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4. $4,319 Accounts Receivable account in the General Ledger (5 min.) S 8-8

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(5 min.) S 8-4

Inventory ... 151

Accounts Payable ... 201

Jan Marks, Capital ... 301

Jan Marks, Drawings ... 311

Service Revenue ... 411

Depreciation Expense ... 531

(5 min.) S 8-7 1. $1,718 Inventory account in the General Ledger 2. $3,927 Posted to Sales Revenue on November 30 3. $ 907 Susan Lu account in the Accounts Receivable Subsidiary Ledger 4. $4,319 Accounts Receivable account in the General Ledger (5 min.) S 8-8 1. Accounts Receivable Subsidiary Ledger 2. General Ledger Accounts Receivable debit balance ... $4,319 From the Accounts Receivable Subsidiary Ledger Customer Balance Maria Galway ... $ 935

Brent Harmon ... 694

Susan Lu ... 907 Clay Schmidt ... 1,783 Total accounts receivable ... $4,319

(2)

1. Cash receipts during November.. $6,134 2. Cash collections on account:

Nov. 14 ... $ 900 22 ... 300 Total ... 1,200 Total discounts ... 35 Decrease in accounts receivable ... $1,235 3. Cash sales during November…… $2,883

(90-120 min.) P 8-5

Reqs. 1 and 4

General Ledger

ACCOUNT CASH AT BANK ACCOUNT NO. 111

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 31 CR.3 13,863 13,863

31 CP.9 11,078 2,785

ACCOUNT ACCOUNTS RECEIVABLE ACCOUNT NO. 112

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 17 J.4 740 740

31 S.8 12,965 12,225

31 CR.3 10,425 1,800

ACCOUNT SUPPLIES ACCOUNT NO. 116

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 24 CR.3 80 80

(3)

ACCOUNT PREPAID INSURANCE ACCOUNT NO. 117

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 22 CP.9 1,345 1,345

ACCOUNT INVENTORY ACCOUNT NO. 118

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 10 CP.9 770 770 17 J.4 410 1,180 29 J.4 420 760 31 P.6 8,470 9,230 31 S.8 7,070 2,160 31 CR.3 1,820 340 31 CP.9 177 163

ACCOUNT FURNITURE ACCOUNT NO. 151

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 5 CP.9 1,080 1,080

22 P.6 775 1,855

ACCOUNT ACCOUNTS PAYABLE ACCOUNT NO. 211

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 29 J.4 420 420

31 P.6 9,925 9,505

(4)

ACCOUNT SALES REVENUE ACCOUNT NO. 411

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 31 CR.3 3,410 3,410

31 S.8 12,965 16,375

ACCOUNT SALES DISCOUNTS ACCOUNT NO. 412

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 31 CR.3 172 172

ACCOUNT SALES RETURNS AND

ALLOWANCES ACCOUNT NO. 413

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 17 J.4 740 740

ACCOUNT INTEREST REVENUE ACCOUNT NO. 419

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 8 CR.3 120 120

ACCOUNT COST OF SALES ACCOUNT NO. 511

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 17 J.4 410 410

31 S.8 7,070 6,660

(5)

ACCOUNT SALARY EXPENSE ACCOUNT NO. 531

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 31 CP.9 1,100 1,100

ACCOUNT ELECTRICITY AND GAS EXPENSE ACCOUNT NO. 541

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 25 CP.9 380 380

Reqs. 2 and 4

Accounts Receivable Subsidiary Ledger ACCOUNT CANBERRA ASSOCIATES

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 9 S.8 6,250 6,250

19 CR.3 6,250

29 S.8 1,800 1,800

ACCOUNT J.R. WAKELAND

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 15 S.8 740 740

17 J.4 740

-0-ACCOUNT L.E. WOOTEN

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 2 S.8 2,350 2,350

12 CR.3 2,350

18 S.8 1,825 1,825

(6)

-0-Accounts Payable Subsidiary Ledger ACCOUNT DELWOOD PLAZA

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 3 P.6 5,900 5,900

13 CP.9 5,900

22 P.6 775 775

ACCOUNT HOUGHTON SUPPLIES

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

Mar. 13 P.6 680 680

28 P.6 420 1,100

29 J.4 420 680

30 CP.9 680

-0-ACCOUNT JASPER SALES

JRNL. BALANCE

DATE ITEM REF. DEBIT CREDIT DEBIT CREDIT

(7)

Reqs. 3 and 5

Sales Journal Page 8

Date Invoice No. Account Debited Post. Ref.

Accounts Receivable Dr. Sales Revenue Cr. Cost of Goods Sold Dr. Inventory Cr.

Mar. 2 191 L.E. Wooten √ 2,350 1,390

9 192 Canberra Associates √ 6,250 3,300 15 193 J.R. Wakeland √ 740 410 18 194 L.E. Wooten √ 1,825 970 29 195 Canberra Associates √ 1,800 1,000 31 Total 12,965 7,070 (112/411) (511/118) Req. 6

Debit balance of Accounts Receivable control

account in General Ledger……… $1,800

Total of balances in Accounts Receivable Ledger….. $1,800 Credit balance of Accounts Payable control

account in General Ledger……… $2,925

Total of balances in Accounts Payable Ledger

(8)

(continued) P 8-5 Cash Receipts Journal Page 3

DATE

DEBITS CREDITS COST OF

GOODS SOLD DR. INVENTORY

CR. CASH AT

BANK DISCOUNTSSALES RECEIVABLEACCOUNTS REVENUESALES

OTHER ACCOUNTS

ACCOUNT TITLE POST.REF. AMOUNT

Mar. 4 3,410 3,410 1,820 8 120 Interest Revenue 419 120 12 2,303 47 2,350 L.E. Wooten √ 19 6,125 125 6,250 Canberra Associates √ 24 80 Supplies 116 80 31 1,825 1,825 L.E. Wooten √ 31 13,863 172 10,425 3,410 Totals 200 1,820 (111) (412) (112) (411) (X) (511/118) 14,035 14,035

Purchases Journal Page 6

DATE ACCOUNT CREDITED TERMS

POST. REF.

CREDITS DEBITS ACCOUNTS

PAYABLE INVENTORY SUPPLIES

OTHER ACCOUNTS ACCOUNT

TITLE POST.REF. AMOUNT

Mar. 3 Delwood Plaza 3/10 n/60 √ 5,900 5,900

13 Houghton Supplies net eom √ 680 680

20 Jasper Sales net 30 √ 2,150 2,150

22 Delwood Plaza 3/10 n/60 √ 775 Furniture 151 775

28 Houghton Supplies 2/10 n/30 420 420

31 Totals 9,925 8,470 680 775

(211) (118) (116) (X)

(9)

(continued) P 8-5 Cash Payments Journal Page 9

DATE NO. ACCOUNT CK. DEBITED POST.REF.

DEBITS CREDITS OTHER

ACCOUNTS ACCOUNTS PAYABLE INVENTORY CASH AT BANK

Mar. 5 473 Furniture 151 1,080 1,080

10 474 Inventory 118 770 770

13 475 Delwood Plaza √ 5,900 177 5,723

22 476 Prepaid Insurance 117 1,345 1,345

25 477 Electricity and Gas Expense 541 380 380

30 478 Houghton Supplies √ 680 680 31 479 Salary Expense 531 1,100 1,100 31 Totals 4,675 6,580 177 11,078 (X) (211) (118) (111) 11,255 11,255 Journal Page 4

DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT

Mar. 17 Sales Returns and Allowances 413 740

Accounts Receivable –

J.R. Wakeland 112/√ 740

17 Inventory 118 410

Cost of sales 511 410

29 Accounts Payable – Houghton Supplies 211/√ 420

(10)

(5 min.) S 9-3 Differences:

1. External auditors are entirely independent of the business. Internal auditors are employees of the business.

2. External audits are designed to determine whether the company’s financial statements are prepared in accordance with generally accepted accounting principles.

Internal audits are designed to ensure that employees follow company policies and that operations run efficiently. Similarity:

1. Both types of auditors suggest improvements that help the business run more efficiently. 2. Both types of auditors determine whether the company is following legal requirements.

(5 min.) S 9-4 The financial institution could have:

1. Kept all accounting duties away from the cashier. This would have kept the cashier from covering his theft with entries in the accounting records.

2. Required employees to take vacations and rotated employees from job to job. These measures would have placed another person in the cashier’s job and probably would have brought the theft to light earlier.

3. Used an internal auditor. Daryl Light would be less likely to steal and manipulate customer accounts if he knew his work would be audited.

Only two measures are required.

(5-10 min.) S 9-9 The controller compares the records of the day’s cash receipts, as follows:

1. Bank deposit amount from the cashier

2. Debit to Cash at Bank from the accounting department

(11)

(5 min.) S 9-10 A dishonest purchasing agent could:

 Purchase goods and have them delivered to his/her home.

 Approve payment for an excessive amount and split the excess with the supplier. Businesses avoid this internal control weakness by separating the following duties:

 purchasing goods  receiving goods

 approving payment for goods

(5 min.) S 9-12

 O’Malley should report the errors to Stone because Stone is her supervisor, and Stone is responsible for the errors. If Stone fails to take action, then O’Malley should report the errors to the owner of the business. In any event, outsiders who are relying on Ireland Limited’s financial statements must be made aware of the need to correct the reported net income figure.

(12)

D.J. Hunter Bank Reconciliation 30 September 20XX

BANK:

Balance, 30 September $ 431

Add: Deposit in transit 1,209

Less: Outstanding cheques:

Cheque No.

626 $ (75)

627 (275) (350)

Adjusted bank balance $1,290

BOOKS:

Balance, 30 September $1,330

Less:

Correction of book error—

Recorded $68 cheque as $58 $ (10)

Cost of cheques (18)

Service charge (12) (40)

Adjusted book balance $1,290

(13)

(10-15 min.) E 9-6 Fred Midas Bank Reconciliation 21 October 20XX BANK: Balance, 31 October $ 900

Add: Deposit in transit 1,788

2,688

Less: Outstanding cheques: (467)

Adjusted bank balance $2,221

BOOKS:

Balance, 31 October $2,177

Add: EFT collection—rent 400

2,577

Less:

Service charge $ (12)

Dishonoured cheques (74)

Charge for printed cheques (9)

Correction of book error—

Recorded $290 cheque as $29 (261) (356)

(14)

(10 min.) E 9-7

Journal

DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT

Oct. 31 Cash at Bank 400

Rent Revenue 400

EFT collection of rent.

31 Miscellaneous Expense ($12 + $9) 21

Cash at Bank 21

Bank service charge and charge

for printed cheques.

31 Accounts Receivable 74

Cash at Bank 74

Dishonoured cheques returned by bank.

31 Salary Expense ($290 − $29) 261

Cash at Bank 261

(15)

(10-15 min.) E 9-10

Journal

DATE

A.

ACCOUNTS AND

EXPLANATIONS

POST.REF. DEBIT CREDIT

(a) Petty Cash 200

Cash in Bank 200

To set up the petty cash fund.

(b) Delivery Expense 22

Postage Expense 42

Supplies Expense ($34 + $8) 42

Miscellaneous Expense 16

Cash Short & Over 3

Cash in Bank ($200 − $75) 125

(16)

(20-25 min.) P 9-3 Dunlap Dollar Stores

Bank Reconciliation 30 April 2008

BANK:

Balance, 30 April $18,080

Add: Deposits in transit ($1,060 + $330) 1,390

19,470 Less: Outstanding cheques:

Cheque No.

3119 $ 630

3120 1,670

3121 100

3122 2,410 (4,810)

Adjusted bank balance, 30 April $14,660

BOOKS:

Balance, 30 April $13,640

Add: EFT collection of rent $ 300

Bank collection of bill receivable 1,300

Book error—$1,390 cheque

recorded as $1,930 540 2,140

15,780

Less: EFT payment of insurance $ 200

Dishonoured cheque 900

Service charge 20 (1,120)

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