CH 07
CH 07
CH 07
Completion Statements
124. 1 K 126. 3 K 128. 4 K 130. 4 K
125. 2 K 127. 3 K 129. 4 K 131. 4 K
sg
This question also appears in the Study Guide.
st
This question also appears in a self-test at the student companion website.
7-2 Test Bank for Accounting Principles, Eighth Edition
a
This question covers a topic in an appendix to the chapter.
Accounting Information Systems 7-3
The chapter also contains one set of ten Matching questions and four Short-Answer Essay
questions.
7-4 Test Bank for Accounting Principles, Eighth Edition
TRUE-FALSE STATEMENTS
1. An accounting information system should be cost effective; that is, the benefits of the
information must outweigh the cost of providing it.
3. General ledger accounting systems are software programs that integrate the various
accounting functions related to sales, purchases, cash receipts and disbursements, and
payroll.
4. Enterprise resource planning systems integrate all aspects of the organization, including
accounting, sales, human resource management, and manufacturing.
6. An accounts receivable subsidiary ledger has all the detailed information about the cash
sales to individual customers.
7. The accounts payable subsidiary ledger provides detailed information about amounts
owed to creditors.
8. 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.
10. A control account and subsidiary ledger can be established for inventory.
12. An advantage of using a subsidiary ledger is that one employee must post to both the
subsidiary ledger and the general ledger.
13. Special journals are used to record unique transactions which do not occur very often.
14. A cash receipts journal can be used to record all transactions involving cash coming into
the business, regardless of the source.
15. The cash payments journal only has one column because all entries recorded in this
journal require a credit to the Cash account.
16. A cash payments journal should not be used to record transactions which require payment
by check.
17. If a transaction cannot be recorded in a special journal, it indicates that the company
should adopt an electronic accounting system.
7-6 Test Bank for Accounting Principles, Eighth Edition
18. A debit column for Sales Returns and Allowances may be found in the cash payments
journal.
20. Using special journals can save time in posting because column totals are often posted
rather than individual entries.
21. The reference column in a sales journal is used to indicate the general ledger account
number when the entry is posted.
22. Postings are generally made more frequently to the general ledger control accounts than
to the individual accounts in the subsidiary ledgers.
23. 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.
24. Transaction amounts recorded in the general journal are never posted to accounts in the
subsidiary ledger.
25. When control and subsidiary accounts are involved, there must be a dual posting.
26. An accounting information system involves data collection, data processing, and informa-
tion dissemination.
27. The basic principles of an accounting information system are cost awareness, usefulness,
and fixed structure.
28. Each general ledger control account balance must equal the composite balance of the
individual accounts in the related subsidiary ledger at the end of an accounting period.
29. When special journals are employed, all postings must be monthly or daily but cannot be
both.
30. Totaling the columns of a journal and proving the equality of the totals is called footing and
cross-footing a journal.
31. Only transactions that cannot be entered in a special journal are recorded in the general
journal.
33. Which of the following is not a basic principle of designing and developing an effective
accounting information system?
a. Approval by the SEC
b. Usefulness
c. Flexibility
d. Cost effectiveness
34. A company will usually replace a manual accounting information system with an electronic
system as the operations increase in
a. efficiency.
b. complexity.
c. simplicity.
d. productivity.
35. In developing an accounting system, cost effectiveness does not imply that
a. the benefits obtained from the system outweigh the costs.
b. an electronic system must be cheaper than the system it is replacing.
c. the system should be cost effective.
d. the value of an accounting report should be at least equal to the cost of producing it.
39. A student should recognize a need to study manual accounting systems because
a. the structure of electronic systems differs greatly from manual systems.
b. all small companies only use manual accounting systems.
c. the software and hardware of electronic systems vary greatly, which makes manual
procedures more practical to study.
d. companies that use manual systems hire more accountants.
40. Which of the following is a true statement about manual and electronic accounting
systems?
a. Few small companies begin with manual systems.
b. The design and structure of manual and electronic systems are essentially the same.
c. Many companies convert from electronic to manual systems.
d. The design and structure of manual and electronic systems are fundamentally different.
41. Postings to the control accounts in the general ledger are made
a. annually.
b. daily.
c. monthly.
d. weekly.
48. The individual amounts in the sales journal are posted to the accounts receivable
subsidiary ledger
a. daily.
b. weekly.
c. monthly.
d. yearly.
51. 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.
53. The one characteristic that all entries recorded in a multi-column purchases journal have
in common is a
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.
7 - 10 Test Bank for Accounting Principles, Eighth Edition
54. A company which uses special journals should record a transaction involving the
purchase of merchandise for cash in a
a. one column purchases journal.
b. multi-column purchases journal.
c. cash payments journal.
d. general journal.
55. 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.
c. cash payments journal.
d. sales journal.
59. All of the column totals in the cash receipts journal are posted to general ledger accounts
except the
a. Accounts Receivable column total.
b. Cash column total.
c. Sales column total.
d. Other Accounts column total.
61. 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.
b. cash receipts journal.
c. cash payments journal.
d. general journal.
Accounting Information Systems 7 - 11
65. If an owner withdraws cash for personal use, the transaction should be recorded in the
a. sales journal.
b. cash receipts journal.
c. general journal.
d. cash payments journal.
66. If a company purchases merchandise for cash, the transaction should be recorded in the
a. purchases journal.
b. general journal.
c. cash payments journal.
d. sales journal.
68. Postings from the purchases journal to the general ledger are made
a. daily.
b. monthly.
c. weekly.
d. yearly.
69. The individual amounts in the Accounts Payable column in the cash payments journal are
posted to the subsidiary ledger
a. daily.
b. monthly.
c. weekly.
d. yearly.
7 - 12 Test Bank for Accounting Principles, Eighth Edition
70. Debit postings to the individual accounts in an accounts receivable subsidiary ledger
generally come from the
a. sales journal.
b. cash receipts journal.
c. purchases journal.
d. cash payments journal.
72. 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 Discount column
c. Accounts Receivable column
d. Other Accounts column
74. 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 Inventory.
d. debit to Accounts Receivable and a credit to Sales.
75. The entries recorded in the Other Accounts column of a cash payments journal
a. are posted to the accounts payable subsidiary ledger daily.
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.
76. The entry to record the granting of credit to a customer for a sales return is posted to
a. the accounts receivable subsidiary ledger only.
b. the general ledger only.
c. both the accounts receivable subsidiary ledger and the general ledger.
d. both the accounts payable subsidiary ledger and the general ledger.
77. 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.
Accounting Information Systems 7 - 13
78. 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.
79. Thompson'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.
80. 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; Purchases
81. 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.
82. Evidence that the monthly posting of the sales journal total has been accomplished is
indicated by
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.
83. 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
84. 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.
85. An entry in the "Other Accounts" column in a cash receipts journal could occur when the
credit is to
a. owner's drawing.
b. Accounts Payable.
c. owner's capital.
d. Merchandise Inventory.
7 - 14 Test Bank for Accounting Principles, Eighth Edition
87. 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.
89. Which of the following would not be an appropriate heading for a column in the cash
receipts journal?
a. Cash
b. Accounts Payable
c. Sales Discounts
d. Sales
91. Proving the postings of a one-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 debit posting to Accounts Payable to the general ledger credit 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.
92. If a company uses a multi-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
Accounting Information Systems 7 - 15
93. The reference column of a multi-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.
94. 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.
95. Principles of an efficient and effective accounting information system include all of the
following except
a. cost effectiveness.
b. flexibility.
c. useful output.
d. All of these options are principles.
97. All of the following are advantages of using subsidiary ledgers except they
a. eliminate errors in individual accounts.
b. free the general ledger of excessive details.
c. show, in a single account, transactions affecting one customer or one creditor.
d. make possible a division of labor.
99. Credit sales of assets other than merchandise are recorded in the
a. cash payments journal.
b. cash receipts journal.
c. general journal.
d. sales journal.
7 - 16 Test Bank for Accounting Principles, Eighth Edition
100. When the totals of the sales journal are posted at the end of the month, there will be
credits to
a. Sales and Merchandise Inventory and debits to Accounts Receivable and Cost of
Goods Sold.
b. Accounts Receivable and Cost of Goods Sold and debits to Sales and Merchandise
Inventory.
c. Sales and debits to each individual customer account.
d. the Sales account only, and no debits.
101. The Other Accounts column of a multi-column journal is often referred to as the
a. Sundry Accounts column.
b. Controlling Account column.
c. Credit Account column.
d. Debit Account column.
103. In the expanded purchases journal, debits are made in which columns?
a. Accounts Payable, Merchandise Inventory, and Office Supplies
b. Merchandise Inventory, Office Supplies, and Store Supplies
c. Cash, Office Supplies, and Store Supplies
d. Accounts Payable, Cash, and Merchandise Inventory
BRIEF EXERCISES
BE 105
Match each of the principles and phases in the development of an accounting system with the
statement that best describes them.
a. Cost effectiveness
b. Flexibility
c. Useful output
_____ 3. The system should accommodate a variety of users and changing information needs.
_____ 4. The accounting system must consider the needs and knowledge of various users.
_____ 5. The system should be capable of meeting the changes in the demands made upon it.
BE 106
Indicate whether each of the following accounts would be shown in the general ledger or
subsidiary ledger.
1. Cash ____________________
3. Equipment ____________________
6. Sales ____________________
BE 107
Dexter 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
______ 10. Made an adjusting entry for store supplies used during the period.
BE 108
Indicate in which journal each of the following transactions is recorded.
BE 109
Indicate the special journal(s) in which the following column headings appear.
1. Cash Cr. _______________________
2. Cost of Goods Sold Dr. _______________________
3. Accounts Receivable Dr. _______________________
4. Accounts Payable Cr. _______________________
5. Merchandise Inventory Cr. _______________________
6. Sales Discounts Dr. _______________________
BE 110
Indicate which of the following cash payments journal columns are posted only in total, only daily,
or both in total and daily.
1. Other Accounts _______________________
2. Accounts Payable _______________________
3. Merchandise Inventory _______________________
4. Cash _______________________
EXERCISES
Ex. 111
After Shaw 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 Austin's
Address 286 Buck Avenue
———————————————————————————————————————————
Date Item Post. Ref. Debit Credit Balance
———————————————————————————————————————————
Dec. 2 P25 2,400 2,400
The balance in the Accounts Payable control account of $37,180 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.
Fryar Company
The $10,600 represents new purchases on account and should be added to the previous balance
of zero. The correct balance is $10,600.
Reed 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 $6,000 is a
payment on account, not an increase. The correct balance is $7,380.
Ex. 112
On December 1, the accounts receivable control account balance in the general ledger of the
Titus Company was $9,000. The accounts receivable subsidiary ledger contained the following
detailed customer balances: Abel $1,500, Dole $2,100, Fabb $2,600, and Hall $2,800. The
following information is available from the company's special journals for the month of December:
Cash Receipts Journal: Cash received from Fabb $1,900, from Abel $1,600, from Reese $1,700,
and from Dole $1,800.
Sales Journal: Sales to Reese $4,300, to Fabb $1,700, to Abel $2,300, and to Hall $2,400.
Additionally, Fabb returned defective merchandise for credit for $900. Abel 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.
Subsidiary Accounts:
Abel Dole
1,500 (CR) 1,600 2,100 (CR) 1,800
(S) 2,300 Bal. 300
Bal. 2,200
Fabb Hall
2,600 (CR) 1,900 2,800
(S) 1,700 (G) 900 (S) 2,400
Bal. 1,500 Bal. 5,200
Reese
(S) 4,300 (CR) 1,700
Bal. 2,600
Ex. 113
Lowry 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 $15,000 to B. Rice 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. Wenger for $900 cash.
July 10 Received a check in payment of Sales invoice No. 100 from B. Rice minus the 2%
discount.
July 15 Sold merchandise for $9,000 to J. Mays 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 $12,000 to C. Kane on account. Credit terms 2/10, n/30. Sales
invoice No. 102.
July 25 Issued a credit (reduction) of $600 to C. Kane as an allowance for damaged
merchandise previously sold on account.
July 31 Received a check from J. Mays for $5,000 as payment on account.
LOWRY COMPANY
Sales Journal
S1
———————————————————————————————————————————
Invoice Acct. Rec. Dr. C. of G. S. Dr.
Date Account Debited No. Ref. Sales Cr. Mer. Inv. Cr.
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
LOWRY COMPANY
General Journal
G1
———————————————————————————————————————————
Date Explanations Ref. Debit Credit
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
7 - 24 Test Bank for Accounting Principles, Eighth Edition
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
LOWRY COMPANY
General Journal
G1
———————————————————————————————————————————
Date Explanation Ref. Debit Credit
———————————————————————————————————————————
July 25 Sales Returns and Allowances 600
———————————————————————————————————————————
Accounts Receivable—C. Kane 600
———————————————————————————————————————————
Accounting Information Systems 7 - 25
Ex. 114
Goren 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 $20,000 from Hendry 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 Flint Supply Company. Terms:
2/10, n/30.
Oct. 11 Purchased merchandise on account for $14,000 from Adler Corporation. Terms:
2/10, n/30; FOB shipping point.
Oct. 13 Granted a reduction of $3,000 to Adler Corporation for merchandise purchased on
October 11 and returned because of damage.
Oct. 15 Paid Hendry Company for merchandise purchased on October 5, less discount.
Oct. 16 Purchased merchandise for $8,000 cash from Clifford Company.
Oct. 21 Paid Adler Corporation for merchandise purchased on October 11, less merchandise
returned on October 13, less discount.
Oct. 25 Purchased merchandise on account for $22,000 from Eaton Company. Terms: 2/10,
n/30; FOB shipping point.
Oct. 31 Purchased office equipment for $30,000 cash from Pate Office Supply Company.
7 - 26 Test Bank for Accounting Principles, Eighth Edition
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
GOREN COMPANY
General Journal
G1
———————————————————————————————————————————
Date Explanation Ref. Debit Credit
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
GOREN COMPANY
Cash Payments Journal
CP1
———————————————————————————————————————————
Other Accounts Merchandise
Accounts Accounts Payable Inventory Cash
Date Debited Ref. Dr. Dr. Cr. Cr.
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
———————————————————————————————————————————
Accounting Information Systems 7 - 27
GOREN COMPANY
General Journal
G1
———————————————————————————————————————————
Date Explanation Ref. Debit Credit
———————————————————————————————————————————
Oct. 8 Store Supplies 700
———————————————————————————————————————————
Accounts Payable—Flint
———————————————————————————————————————————
Supply Company 700
———————————————————————————————————————————
Oct. 13 Accounts Payable—Adler Corp. 3,000
———————————————————————————————————————————
Merchandise Inventory 3,000
———————————————————————————————————————————
GOREN COMPANY
Cash Payments Journal
CP1
———————————————————————————————————————————
Other Accounts Merchandise
Accounts Accounts Payable Inventory Cash
Date Debited Ref. Dr. Dr. Cr. Cr.
———————————————————————————————————————————
Oct. 6 Prepaid Insurance 7,200 7,200
Ex. 115
Handy 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 Dan Lang was correctly recorded in the cash receipts journal,
but the amount was posted incorrectly to the account of customer Bill Lang in the
subsidiary ledger.
3. A purchase of merchandise on account from Gagne 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.
Ex. 116
Below are some typical transactions incurred by Farley 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 owner's capital.
______ 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.
Accounting Information Systems 7 - 29
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
Ex. 117
Circle the correct answer to each situation.
Ex. 118
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)
Ex. 119
Kiner Company uses four special journals, (cash receipts, cash payments, sales, and purchases
journal) in addition to a general journal. On November 1, 2008, 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:
Purchases Journal:
Accounts Merchandise Office Store Other Accounts
Payable Inventory Supplies Supplies Dr.
Cr. Dr. Dr. Dr. Acct. Ref. Amount
? $35,000 $800 $650 (X) $3,300
Additional Data:
The Sales Journal totaled $41,000. A customer returned merchandise for credit for $360 and
Kiner 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.
7 - 32 Test Bank for Accounting Principles, Eighth Edition
Accounts Payable
(CP) 14,300 42,000
(G) 400 (P) 39,750
Bal. 67,050
Ex. 120
Gaston Company began business on October 1. The partial 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 Pratt 1001 575
11 Mike Ace 1002 335
16 Donna Pratt 1003 818
19 Laura Carr 1004 147
26 Mary Trear 1005 1,184
3,059
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.
Accounting Information Systems 7 - 33
Pratt, Donna
10/5 (S1) 575
10/16 (S1) 818
1,393
Trear, Mary
10/26 (S1) 1,184
Ex. 121
CASH PAYMENTS JOURNAL Page 45
———————————————————————————————————————————
Other Accounts Merchandise
Ck. Account Post. Accounts Payable Inventory Cash
Date No. Debited Ref. Dr. Dr. Cr. Cr.
———————————————————————————————————————————
20—
Jan. 4 659 N. Miles (a) 4,000 40 3,960
11 660 Prepaid Rent (b) 1,000 1,000
13 661 Merch. Inventory (c) 565 565
14 662 Smith, Drawing (d) 2,000 2,000
18 663 Welch (e) 1,300 1,300
20 664 Merch. Inventory (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.
Ex. 122
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.
Accounting Information Systems 7 - 35
———————————————————————————————————————————
Sales Accounts Other C. of G. S. Dr.
Accounts Post Cash Discounts Receivable Sales Accounts Mer. Inv. Cr.
Date Credited Ref. Dr. Dr. Cr. Cr. Cr.
———————————————————————————————————————————
May 27 Don Ritz 980 20 1,000
28 Notes Receivable 113 3,000
Interest Revenue 416 3,360 360
29 Cash Sale 370 370 260
31 Bob Eaton 400 400
5,110 20 1,400 370 3,360 260
(101) (414) (112) (401) (x) (505)(120)
2. May 27— Don Ritz 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— Bob Eaton 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.
(b) The check in the posting reference column of the journal indicated 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 $3,000. The 416 indicates that account No. 416 in the general
ledger, Interest Revenue, has been credited for $360.
(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.
7 - 36 Test Bank for Accounting Principles, Eighth Edition
Ex. 123
On September 30, after all monthly postings had been completed, the Accounts Receivable
control account in the general ledger had a debit balance of $240,000; the Accounts Payable
control account had a credit balance of $65,000.
The October transactions recorded in the special journals are presented below.
Special Journals October Transactions
Sales journal Total sales $140,000
Purchases journal Total purchases 45,000
Cash receipts journal Accounts receivable column total 105,000
Cash payments journal Accounts payable column total 30,000
Instructions
Compute the balances of the (1) Accounts Receivable and (2) Accounts Payable control accounts
after the monthly postings on October 31.
COMPLETION STATEMENTS
124. The basic principles in the development of an accounting information system are
(1)________________, (2)________________, and (3)_______________.
125. The accounts receivable ______________ provides detailed information about customer
accounts which is summarized in one ______________ account in the general ledger.
126. If a certain type of transaction occurs with great frequency, it is more efficient to create a
______________ to record that type of transaction.
128. The use of special journals often saves time in the _______________ process.
129. 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.
130. 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.
131. Only transactions that cannot be entered in a _______________ journal are recorded in
the _______________ journal.
MATCHING
132. Match the items below by entering the appropriate code letter in the space provided.
______ 5. Group of accounts with a common characteristic which provides detailed information.
______ 6. Collects and processes transaction data and communicates financial information.
______ 7. Integrate all aspects of the organization, including accounting, sales, and manu-
facturing.
Answers to Matching
1. G 6. I
2. A 7. B
3. J 8. E
4. C 9. D
5. F 10. H
Accounting Information Systems 7 - 39
Solution 133
In order for Mr. Snead to have a more efficient accounting system, three principles must be
followed. These principles are cost effectiveness, usefulness, and flexibility. Cost effectiveness
simply means that the benefits received must outweigh the costs. Usefulness refers to the fact
that the system must provide the users with timely, accurate, and understandable information.
And flexibility means that the system must be able to adapt to changing needs. Applying these
principles to Mr. Snead's situation would lead to the recommendation for the use of special
journals.
S-A E 134
At the end of the month, the accountant for Goltra Company prepared a schedule of accounts
receivable from the accounts receivable subsidiary ledger. Its total did not agree with the balance
in the Accounts Receivable control account in the general ledger. Briefly describe the procedure
that should be followed in reconciling the two balances.
Solution 134
The first step would be to go back and double check the total of the accounts receivable
subsidiary ledger. There may have been a math error which caused the total to be incorrect. If the
math is accurate, then the next step would be to review the postings in the accounts receivable
control account. This review includes checking both the accuracy of the math and the accuracy of
the posting from the journals. If the control account is correct, then the next step is to repeat the
procedure with each individual subsidiary account. If the error still has not been found, then the
final step is to look at the journals to see if there were any entries that failed to get recorded.
Solution 135
There has certainly been a violation of integrity. Maria has no right to let her personal animosity
toward a fellow employee cause her to misrecord journal entries. The fact that others knew of her
actions does not make what she did right—in fact it causes them to be accomplices. Even though
the amounts are not significant, and net income is not affected, Maria's action is wrong. There is
also reason for concern that Maria's frustration will show itself in more serious forms of sabotage.
Required:
Write a memo to Carl Klugman, your boss, explaining your mistake.
Accounting Information Systems 7 - 41
Solution 136
MEMO
TO: Carl Klugman, Controller
FROM: Marty Kline, Accounting Supervisor
DATE: October 15, 200x
I'm ba–ack! Unfortunately, I already have a problem. It seems that my mind went
on vacation before the rest of me did. You remember that I sent you a note telling
you that I had recorded all those journal entries—well, I got almost all of them
right.
I recorded Norton's payment in Nolten's account. I found it out when I saw Norton’s
account in the file of accounts sent for collection. I thought I remembered a
payment—and I had. When I checked further, I found out that I had recorded the
payment in Nolten's account. Unfortunately, Customer Service was on the ball and
sent Nolten a refund—of a payment they never made!
I am trying to sort all this out—I've already removed Norton from the collection list
and I'm sending them an apology letter. What do you wish to do about the refund
that Nolten got?
I'm really sorry about all this. Next year, I'll try not to be so “helpful.”
(signature)