1.
Prepare a single column revenue journal and cash receipt journal, and post the accounts in the accounts payable subsidiary ledger.
1.
Explanation of Solution
General Ledger: General ledger refers to the ledger that records all the transactions of the business related to the company’s assets, liabilities, owners’ equities, revenues, and expenses. Each subsidiary ledger is represented in the general ledger by summarizing the account.
Accounts payable control account and subsidiary ledger: Accounts payable account and subsidiary ledger is the ledger which is used to post the creditors transaction in one particular ledger account. It helps the business to locate the error in the creditor ledger balance. After all transactions of creditor accounts are posted, the balances in the accounts payable subsidiary ledger should be totaled, and compare with the balance in the general ledger of accounts payable. If both the balance does not agree, the error has been located and corrected.
Purchase journal: Purchase journal refers to the journal that is used to record all purchases on account. In the purchase journal, all purchase transactions are recorded only when the business purchased the goods on account. For example, the business purchased cleaning supplies on account.
Cash payments journal: Cash payments journal refers to the journal that is used to record all transaction which involves the cash payments. For example, the business paid cash to employees (salary paid to employees).
Purchase journal: Purchase journal of Company AF in the month of April is as follows:
Purchase journal
Figure (1)
Cash payment journal: Cash payment journal of Company AF in the month of April is as follows:
Cash payment journal
Date | Check No. | Account debited | Post Ref. | Other accounts Dr. | Accounts payable Dr. | Cash Dr. | |
Apr. | 16 | 1 | Rent expense | 71 | 3,500 | 3,500 | |
19 | 2 | Field supplies | 14 | 3,340 | 3,340 | ||
Office supplies | 15 | 400 | 400 | ||||
23 | 3 | Land | 19 | 140,000 | 140,000 | ||
24 | 4 | HS Company | ✓ | 5,340 | 5,340 | ||
26 | 5 | P Equipment Company | ✓ | 21,450 | 21,450 | ||
30 | 6 | BO Supply Company | ✓ | 510 | 510 | ||
30 | 7 | Salary expense | 61 | 29,400 | 29,400 | ||
30 | 176,640 | 27,300 | 203,940 | ||||
✓ | (21) | (11) |
Table (1)
Accounts payable subsidiary ledger
Name: BO Supply Company | ||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) |
Balance ($) | |
April | 17 | P1 | 510 | 550 | ||
23 | P1 | 660 | 1,170 | |||
30 | CP1 | 510 | 660 |
Table (2)
Name: HS Company | ||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) |
Balance ($) | |
April | 16 | P1 | 5,340 | 5,340 | ||
24 | CP1 | 5,340 | - | |||
30 | P1 | 7,650 | 7,650 |
Table (3)
Name: P Equipment Company | ||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) |
Balance ($) | |
April | 16 | P1 | 21,450 | 21,450 | ||
26 | CP1 | 21,450 | - | |||
30 | P1 | 6,040 | 6,040 |
Table (4)
2. and 3.
2. and 3.
Explanation of Solution
Prepare the general ledger for given accounts as follows:
Account: Cash Account no. 11 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
April | 30 | CP1 | 203,940 | 203,940 |
Table (5)
Account: Field supplies Account no. 14 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
April | 19 | CP1 | 3,340 | 3,340 | |||
30 | P1 | 14,330 | 17,670 |
Table (6)
Account: Office supplies Account no. 15 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
April | 19 | CP1 | 400 | 400 | |||
30 | P1 | 1,170 | 1,570 |
Table (7)
Account: Field equipment Account no. 17 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
April | 16 | P1 | 21,450 | 21,450 | |||
30 | P1 | 4,700 | 26,150 | ||||
30 | J1 | 12,000 | 14,150 |
Table (8)
Account: Land Account no. 19 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
April | 23 | CP1 | 140,000 | 140,000 | |||
30 | J1 | 12,000 | 152,000 |
Table (9)
Account: Accounts payable Account no. 21 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
April | 30 | P1 | 41,650 | 41,650 | |||
30 | CP1 | 27,300 | 14,350 |
Table (10)
Account: Salary expense Account no. 61 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
April | 30 | CP1 | 29,400 | 29,400 |
Table (11)
Account: Rent expense Account no. 71 | |||||||
Date | Item | Post. Ref |
Debit ($) | Credit ($) | Balance | ||
Debit ($) | Credit ($) | ||||||
April | 16 | CP1 | 3,500 | 3,500 |
Table (12)
Journal Page 01 | |||||
Date | Description | Post. Ref | Debit ($) | Credit ($) | |
April | 30 | Land | 19 | 12,000 | |
Field equipment | 17 | 12,000 | |||
(To record the acquisition of land in exchange for field equipment) |
Table (13)
4.
Prepare the accounts payable creditor balances.
4.
Explanation of Solution
Accounts payable creditor balance
Accounts payable creditor balance is as follows:
Company AF | |
Accounts payable creditor balances | |
April 30 | |
Amount ($) | |
BO Supply Company | 660 |
HS Company | 7,650 |
P Equipment Company | 6,040 |
Total accounts receivable | 14,350 |
Table (14)
Accounts payable controlling account
Ending balance of accounts payable controlling account is as follows:
Company AF | |
Accounts payable (Controlling account) | |
April 30 | |
Amount ($) | |
Opening balance | 0 |
Add: | |
Total credits (from purchase journal) | 41,650 |
41,650 | |
Less: | |
Total debits (from cash payment journal) | (27,300) |
Total accounts payable | 14,350 |
Table (15)
In this case, accounts payable subsidiary ledger is used to identify, and locate the error by way of cross check the creditor balance and accounts payable controlling account. From the above calculation, we can understand that the both balance of accounts payable is agree, hence there is no error in the recording and posing of transactions.
5.
Discuss the reason for using subsidary ledger for the field equipment.
5.
Explanation of Solution
A subsidiary ledger for the field equipment helps the company to track the cost of each piece of equipment, location, useful life, and other necessary data. This information is useful for safeguarding the equipment, and determining depreciation of equipment.
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Chapter 5 Solutions
Financial Accounting
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