(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
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
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
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
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
-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
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
(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)
(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
(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
(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.
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
(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)
(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
(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
(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)
