Rent Expense ACCOUNT NO. 620
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 2 CP12 1,700 1,700
ACCOUNT Salaries Expense ACCOUNT NO. 623
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 30 CP12 2,500 2,500
ACCOUNT Telephone Expense ACCOUNT NO. 626
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 18 CP12 187 187
Analyze:Total debits made to general ledger liability accounts during the month of September were $6,904.
Problem 9.3B
SALES JOURNAL PAGE 10
Invoice Post. Accounts Receivable Dr./
Date No. Customer’s Name Ref. Sales Cr.
2007
Aug. 2 2978 Jamison Builders . . . 19,450
7 2979 Branch Construction Company . 18,550
22 2980 Contemporary Homes . . . 6,850
31 2981 Denton County Builders . . . 17,440
31 Total . . . 62,290 (111/401)
CASH RECEIPTS JOURNAL P AGE 10 Accounts Other Accouns Credit Sales Post Receivable Sales Post Discounts Cash Date Description Ref. Credit Credit Account Name Ref. Amount Debit Debit 2007 Aug. 1 Construction Supply Company 6,600 132 6,468 1 1 Jamison Builders 19,450 389 19,061 14 Cash sales 7,050 7,050 16
Branch Construction Company
18,550
371
18,179
24
Garcia Homes Center
6,000 6,000 31 T otals 50,600 7,050 892 56,758 (1 1 1 ) (401) (452) (101)
GENERAL JOURNAL PAGE 24 Post.
Date Description Ref. Debit Credit
2007
Aug. 4 Notes Receivable . . . 109 12,000
Accounts Receivable/Davis Custom Homes . . . 111/ 12,000 Received a 3-month, 12% note from Davis Custom
Homes to replace open account
26 Sales Returns and Allowances . . . 451 550
Accounts Receivable/Contemporary Homes . . . 111/ 550 Accepted a return of damaged merchandise,
Credit Memo 101; sale originally made on Inv. 2980, August 22
GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 101
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Aug. 1 Balance ✓ 15,070
31 CR10 56,758 71,828
ACCOUNT Notes Receivable ACCOUNT NO. 109
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Aug. 4 J24 12,000 12,000
ACCOUNT Accounts Receivable ACCOUNT NO. 111
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007 Aug. 1 Balance ✓ 22,507 4 J24 12,000 10,507 26 J24 550 9,957 31 S10 62,290 72,247 31 CR10 50,600 21,647
ACCOUNT Sales ACCOUNT NO. 401
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Aug. 31 S10 62,290 62,290
GENERAL LEDGER
ACCOUNT Sales Returns and Allowances ACCOUNT NO. 451
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Aug. 26 J24 550 550
ACCOUNT Sales Discounts ACCOUNT NO. 452
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Aug. 31 CR10 892 892
ROYAL CONSTRUCTION COMPANY Partial Income Statement Month Ended August 31, 2007 Revenue
Sales . . . 69,340 Less Sales Returns and Allowances . . . . 550
Sales Discounts . . . 892 1,442 Net Sales . . . 67,898
Problem 9.4B
PURCHASES JOURNAL PAGE 12
Invoice Inv. Post Purchases Dr./
Date Purchased From Number Date Terms Ref. Accounts Payable Credit
2007
Dec. 1 Alexis Products for Homes 6559 11/28 2/10, n/30 6,600
10 Baxter Corporation 5119 12/7 2/10, n/30 9,200
18 Household Appliance Center 7238 12/16 3/10, n/30 12,400
22 Zale Corporation 3161 12/19 n/30 5,800
31 Total 34,000
(501/205)
GENERAL JOURNAL PAGE 30
Post.
Date Description Ref. Debit Credit
2007
Dec. 4 Equipment . . . 131 14,000
Notes Payable . . . 201 14,000 Issued 2-month, 10% note to Kesterson Company
to purchase new store equipment
20 Equipment . . . 131 6,000
Accounts Payable/Safety Security Systems, Inc. . . 205/ 6,000 Purchased new store equipment, Inv. 536,
dated December 17, payable in 45 days
28 Accounts Payable/Safety Security Systems . . . 205/ 1,050
Purchases Returns and Allowances . . . 503 1,050 Returned damaged goods, receiving Credit Memo
201; original purchase made on Inv. 536, December 17
CASH P A YMENTS JOURNAL P AGE 12 Accounts Other Accounts Debit Purchases Ck. Post Payable Post Discounts Cash Date N o. Description Ref. Debit Account Name Ref. Amount Credit Credit 2007 Dec. 2 1801 Monthly rent Rent Expense 61 1 3 ,000 3,000 6 1802
Axis Products for Homes
6,600
132
6,468
13
1803
Monthly telephone bill
T elephone Expense 617 265 265 15 1804 Baxter Corporation 9,200 184 9,016 21 1805
Chain Lighting and
Appliances 4,200 4,200 24 1806 Household Appliance 12,400 372 12,028 31 1807 Monthly salaries Salaries Expense 614 6,500 6,500 31 T otals 32,400 9,765 688 41,477 (205) (X) (504) (101)
GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 101
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Dec. 1 Balance ✓ 60,700
31 CP12 41,477 19,223
ACCOUNT Equipment ACCOUNT NO. 131
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Dec. 1 Balance ✓ 68,000
4 J30 14,000 82,000
20 J30 6,000 88,000
ACCOUNT Notes Payable ACCOUNT NO. 201
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Dec. 4 J30 14,000 14,000
ACCOUNT Accounts Payable ACCOUNT NO. 205
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007 Dec. 1 Balance ✓ 7,600 20 J30 6,000 13,600 28 J30 1,050 12,550 31 P12 34,000 46,550 31 CP12 32,400 14,150
ACCOUNT Purchases ACCOUNT NO. 501
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Dec. 31 P12 34,000 34,000
ACCOUNT Purchases Returns and Allowances ACCOUNT NO. 503
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
GENERAL LEDGER
ACCOUNT Purchases Discounts ACCOUNT NO. 504
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Dec. 31 CP12 688 688
ACCOUNT Rent Expense ACCOUNT NO. 611
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Dec. 2 CP12 3,000 3,000
ACCOUNT Salaries Expense ACCOUNT NO. 614
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Dec. 31 CP12 6,500 6,500
ACCOUNT Telephone Expense ACCOUNT NO. 617
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Dec. 13 CP12 265 265
CONTEMPORARY APPLIANCE CENTER Partial Income Statement
Month Ended December 31, 2007
Purchases . . . 34,000 Less Purchases Returns and Allowances 1,050
Purchases Discount . . . 688 1,738 Net Purchases . . . 32,262
Problem 9.5B
PETER CHEN, ATTORNEY AT LAW Bank Reconciliation Statement
September 30, 2007
Balance on bank statement . . . 7,323.50 Additions:
Deposit of September 28 in transit . . . 900.00 8,223.50 Deductions for outstanding checks:
Check 108 of September 15 . . . 75.00 Check 112 of September 27 . . . 140.00
Total outstanding checks . . . 215.00 Adjusted bank balance . . . 8,008.50 Balance in books . . . 8,134.00 Deductions:
NSF check . . . 118.00
Bank service charge . . . 7.50 125.50 Adjusted book balance . . . 8,008.50
GENERAL JOURNAL PAGE 1
Post.
Date Description Ref. Debit Credit
2007
Oct. 5 Accounts Receivable/Annette Cole . . . 118.00
Cash . . . 118.00 To record NSF check returned by bank
5 Miscellaneous Expense . . . 7.50
Cash . . . 7.50 To record bank service charge for September
Problem 9.6B
WELLS BUILDERS Bank Reconciliation Statement
June 30, 2007
Balance on bank statement . . . 7,542.03 Additions:
Deposit of June 30 in transit . . . 944.07 8,486.10 Deductions for outstanding checks:
Check 533 . . . 148.95 Check 535 . . . 97.50 Check 537 . . . 425.40
Total outstanding checks . . . 671.85 Adjusted bank balance . . . 7,814.25 Balance in books . . . 6,418.59 Additions:
Note receivable collected by bank . . . 1,500.00
Interest on note receivable . . . 30.00 1,530.00 7,948.59 Deductions:
NSF check . . . 120.00
Bank service charge . . . 14.34 134.34 Adjusted book balance . . . 7,814.25
GENERAL JOURNAL PAGE 1
Post.
Date Description Ref. Debit Credit
2007
July 3 Cash . . . 1,530.00
Notes Receivable . . . 1,500.00 Interest Income . . . 30.00
To record receipt of amount due on note plus interest collected
3 Accounts Receivable/Robert Boley . . . 120.00
Cash . . . 120.00 To record NSF check returned by bank
3 Miscellaneous Expense . . . 14.34
Cash . . . 14.34 To record bank service charge for June
Problem 9.7B
LITTLE GUY MOVERS Bank Reconciliation Statement
February 28, 2007
Balance in books . . . 19,451 Additions:
Check 1201 dated February 8 was recorded as $316;
check was actually written for $308 . . . 8 . . . 19,459 Deductions:
Check 1222 dated February 24 was recorded as $404;
check was actually written for $440 . . . 36 Adjusted book balance . . . 19,423
GENERAL JOURNAL PAGE 1
Post.
Date Description Ref. Debit Credit
2007
March 3 Cash . . . 8
Hauling Expense . . . 8 To correct error in entry for Check 1201 of February 8
3 Telephone Expense . . . 36
Cash . . . 36 To correct error in entry for Check 1222 of February 24
Analyze:The net change to the Cash account was a decrease of $28.
Challenge Problem
SALES JOURNAL PAGE 12
Accounts Sales Tax
Sales Slip Post. Receivable Payable Sales
Date No. Customer’s Name Ref. Debit Credit Credit
2007
Sept. 3 1850 Pam Lawrence . . . ✓ 702 52 650
8 1851 Henry Tolliver . . . ✓ 1,026 76 950
19 1852 Rachel Carter . . . ✓ 270 20 250
29 1853 Mesia Davis . . . ✓ 1,296 96 1,200
30 3,294 244 3,050
PURCHASES JOURNAL PAGE 12
Accounts Freight
Invoice Inv. Post. Payable Purchases in
Date Purchased From Number Date Terms Ref. Credit Debit Debit
2007
Sept. 6 Reed Millings Company 827 9/3 2/10, n/30 ✓ 4,450 4,450
14 Wells Products 9453 9/11 n/30 ✓ 3,784 3,700 84
21 Nelson Craft Products 677 9/18 2/10, n/30 ✓ 2,800 2,800
27 Booker, Inc. 1368 9/23 n/45 ✓ 4,328 4,200 128
31 Totals 15,362 15,150 212
(205) (501) (502)
GENERAL JOURNAL PAGE 32
Post.
Date Description Ref. Debit Credit
2007
Sept. 8 Supplies . . . 121 370
Accounts Payable/Rocker Company . . . 205/✓ 370 Bought store supplies, Inv. 4204 dated Sept. 6,
net amount due in 30 days
11 Notes Receivable . . . 109 2,100
Accounts Receivable/Jason Williams . . . 111/✓ 2,100 Received a 2-month, 10% note from
Jason Williams to replace open account
17 Accounts Payable/McNight Corporation . . . 205/✓ 5,500
Notes Payable . . . 201 5,500 Issued a 2-month, 12% note to McNight Corp.
to replace open account
23 Sales Returns & Allowances . . . 451 50 Sales Tax Payable . . . 231 4
Accounts Receivable/Rachel Carter . . . 111/✓ 54 Granted allowance for damaged lamps, CM 151,
original sale made on Sales Slip 1852, Sept. 19 . .
24 Accounts Payable/Nelson Craft Products . . . 205/✓ 300
Purchases Returns & Allowances . . . 503 300 Returned a damaged rug, receiving CM 110
CASH RECEIPTS JOURNAL P AGE 12 Accounts Sales T a x Other Accounts Credit Post. Receivable Payable Sales Post. Cash Date Description Ref Credit Credit Credit Account Name Ref. Amount Debit 2007 Sept 1 David Prater ✓ 1,050 1,050 5 Additional investment
Sergio Cortez, Capital
301 15,000 15,000 6 Cash sales 312 3,900
Cash Short or Over
61 1 (20) 4,192 13 Cash sales 308 3,850 4,158 15 Mesia Davis ✓ 1,260 1,260 20 Cash sales 328 4,100
Cash Short or Over
61 1 (9) 4,419 24 Robert Kent ✓ 1,730 1,730 27 Cash sales 384 4,800 5,184 30 Cash sales 120 1,500
Cash Short or Over
61 1 1 0 1,630 30 T otals 4,040 1,452 18,150 14,981 38,623 (1 1 1 ) (231) (401) (X) (101) CASH P A YMENTS JOURNAL P AGE 12 Accounts Other Accounts Debit Purchases Ck. Post Payable Post Discounts Cash Date No. Description Ref. Debit Account Name Ref. Amount Credit Credit 2007 Sept. 1 1401
Sadlers Floor Coverings
✓ 1,940 1,940 2 1402 Monthly rent Rent Expense 614 2,500 2,500 6 1403 Freight charge Freight In 502 158 158 1 1 1404 Reed Millings ✓ 4,450 89 4,361 22 1405 Utility bill Utilities Expense 619 306 306 25 1406 Cash purchase Purchases 501 3,600 3,600 26 1407
Nelson Craft Products
✓ 2,500 50 2,450 28 1408 W ells Products ✓ 2,120 2,120 30 1409 Monthly salaries Salaries Expense 617 6,800 6,800 30 T otals 1 1 ,010 13,364 139 24,235 (205) (X) (504) (101)
GENERAL LEDGER
ACCOUNT Cash ACCOUNT NO. 101
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 1 Balance ✓ 18,945
30 CR12 38,623 57,568
30 CP12 24,235 33,333
ACCOUNT Notes Receivable ACCOUNT NO. 109
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 11 J32 2,100 2,100
ACCOUNT Accounts Receivable ACCOUNT NO. 111
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007 Sept. 1 Balance ✓ 6,140 11 J32 2,100 4,040 23 J32 54 3,986 30 S12 3,294 7,280 30 CR12 4,040 3,240
ACCOUNT Supplies ACCOUNT NO. 121
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 1 Balance ✓ 710
8 J32 370 1,080
ACCOUNT Inventory ACCOUNT NO. 131
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 1 Balance ✓ 29,365
ACCOUNT Notes Payable ACCOUNT NO. 201
Post. Balance
GENERAL LEDGER
ACCOUNT Accounts Payable ACCOUNT NO. 205
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007 Sept. 1 Balance ✓ 9,560 8 J32 370 9,930 17 J32 5,500 4,430 24 J32 300 4,130 31 P12 15,362 19,492 31 CP12 11,010 8,482
ACCOUNT Sales Tax Payable ACCOUNT NO. 231
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 23 J32 4 4
30 S12 244 240
30 CR12 1,452 1,692
ACCOUNT Sergio Cortez, Capital ACCOUNT NO. 301
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 1 Balance ✓ 45,600
5 CR12 15,000 60,600
ACCOUNT Sales ACCOUNT NO. 401
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 30 S12 3,050 3,050
30 CR12 18,150 21,200
ACCOUNT Sales Returns & Allowances ACCOUNT NO. 451
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
GENERAL LEDGER
ACCOUNT Purchases ACCOUNT NO. 501
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 25 CP12 3,600 3,600
30 P12 15,150 18,750
ACCOUNT Freight In ACCOUNT NO. 502
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 6 CP12 158 158
31 P12 212 370
ACCOUNT Purchases Returns & Allowances ACCOUNT NO. 503
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 24 J32 300 300
ACCOUNT Purchases Discounts ACCOUNT NO. 504
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 30 CP12 139 139
ACCOUNT Cash Short or Over ACCOUNT NO. 611
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 6 CR12 20 20
20 CR12 9 29
30 CR12 10 19
ACCOUNT Rent Expense ACCOUNT NO. 614
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
GENERAL LEDGER
ACCOUNT Salaries Expense ACCOUNT NO. 617
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept 30 CP12 6,800 6,800
ACCOUNT Utilities Expense ACCOUNT NO. 619
Post. Balance
Date Description Ref. Debit Credit Debit Credit
2007
Sept. 22 CP12 306 306
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME Rachel Carter TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 19 Sales Slip 1852 S12 270 270
23 CM 151 J32 54 216
NAME Mesia Davis TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 1 Balance ✓ 1,260
15 CR12 1,260
-0-29 Sales Slip 1853 S12 1,296 1,296
NAME Robert Kent TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 1 Balance ✓ 1,730
24 CR12 1,730
-0-NAME Pam Lawrence TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME David Prater TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 1 Balance ✓ 1,050
1 CR12 1,050
-0-NAME Henry Tolliver TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 8 Sales Slip 1851 S12 1,026 1,026
NAME Jason Williams TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 1 Balance ✓ 2,100
11 Transferred to Notes Receivable J32 2,100
-0-INTERIOR DESIGNS SPECIALTY SHOP Schedule of Accounts Receivable
September 30, 2007 Rachel Carter . . . 216 Mesia Davis . . . 1,296 Pam Lawrence . . . 702 Henry Tolliver . . . 1,026 Total . . . 3,240
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME Booker, Inc. TERMS n/45
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 27 Invoice 1368, 9/23/07 P12 4,328 4,328
NAME McKnight Corporation TERMS 1/10, n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 1 Balance ✓ 5,500
17 J32 5,500
-0-NAME Nelson Craft Products TERMS 2/10, n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 21 Invoice 677, 9/18/07 P12 2,800 2,800
24 CM 110 J32 300 2,500
26 CP12 2,500
-0-NAME Rocker Company TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 8 Invoice 4204, 9/6/07 J32 370 370
NAME Reed Millings Company TERMS 2/10, n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 6 Invoice 827, 9/3/07 P12 4,450 4,450
11 CP12 4,450
-0-NAME Sadler Floor Coverings TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 1 Balance ✓ 1,940
-0-ACCOUNTS PAYABLE SUBSIDIARY LEDGER
NAME Wells Products TERMS n/30
Post.
Date Description Ref. Debit Credit Balance
2007
Sept. 1 Balance ✓ 2,120
14 Invoice 9453,9/11/07 P12 3,784 5,904
28 CP12 2,120 3,784
INTERIOR DESIGNS SPECIALTY SHOP Schedule of Accounts Payable
September 30, 2007
Booker, Inc. . . 4,328 Rocker Company . . . 370 Wells Products . . . 3,784 Total . . . 8,482
Analyze:Total cash disbursements for the month of September were $24,235.
Critical Thinking Problem
JULIUS WELLS Bank Reconciliation Statement
August 31, 2007
Balance on bank statement . . . 16,589 Addition: Deposit in transit, August 28 . . . . 4,882 21,471 Deductions for outstanding checks
Check 1590 . . . 263 Check 1680 . . . 1,218 Check 1724 . . . 486 Check 1780 . . . 792 Check 1784 . . . 1,819 Check 1806 . . . 384
Total outstanding checks . . . 4,962 Adjusted bank balance . . . 16,509 Balance in books . . . 18,786 Deduction: Bank service charge . . . 10 Adjusted book balance . . . 18,776 Less: Cash shortage . . . 2,267 Corrected adjusted book balance . . . 16,509
Since Gloria Harris handled all cash records, it was relatively easy for her to conceal her theft. Julius should separate the jobs of receiving cash, making disbursements, maintaining accounting records, and preparing bank reconciliations. If the company is not large enough to permit different people to handle these jobs, then Julius should oversee the cash/accounting functions more closely, including reconciliation of the bank account. If Julius does not have the time to do this, he could hire an independent accountant to review the cash/accounting records on a monthly basis and then report any discrepancies to him.
Business Connections
Managerial Focus1. a. No assurance money taken actually accounted for.
b. A gap in the control of cash exists, and unauthorized expenditures can be made. c. Increases the opportunity for theft; no current cash position is known.
d. Increases risk of theft.
e. Weakens internal control over cash receipts.
2. Payment of bills in timely fashion, anticipation of fund shortages or overages, take advantage of investment opportunities.
3. Loss of control and check-and-balance system. 4. a. Yes. Blank endorsements are not secure.
b. Yes. Checkbook should be kept in a locked drawer and should be available only to specified employees.
c. Yes. To deter fraud, different tasks should be assigned to different employees. d. Yes. Reconciliation should be done soon after receiving bank statement.
e. Yes. Financial records should be maintained for a reasonable number of years in case of a tax audit or if records are destroyed.
f. No. The task would be impractical for a large firm.
5. Essential assets should be safeguarded against loss and theft.
6. Up-to-date cash position; information for day-to-day business decisions. 7. Insures against losses.
8. Control of cash; audit trail.
Ethical Dilemma
Daniel should be sure to pay this $30 to petty cash immediately. He can then record cash short/over the next month. Daniel should be sure to never borrow money from petty cash as it is not his money.
Streetwise
1. January 30, 2005 $506 million; February 1, 2004 $1,103 million; decreased by 54.1%. 2. 1,295,185,000 transactions. The average sale was $54.89. $28,437,081,860.
Financial Statement Analysis
1. 28.1%
2. Increased by $430 million.
3. The balance reported for “Cash and cash equivalents” would be understated by $125,000.
Analyze Online:Answers will vary depending on the year.
Extending the Thought
Answers will vary. Students may suggest the following checks and balances for stronger internal control over online cash receipts.
1. Verify agreement of daily sales totals and e-cash deposit records.
2. Perform a spot check on the sales report generated from the Web site to ensure the report is capturing all online sales.
Business Communication
Students’ lists of questions will vary, but class members should demonstrate an understanding of the controls necessary to prevent fraud and errors. Topics should include processes on cash payments, cash receipts, and petty cash.
Team Work
A Sales Invoice for each job should be given to each customer with a place to incorporate any additions or subtractions for service. Any changes must be communicated to the home office and an approval number will be given. The Sales Invoice, as well as each change, should be signed by the customer. Only cash and money orders should be allowed since the families have just moved and do not currently have a local bank.
Internet Connection
Each bank should list the possible interest rates, both variable and fixed. Most banks will be within a few tenths of points of each other.
Practice Test Answer Key
Part A True–False 1. F 2. T 3. T 4. T 5. F 6. T 7. F 8. T 9. F 10. T 11. F 12. F 13. T 14. F 15. T 16. T 17. F 18. T 19. F 20. T 21. T Part B Matching 1. k 2. j 3. l 4. e 5. b 6. i 7. c 8. a 9. h