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Unit 9

Accounting

Books of Account

Cash Book

The Book of Original Entry


General Journal

Unit 9
Roadmap

Return Outward Book

Return Inward Book

Subdivision of Journal

Sales Day Book

Purchase Day Book

I have enough money to last me the rest of my life, unless I buy something Jackie Mason
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BOOKS OF ACCOUNT

There are two main books of account, Journal and Ledger

Journal used to record the economic transaction chronologically

Ledger used to classifying economic activities according to nature

Books of Account

Ledger

Journal

Accounts

Purchase Day
Book

Sales Day
Book

Return Inward
Book

Return Outward
Book

General
Ledger

Cash
Book

General
Journal

Cash
Book

Personal
Ledger

Private
Ledger

9.1 Subdivision of Journal


In large business it is found inconvenient to journalize every transaction in one journal
Therefore, the journal is sub-divided into different journals known as the subsidiary books
The journal is divided in such a way that a separate book is used for each class of transactions
The important subsidiary books used in modern business world are the following
9.1.1 Purchases Day Book

Purchases book or purchases day book is a book of original entry maintained to record credit purchases

You must note that cash purchases will not be entered in purchases day book because entries in respect of cash
purchases must have been entered in the cash book

At the end of each month, the purchases book is totaled. The total shows the total amount of goods purchased on credit

Purchases book is written up daily from the invoices received

The invoices are consecutively numbered

The invoice of each number is noted in the purchases book

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Purchase Journal (Format)


Date

Account Credited

Invoice #

Ref

Amount

Total
Example # 9.1: From the following transactions of a trader prepare the Purchases day book

(3 Minutes)

2011
January 5

Purchased goods from Qurat Ul Ain & Co

Rs. 2,400

"

15

Purchased goods from Saba Sajjad

6,000

"

25

Purchased goods from Omer Nawaz & Co

1,500

"

30

Purchased goods from Maqbool & Co

3,000

Purchase Journal
Date

Account Credited

Invoice #

Ref

Amount

2011
Januar
y

Account Payable_ Qurat Ul Ain & Co

2,400

15

Account Payable_ Saba Sajjad

6,000

25

Account Payable_ Omer Nawaz & Co

1,500

30

Account Payable_ Maqbool & Co

3,000

Total

Rs. 12,900

9.1.2 Sales Day Book

A sales book is also known as sales day book in which are recorded the details of credit sales made by a businessman

Total of sales book shows the total credit sales of goods during the period concerned

Usually the sales book is totaled every month. The sales day book is written up daily from the copies of invoices sent out
Sales Journal (Format)
Date

Account Debited

Invoice #

Ref

Amount

Total

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Example # 9.2: From the following transactions of a trader prepare the sales day book of M. Amin

(3 Minutes)

2011
March

Sold goods to Ideal College

Rs. 200

"

10

Sold goods to Ahmad & Co

100

"

20

Credit sales to Ayesha Bibi

400

"

31

Sold goods to Gulbaz Khan

100

Sales Journal
Date
2011
March
5
10
20
31

Account Debited

Invoice #

Ref

Account Receivable _ Ideal College


Account Receivable _ Ahmad & Co
Account Receivable _ Ayesha Bibi
Account Receivable _ Gulbaz Khan
Total

Amount
200
100
400
100
Rs. 800

9.1.3 Return Inward Book

Sales returns book is also called returns inwards book. It is used for recording goods returned by credit customers

Customers who return goods should be sent a credit note. It is a statement sent by a business to customer showing the
amount credited to the account

Return Inward Journal (Format)


Date

Account Credited

Credit Note #

Ref

Amount

Total
Example # 9.3: From the following transactions of a trader prepare the sales returns book

(2 Minutes)

2011
June 8

Goods returned by Sana Khalid & Co

"

Goods returned by Ideal Traders

20

Rs. 40
52

Return Inward Journal


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Accounting

Date
2011
June
8
20

Account Credited

Credit Note #

Ref

Account Receivable _ Sana Khalid & Co


Account Receivable _ Ideal Traders
Total

Amount
40
52
Rs. 92

9.1.4 Return Outward Book


Purchases returns book is a book in which the goods returned to credit suppliers are recorded. It is also called returns
outward book or purchases returns day book
Goods may be returned because they are of the wrong kind or not up to sample or because they are damaged etc.
When the goods are returned to the suppliers, intimation is sent to them through what is known as a debit note
These debit notes serve as vouchers for these entries. A debit note is a statement sent by a businessman to vendor,
showing the amount debited to the account

Return Outward Journal (Format)


Date

Account Debited

Debit Note #

Ref

Amount

Total
Example # 9.4: From the following transactions of a trader prepare the purchases returns day book

(3 Minutes)

2011
July 14

Karim & Sons

"

27

Maria Waheed & Co

"

31

Saeed Bros

Rs. 135
150
25

Return Outward Journal


Date
Work Book Foundation Level

Account Debited

Debit Note #
207

Ref

Amount
Books of Account

Unit 9

Accounting

2011
July

14

Account Payable _ Karim & Sons

135

27

Account Payable_ Maria Waheed & Co

150

31

Account Payable_ Saeed Bros

25

Total

Columnar Journal: This Journal is used when a business deals with more than
one line of goods. The journal is prepared with a column for each line of goods in
which the business deals. The journal could be any of the ones mentioned above.
Illustration Two
Baba Yargo & Sons, a wholesaler, divides his business into 3 departments:
Clothing, Hardware and Sundries.
Rule up a suitable columnar Purchases Book to record the following transactions
for the month of September 2008.
Sept. 1. Bought from K. Nwosu & Sons:
240 Shirts @ N600 for twelve
60 Singlets @ N350 for twelve
48 Buckets @ N200 each.
Sept. 7. Bought from Namu and Co. Ltd:
22 Buckets @ N200 each
1 carton ,Nescafe Coffee @ N1,800 a carton
Sept. 16. Bought from Oodua Trading Company:
40 tablets of Premier Soap @ N85 a tablets
Less 5% trade discounts.
Sept. 24. Bought from Igwe Brothers:
400 yards of Shaddah @ N250 a yard
3 cartons, Nescafe Coffee @ N1,480 a carton.

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Accounting

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Accounting

9.1.5 Proper/ General Journal

Journal proper is book of original entry (simple journal) in which miscellaneous credit transactions which do not fit in
any other books. It is also called miscellaneous journal or General Journal

For example purchase assets on credit, Correcting Entries, Adjusting Entries and Closing Entries etc.

The Journal is meant for recording such transactions, which do not occur
frequently in the business and, therefore, do not warrant setting-up of special
journals. The journal has columns for Date, Particulars and Amounts columns,
divided into Debit (DR.) and Credit (CR.).
In General Journal, each entry is appended with an explanation of the
transaction
or narration. The explanation or narration enables one to ascertain the origin
of,
and reason(s) for, the treatment given. The narration should, therefore,
contain
full information as to the nature of the transactions and their dates of
occurrence.
Self-Assessment Exercises
1. Explain Date, Particulars and Amount Columns in Journal.
2. What is narration in journal?
3.6 Uses of General Journal
Instances where a general journal could be used include:
1) Opening Entries: When a new set of books is started, the old accounts
have to be
brought forward in the beginning of the year from last years books. The
general
journal is meant for recording these transactions.
2) Closing Entries: At the end of the accounting year, the nominal
accounts are
closed by transferring them to trading account or profit and loss account.
The
entries passed for this purpose are termed as Closing Entries.
3) Adjustment Entries: At the end of the accounting year, adjustment
entries are to
be passed for outstanding/ prepaid expenses, accrued/ outstanding income,
etc.
Entries for all these adjustments are passed in the General Journal.
4) Rectification Entries: Rectification entries are passed for rectifying the
errors,
which might have been committed in the books of accounts.
5) Transfer Entries: Transfer entries are required for transferring one
account to the

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other. Entries for such transfers are passed in the General Journal.
6) Purchase of Fixed Assets: The entries for the purchase of fixed assets
such as
Plant, Machinery, and Furniture etc. on credit are also passed in this Journal.
9.1.6 Single column cash book (cash column)

Single column cash book records only cash receipts and payments

It has only one money column on each of the debit and credit sides of the cash book

All the cash receipts are entered on the debit side and the cash payments on the credit side
Name of Company
Cash Book
For the month ended
Receipts
Date

Description

Payments
Ref

Amount

Date

Description

Ref

Example # 9.5: Write the following transactions in the simple cash book of AAA Company?

Amount

(7 Minutes)

2011
July
"
"
"
"
"
"
"

1
6
16
18
20
25
30
31

Cash in hand
Purchased goods for cash
Received from Akbar
Paid to Babar
Cash sales
Paid for stationary
Paid for salaries
Purchased office furniture

15,000
2,000
3,000
1,000
4,000
100
500
5,000

AAA Company
Cash Book
For the month ended July, 2011
Receipts
Date
2011
July
1
16
20

Description
Balance b/d
A/R_ Akbar
Sales

Work Book Foundation Level

Payments
Ref

Amount
15,000
3,000
4,000

211

Date
2011
July
6
18
25
30
31

Description
Purchases
A/P_ Babar
Stationery
Salaries
Furniture

Ref

Amount
2,000
1,000
100
500
5,000

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Unit 9

Accounting

Balance c/d

13,400

Rs. 22,000
Aug

Balance b/d

Rs. 22,000

13,400

Example # 9.6: Record the following transactions in the appropriate journal?

(20 Minutes)

2011
March

Purchased goods from Ali & Co for Rs. 4,500

Sold merchandise to Naeem & Sons worth of Rs. 6,000

12

Purchase merchandise from B & Brothers Rs. 3,000

14

Credit sales of goods to Z & Co for Rs. 2,500

15

Naeem & Sons returned goods Rs. 1,000

18

Return merchandise to Ali & Co Rs. 500

22

Purchase Furniture from Mr. Saeed of Rs. 3,200

24

Returned goods to B & Brothers of Rs. 200

27

Purchase Machinery on account from MMM Machines Rs. 7,000

29

Z & Co returned merchandise of Rs. 300


Purchase Journal

Date

Account Credited

Invoice #

Ref

Amount

2011
March

Account Payable_ Ali & Co

4,500

12

Account Payable_ B & Brothers

3,000

Total

Rs. 7,500

Sales Journal
Date

Account Debited

Invoice #

Ref

Amount

2011
March

Account Receivable_ Naeem & Sons

6,000

14

Account Receivable_ Z & Co

2,500

Total

Rs. 8,500

Return Inward Journal


Date

Account Credited

Credit Note #

Ref

Amount

2011
March

15

Account Receivable_ Naeem & Sons

29

Account Receivable_ Z & Co

Work Book Foundation Level

1,000
300

212

Books of Account

Unit 9

Accounting

Total

Rs. 1,300

Return Outward Journal


Date

Account Debited

Debit Note #

Ref

Amount

2011
March

18

Account Payable_ Ali & Co

500

24

Account Payable_ B & Brothers

200

Total

Rs. 700

General Journal
Amount (Rs)
Date

Account Titles and Explanation

Ref

Debit

Credit

2011
March

22

Furniture

3,200

Account Payable_ Mr. Saeed

3,200

(Being furniture purchased on credit)


27

Machinery

7,000

Account Payable_ MMM Machines

7,000

(Being furniture purchased on credit)


Total

Work Book Foundation Level

Rs. 10,200

213

Rs. 10,200

Books of Account

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Accounting

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Accounting

END-OF-UNIT ASSIGNMENT
TRUE-FALSE STATEMENTS
1.

A subsidiary ledger is a listing of all journal entries related to a given general ledger account?
(a) True

2.

(45Seconds Each)

(b) False

In the sales subsystem, the sales invoice is the source document used to record the journal entry for the sale in the sales
journal?
(a) True

3.

(b) False

In the sales subsystem, a sales order is an internal document that a customers credit has been approved and that other
appropriate approvals have been given?
(a) True

4.

In the sales subsystem, once goods are shipped a shipping document, also known as a bill of lading is prepared?
(a) True

5.

(b) False

In the sales subsystem, the source document used to record the sales in the sales journal is the bill of lading?
(a) True

6.

(b) False

(b) False

In the sales returns and allowances subsystem, when a customers request for a sales return or allowance is approved, a
debit memo is issued?
(a) True

7.

In the purchases subsystem, the source document used to enter the purchase journal is the vendor invoice?
(a) True

8.

(b) False

In the purchases subsystem, a company orders goods or services by sending a purchase requisition to the supplier?
(a) True

9.

(b) False

(b) False

A customer is offered a sales discount of 3/5, net 20. In this case, the customer is expected to pay within 20 days.
However, a three percent discount will be given if the customer pays within 5 days?
(a) True

(b) False

10. In the purchase subsystem, if an internal department or function within a company wishes to purchase goods or services,
a purchase requisition is prepared?
(a) True

(b) False

11. In the cash disbursements subsystem, the journal entry to record payment is prepared from the check or electronic funds
transfer sent to the vendor?
(a) True

(b) False

A subsidiary ledger is a group of control accounts which provides information to the


managers for controlling the operation of the company.
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Answer: F, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

2.

An accounts receivable subsidiary ledger has all the detailed information about the
cash sales to individual customers.

Answer: F, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

3.

The accounts payable subsidiary ledger provides detailed information about


amounts owed to creditors.

Answer: T, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

4.

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.

Answer: F, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

5.

Control accounts are always located in the general ledger.

Answer: T, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

6.

A control account and subsidiary ledger can be established for inventory.

Answer: T, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Decision
Modeling, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

7.

A subsidiary ledger provides up-to-date information on specific account balances.

Answer: T, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Reporting,
AICPA-PC: Problem Solving/Decision Making, IMA: Reporting, Sector: General, IFRS: No

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8.

An advantage of using a subsidiary ledger is that one employee must post to both
the subsidiary ledger and the general ledger.

Answer: F, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Risk Analysis,
AICPA-PC: Project Management, IMA: Internal Controls, Sector: General, IFRS: No

9.

Special journals are used to record unique transactions which do not occur very
often.

Answer: F, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Decision
Modeling, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

10.

A cash receipts journal can be used to record all transactions involving cash coming
into the business, regardless of the source.

Answer: T, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

11.

The cash payments journal only has one column because all entries recorded in this
journal require a credit to the Cash account.

Answer: F, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

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12.

A cash payments journal should not be used to record transactions which require
payment by check.

Answer: F, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

13.

If a transaction cannot be recorded in a special journal, it indicates that the


company should adopt an electronic accounting system.

Answer: F, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Decision Modeling,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

14.

A debit column for Sales Returns and Allowances may be found in the cash
payments journal.

Answer: T, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

15.

A single-column purchases journal is used to record purchases of merchandise on


account.

Answer: T, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

16.

Using special journals can save time in posting because column totals are often
posted rather than individual entries.

Answer: T, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

17.

The reference column in a sales journal is used to indicate the general ledger
account number when the entry is posted.

Answer: F, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

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18.

Postings are generally made more frequently to the general ledger control accounts
than to the individual accounts in the subsidiary ledgers.

Answer: F, SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

19.

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.

Answer: F, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

20.

Transaction amounts recorded in the general journal are never posted to accounts in
the subsidiary ledger.

Answer: F, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

EXERCISES
Exercise # 9.1: State in which journal the following items will be recorded:
Transactions

Amount

(5 Minutes)

Respective Journal

(a) Cash purchase of goods

Rs. 25,000

Cash Payment Journal

(b) Cash purchase of furniture

Rs. 30,000

Cash Payment Journal

(c) Credit sale of goods

Rs. 56,000

Sales Day Book

(d) Credit sale of furniture

Rs. 27,000

General Journal

(e) Interest accrued on investment

Rs. 5,000

General Journal

(f) Bill accepted by a customer

Rs. 7,500

General Journal

(g) Goods returned by a customer

Rs. 3,500

Sales Return Book

(h) Cheque dishonored by bank

Rs. 2,000

Cash Book

Exercise # 9.2: From the transactions given below prepare the Sales Book of Rahim for July 2011

(8 Minutes)

2011
July 5: Sold on credit to S.S. Traders
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10 Chairs @ Rs. 250 Less 10%


10 Tables @ Rs. 850 Discount 10%
July 8: Sold to Raja for cash
15 Chairs @ Rs. 250
July 20: Sold to Mohsin & Co.
5 Almirah @ Rs. 2,200
10 Tables @ Rs. 850
July 23: Sold on credit to Ahmed & Co. old computer for Rs. 5,000
July 28: Sold to Kamaran for cash
15 Chairs @ Rs. 250
Sales Journal
Date
2011

Account Debited

July

5
20

Invoice #

Ref

Account Receivable _ S. S. Traders*


Account Receivable _ Mohsin & Co**
Total

Amount
9,900
19,500
Rs. 29,400

* (10 x 250) + (10 x 850) (10% discount) = 9,900


** (5x 2200) + (10 x 850) = 19.500

Exercise # 9.3: Enter the following transactions in the purchases return book of Mr. Hamid

(5 Minutes)

2012
Jan 5:

Returned goods to Ahmed 5 chairs @ Rs.200 each, not in accordance with order

Jan 14: Returned goods to Ali 4 chairs @ Rs. 200 each and 10 tables @ Rs. 350 each, due to inferior quality
Jan 24: Return goods to Naeem and sons of Rs. 900
Return Outward Journal
Date

Account Debited

Debit Note #

Ref

Amount

2012
January

18

Account Payable_ Ahmed

1,000

14

Account Payable_ Ali

4,300

24

Account Payable_ Naeem and sons

Total

900

Rs. 6,200

Exercise # 9.4: Enter the following transactions in Returns Inward Book

(5 Minutes)

2012
Work Book Foundation Level

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Books of Account

Unit 9

Accounting

April 6: Returned by Sakandar 30 shirts each costing Rs. 550, due to inferior quality
April 8: Amar Tailors returned 10 ladies suits, each costing Rs. 1,900, on account of being not in accordance with
their order
April 21: T.N. Stores returned 12 male suits sets each costing Rs. 2,500, being not in accordance with order
Return Inward Journal
Date

Account Credited

Credit Note #

Ref

Amount

2012
April

Account Receivable_ Sakandar

16,500

Account Receivable_ Amar Tailors

19,000

21

Account Receivable_ T.N. Stores

30,000

Total

Rs. 65,500

Exercise # 9.5: Write up a Sharjeel Siraj Khans single column cash book for the month of April 2011, from the following?
(15 Minutes)

Rs.
1 Cash in hand ...1,650

Rs.
17 Paid cash for repairing 360

2 Cash sales ...16,000

19 Sales by cash ... 11,400

3 Paid check to creditors... 4,000

21 Paid office expense . 180

4 Wages paid in cash . 2,250

25 Paid rent and rates ... 3,600

4 Cash sales ...18,000

26 Credit sales .. 19,200

9 Paid cash to TCP against Note Payable.. 420

27 Paid electricity bill .......900

11 Paid salaries by cash .... 2,850

28 Cash collected from debtor. 4,500

12 Credit Sales 1,000

29 Goods Purchase ... 2,000

14 Note Receivable Realized ..3,000

30 Retire bank loan 3,000

Requirement: Rull-off and balance the cash book at April 30, 2011.
Sharjeel Siraj Khan
Cash Book (Single Column)
For the month ended April, 2011
Receipts
Date
Work Book Foundation Level

Description

Payments
Ref

Amount
221

Date

Description

Ref

Amount

Books of Account

Unit 9

Accounting

2011
April

May

2011
1

Balance b/d

1,650

Sales

Wages

16,000

Note Payable_ TCP

Sales

18,000

11

Salaries

14

Note Receivable

3,000

17

Repairing

360

19

Sales

11,400

21

Office Expenses

180

28

Debtor

4,500

25

Rent and Rates

3,600

27

Electricity Bill

900

29

Purchases

2,000

30

Bank Loan

3,000

Balance c/d

38,990

Total
Balance b/d

Work Book Foundation Level

54,550
38,990

222

April

Total

2,250
420
2,850

54,550

Books of Account

Unit 9

Accounting

Exercise # 9.6: Enter the following transactions in the single column cash book of Mr. Mobbushar Khan
2011
Jan. 1
Jan. 3
Jan. 7
Jan. 10
Jan. 11
Jan. 12
Jan. 13
Jan. 14
Jan. 15
Jan. 16
Jan. 18
Jan. 22
Jan. 23
Jan. 24
Jan. 25
Jan. 26
Jan. 31

Transactions
Mr. Mobbushar Khan stared business with cash
Bought goods for cash
Sold goods for cash
Paid for trade expenses
Sold goods for cash
Credit sales
Received commission
Received cash from Essa Khan
Paid cash to Mr. Arifullah Khan
Expenses incurred but not paid
Withdrew cash for personal use
Bought machinery for cash
Sold old furniture for cash
Purchase on account
Revenue earned but not received
Paid for electricity bill
Paid rent

(15 Minutes)

Rs.
10,000
7,000
4,000
1,000
1,600
400
300
5,000
700
1,800
3,000
2,000
4,000
8,000
1,900
900
1,500

Mobbushar Khan
Cash Book (Single Column)
For the month ended January, 2011
Receipts

Payments
Re

Date
2011
Jan

Feb

Description

Re
Amount

1
7
11
13
14
23

Capital b/d
Sales
Sales
Commission
A/R_ Essa Khan
Furniture

10,000
4,000
1,600
300
5,000
4,000

Total
Balance

24,900
8,800

Date
2011
Jan

Description
3
10
15
18
22
26
31

Purchases
Trade expenses
A/P_ Arifullah Khan
Drawing
Machinery
Electricity bill
Rent
Balance
Total

Exercise # 9.7: Enter the following transactions in a single column cash book of Mr. Adeel Nawaz

Amount
7,000
1,000
700
3,000
2,000
900
1,500
8,800
24,900

(20 Minutes)

2011
November 1. Started business with cash Rs. 70,000 and Land Rs. 30,000
3. Purchased merchandising for cash Rs. 5,000
Work Book Foundation Level

223

Books of Account

Unit 9

Accounting

4. Sold goods Rs. 1,700 on cash and Rs. 1,300 on account


5. Cash received from Manzoor Alam Rs. 200
12. Paid to Naima Kayani Rs. 150
14. Bought furniture worth of Rs. 200
15. Purchased goods from Muhammad Abid Tariq on credit Rs. 2,000
16. Purchase machinery of worth Rs. 20,000 cash down payment was 5,000 and remaining note payable
18. Company paid Rs. 2,400 for a one-year insurance policy
19. Received advance payment from customers Rs. 5,200, services will be provided in December
20. Paid electric charges Rs. 225
24. Paid salaries Rs. 250
25. Bought goods from Maria Muhammad Rs. 4,000 and by cash from Seemab Akhter Co. Rs 2,000
28. Received commission Rs. 750
28. Owner draws out Rs. 700 from the business for his own use
29. Accrued expenses Rs. 1,500
30. Sale of marketable securities that cost Rs. 6,000 for Rs. 7,500
Adeel Nawaz
Cash Book
For the month ended November, 2011
Receipts
Date

Description

Payments
Ref

Amount

2011
Nov

Date

Description

Ref

2011
1

Balance b/d

70,000

Sales

A/R_ Manzoor Alam

19

Unearned Services

28

Commission

30

Marketable securities

Nov

Purchases

5,000

1,700

12

A/P_ Naima Kayani

150

200

14

Furniture

200

5,200

16

Machinery

5,000

750

18

Prepaid insurance

2,400

7,500

20

Electric charges

225

24

Salaries

250

25

Purchases

2,000

28

Drawing

700

Balance c/d

69,425

85,350
Dec

Amount

Balance c/d

85,350

69,425

Exercises
Ex. 66
After Artie 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.

Work Book Foundation Level

224

Books of Account

Unit 9

Accounting

Name

Aston's

Address 286 Buck Avenue

Date

Item

Post. Ref.

Debit

Credit

Balance

Dec.

Name

P25

2,400

2,400

Carson Company

Address 818 Western Avenue

Date

Item

Post. Ref.

Debit

Credit

Balance

Dec.

Balance

7,600

10

CP23

20

P32

29

J15

Name

7,600

3,300

200

3,300
3,500

Diana Fenn Company

Address 90210 Baker Boulevard

Date

Item

Post. Ref.

Debit

Credit

Balance

Dec.

Balance

9,900

18

CP28

29

P34

Name

9,900

13,600 3,700

Maria Lopez

Address 2720 Sommers Avenue

Date

Item

Post. Ref.

Debit

Credit

Balance

Dec.

P27

6,000

6,000

27

P33

8,000

14,000

Work Book Foundation Level

225

Books of Account

Unit 9

Accounting

Ex. 66 (cont.)
Name

Oster Supplies

Address 1560 Puckett Street

Date

Item

Post. Ref.

Debit

Credit

Balance

Dec.

Balance

8,200

P26

12

J11

20

CP29

5,600
420

12,800
12,380

5,000

17,380

The balance in the Accounts Payable control account of $41,480 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.
Answer: N/A, SO: 1, Bloom: AN, Difficulty: Hard, Min: 10, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 66

(10 min.)

IDENTIFICATION OF ERRORS:
Carson Company
The $200 represents merchandise returned and should be subtracted from the balance owed. Correct balance is $3,100.
Diana Fenn Company
The $13,600 represents new purchases on account and should be added to the previous balance of zero. The correct balance is
$13,600.
Oster 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 $5,000 is a payment on account, not an increase. The correct
balance is $8,380.

Work Book Foundation Level

226

Books of Account

Unit 9

Accounting

ACCOUNTS PAYABLE SUBSIDIARY LEDGER ACCOUNT BALANCES


Aston's $ 2,400
Carson Company 3,100
Diana Fenn Company
Maria Lopez
Oster Supplies
Total

13,600

14,000
8,380

$41,480

Work Book Foundation Level

227

Books of Account

Unit 9

Accounting

Ex. 67
On December 1, the accounts receivable control account balance in the general ledger of Mitus Company was $9,000. The
accounts receivable subsidiary ledger contained the following detailed customer balances: Acme $1,500, Baker $2,100, Fare
$2,600, and Grote $2,800. The following information is available from the company's special journals for the month of
December:
Cash Receipts Journal: Cash received from Farr $1,900, from Acme $1,600, from Santos $1,700, and from Baker $1,800.
Sales Journal: Sales to Santos $2,300, to Fare $1,700, to Acme $2,300, and to Grote $2,400.
Additionally, Fare returned defective merchandise for credit for $900. Acme 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.


Answer: N/A, SO: 1, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 67
(a)

(10 min.)

Control Account: Accounts Receivable


9,000

(CR)

(SJ)

8,700

(G)

Bal.

9,800

7,000
900

Subsidiary Accounts:
Acme

Baker
1,500

(S)

2,300

Bal.

2,200

Fare

Grote
2,600

Work Book Foundation Level

(CR)

1,600

2,100
Bal.

(CR)

1,900

(CR)

1,800

300

2,800
228

Books of Account

Unit 9

Accounting

(S)

1,700

Bal.

1,500

(G)

900

(S)

2,400

Bal.

5,200

Santos
(S)

2,300

Bal.

600

Work Book Foundation Level

(CR)

1,700

229

Books of Account

Unit 9

Accounting

Solution 67
(b)

(cont.)

Listing of accounts receivable at end of the month:


Acme

$2,200

Baker

300

Fare

1,500

Grote

5,200

Santos
Total

600
$9,800 Accounts receivable balance

Ex. 68
Gates 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

Sales journal

CR

Cash receipts journal

CP

Cash payments journal

Single-column purchases journal

General journal
1.

Shareholders invested cash in the business in exchange for ordinary shares.

2.

Purchased store supplies on account.

3.

Sold merchandise to customer on account.

4.

Purchased a 2-year fire insurance policy for cash.

5.

Received a check from a customer as payment on account.

6.

Paid for store supplies purchased in transaction 2.

7.

Purchased merchandise on account.

8.

Issued a credit memorandum to a customer who returned defective merchandise previously sold

9.

Purchased office equipment for cash.

10.

Made an adjusting entry for store supplies used during the period.

on account.

Answer: N/A, SO: 2, Bloom: C, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No

Work Book Foundation Level

230

Books of Account

Unit 9

Accounting

Solution 68

(5 min.)

1.

CR

6.

CP

2.

7.

3.

8.

4.

CP

9.

CP

5.

CR

10.

Work Book Foundation Level

231

Books of Account

Unit 9

Accounting

Ex. 69
Sasser 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

Sold merchandise for $18,000 to B. Stine on account. Credit terms 2/10, n/30. Sales invoice No. 100.

July

Received a check for $800 from R. Hyatt in payment of his account.

July

Sold merchandise to F. Wendel for $700 cash.

July

10

Received a check in payment of Sales invoice No. 100 from B. Stine minus the 2% discount.

July

15

Sold merchandise for $9,000 to J. Nott 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 $15,000 to C. Karn on account. Credit terms 2/10, n/30. Sales invoice No. 102.

July

25

Issued a credit memorandum for $600 to C. Karn as an allowance for damaged merchandise previously

sold on account.
July

31

Received a check from J. Nott for $5,000 as payment on account.

SASSER COMPANY
Sales Journal
S1

Invoice
Date

Acct. Rec. Dr.

Account Debited No.

Ref.

COGS Dr.
Sales Cr.Mer. Inv. Cr.

SASSER COMPANY
General Journal
G1

Date

Explanations

Ref.

Debit

Credit

Work Book Foundation Level

232

Books of Account

Unit 9

Accounting

Ex. 69 (cont.)
SASSER COMPANY
Cash Receipts Journal
CR1

Date

Sales

Accounts

Other

COGS Dr.

Accounts

Cash

Discounts

Rec.

Sales

Credited Ref.

Dr.

Dr.

Cr.

Cr.

Cr.

Accounts

Mer. Inv. Cr.

Answer: N/A, SO: 2, Bloom: AP, Difficulty: Medium, Min: 15, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 69

(15 min.)

SASSER COMPANY
Sales Journal
S1

Date

Invoice Acct. Rec. Dr.

COGS Dr.

Account Debited No.

Ref.

Sales Cr.

Mer. Inv. Cr.

July

B. Stine 100

18,000 12,600

July

15

J. Nott 101

9,000

6,300

July

20

C. Karn 102

15,000 10,500

SASSER COMPANY
General Journal
Work Book Foundation Level

233

Books of Account

Unit 9

Accounting

G1

Date

Explanation

Ref.

Debit

Credit

July

25

Sales Returns and Allowances

600

Accounts ReceivableC. Karn

600

Work Book Foundation Level

234

Books of Account

Unit 9

Accounting

Solution 69

(cont.)

SASSER COMPANY
Cash Receipts Journal
CR1

Sales
Accounts
Date

Credited Ref.

Dr.

Accounts

Other

Cash

Discounts

Rec.

Sales

Dr.

Cr.

Cr.

Mer. Inv. Cr.

Cr.

Accounts

COGS Dr.

July

R. Hyatt 800

800

July

Sales

700

700

490

July

10

B. Stine 17,640 360

18,000

July

18

Notes Pay.

25,000

25,000

July

31

J. Nott 5,000

5,000

Ex. 70
Ward 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.

Purchased merchandise on account for $10,000 from Groton Company. Terms: 2/10, n/30; FOB shipping

Oct.

Paid $7,200 to Federated Insurance Company for a two-year fire insurance policy.

Oct.

Purchased store supplies on account for $700 from Flynn Supply Company. Terms: 2/10, n/30.

Oct.

11

Purchased merchandise on account for $14,000 from Buehler Corporation. Terms: 2/10, n/30; FOB

point.

shipping point.
Oct.

13

Issued a debit memorandum for $5,000 to Buehler Corporation for merchandise purchased on October 11

and returned because of damage.


Oct.

15

Paid Groton Company for merchandise purchased on October 5, less discount.

Oct.

16

Purchased merchandise for $8,000 cash from Clifford Company.

Oct.

21

Paid Buehler Corporation for merchandise purchased on October 11, less merchandise returned on October

13, less discount.

Work Book Foundation Level

235

Books of Account

Unit 9

Accounting

Oct.

25

Purchased merchandise on account for $22,000 from Dooley Company. Terms: 2/10, n/30; FOB shipping

31

Purchased office equipment for $30,000 cash from Paten Office Supply Company.

point.
Oct.

Work Book Foundation Level

236

Books of Account

Unit 9

Accounting

Ex. 70 (cont.)
WARD COMPANY
Purchases Journal
P1

Merchandise Inv. Dr.


Date

Account Credited Ref.

Accounts PayableCr.

WARD COMPANY
General Journal
G1

Date

Explanation

Ref.

Debit

Credit

WARD COMPANY
Cash Payments Journal
CP1

Other
Accounts
Date

Debited Ref.

Dr.

Accounts

Merchandise

Accounts

Payable Inventory

Dr.

Cr.

Cr.

Cash

Work Book Foundation Level

237

Books of Account

Unit 9

Accounting

Work Book Foundation Level

238

Books of Account

Unit 9

Accounting

Answer: N/A, SO: 2, Bloom: AP, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 70

(15 min.)

WARD COMPANY
Purchases Journal
P1

Merchandise Inv. Dr.


Date

Account Credited Ref.

Accounts Payable

Cr.

Oct.

Groton Company 10,000

Oct.

11

Buehler Corporation

14,000

Oct.

25

Dooley Company 22,000

WARD COMPANY
General Journal
G1

Date

Explanation

Ref.

Debit

Credit

Oct.

Store Supplies

700

Accounts PayableFlynn Supply Company

700

Oct.

13

Accounts PayableBuehler Corp. 5,000

Merchandise Inventory

5,000

WARD COMPANY
Cash Payments Journal
CP1

Work Book Foundation Level

239

Books of Account

Unit 9

Accounting

Other
Accounts
Date

Debited Ref.

Dr.

Accounts

Merchandise

Accounts

Payable Inventory

Dr.

Cr.

Cr.

Cash

Oct.

Prepaid Insurance7,200

7,200

Oct.

15

Groton Company 10,000 200

9,800

Oct.

16

Merchandise Inventory

8,000

8,000

Oct.

21

Buehler Corp.

9,000

180

8,820

Oct.

31

Office Equipment30,000

30,000

Work Book Foundation Level

240

Books of Account

Unit 9

Accounting

Ex. 71
Sandy 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 Tom Short was correctly recorded in the cash receipts journal, but the amount

was posted incorrectly to the account of customer Will Short in the subsidiary ledger.
3.

A purchase of merchandise on account from Easton 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.
Answer: N/A, SO: 2, Bloom: AN, Difficulty: Hard, Min: 10, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 71
1.

(10 min.)

The subsidiary ledger will not agree with the general ledger control account. Refooting the subsidiary ledger should

locate the error.


2.

The error will be discovered when the customer receives his statement. Mr. Tom Short's statement will indicate a

balance of $400 more than he owes.


3.

The error may not be discovered until the payment is sent to the supplier. Then, hopefully Easton will send back the

excess payment. Additionally, analysis of gross profit may indicate it is inordinately out of line with prior periods.
4.

When the accounts receivable control account is reconciled with the accounts receivable subsidiary ledger, it will be

$540 higher than the subsidiary ledger. Refooting the sales journal should then locate the error.

Work Book Foundation Level

241

Books of Account

Unit 9

Accounting

Ex. 72
Below are some typical transactions incurred by Harley 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 Retained Earnings.

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.

10.

Sales of merchandise on account.

11.

Purchase of a delivery truck for cash.

12.

Return of merchandise purchased on credit.

13.

Payment of rent in advance.

14.

Adjusting entry for accrued interest expense.

15.

Purchase of office supplies for cash.

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

Sales Journal

Single-Column Purchases Journal

General Journal

Answer: N/A, SO: 2, Bloom: C, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 72

(10 min.)

1.

6.

11.

CP

2.

CR

7.

CP

12.

3.

CP

8.

13.

CP

4.

CR

9.

CR

14.

5.

10.

15.

CP

Work Book Foundation Level

242

Books of Account

Unit 9

Accounting

Ex. 73
Circle the correct answer to each situation.
(a)

(b)

A sales journal will be used for:


Credit Sales

Cash Sales

Sales Discounts

Yes

Yes

Yes

No

No

No

A single-column purchases journal will be used for:


Purchase Returns

(c)

Cash Purchases Purchases on Account

and Allowances

Yes

No

No

Yes

No

Yes

A multiple-column purchases journal will be used for:


Supplies Purchased

(d)

Cash Purchases on Account

on Account

Yes

Yes

No

Yes

No

No

A cash payments journal will be used for:


Payments to

Purchases

Creditors
Yes

(e)

Equipment Purchases

No

Payment of

Discounts
Yes

No

Yes

Dividends
No

A cash receipts journal will be used for:


Sale of Shares

Purchases Discounts

Cash Sales

Yes

Yes

No

No

No

Yes

Answer: N/A, SO: 2, Bloom: C, Difficulty: Medium, Min: 5, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 73

(5 min.)

(a)

Yes, No, No

(d)

Yes, Yes, Yes

(b)

No, Yes, No

(e)

Yes, No, Yes

(c)

No, Yes, Yes

Work Book Foundation Level

243

Books of Account

Unit 9

Accounting

Ex. 74
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)
Code:

Special Journals Code:

Posting

Sales journal

Single-column purchases journal

CR

Cash receipts journal

Both individual and total posting

CP

Cash payments journal

Heading Special Journal

Individual posting

Total posting

Posting

1.

Accounts PayableCr.

2.

SalesCr.

3.

Sales DiscountsDr.

4.

Merchandise InventoryDr.

5.

CashCr.

6.

Accounts ReceivableDr.

7.

Other AccountsCr.

8.

Merchandise InventoryCr.

9.

Accounts ReceivableCr.

10.

Accounts PayableDr.

Answer: N/A, SO: 3, Bloom: C, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No

Work Book Foundation Level

244

Books of Account

Unit 9

Accounting

Solution 74

(8 min.)

Heading Special Journal

Posting

1.

Accounts PayableCr.

2.

SalesCr.

3.

Sales DiscountsDr.

4.

Merchandise InventoryDr.

5.

CashCr.

6.

Accounts ReceivableDr.

7.

Other AccountsCr.

CR

InventoryCr.

S, CR

T
CR

T
P, CP

CP

T
T

CP, CR, S

Merchandise

9.

Accounts ReceivableCr.

CR

10.

Accounts PayableDr.

CP

Work Book Foundation Level

8.

245

Books of Account

Unit 9

Accounting

Ex. 75
Horton Company uses four special journals, (cash receipts, cash payments, sales, and purchases journal) in addition to a
general journal. On November 1, 2011, 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:
Cash Receipts Journal:
Sales
Cash

Accounts

Discount

Dr.

Other Accounts

Receivable
Dr.

$600

Sales

Cr.

Cr.

C. of G. S. Dr.
Cr.

$6,400 $29,000 (X)

Acct. Ref.

Amount Mer. Inv. Cr.

$1,000 $17,400

Cash Payments Journal:


Other Accounts Accounts
Dr.
Acct. Ref.
(X)

Office

Store

Payable Supplies Supplies Inventory


Amount

$1,600 ?

Dr.

Merchandise
Cash

Dr.

$1,300 $1,100 $700

$18,600

Merchandise

Store

Dr.

Cr.

Cr.

Purchases Journal:
Accounts

Payable Inventory
Cr.
?

Office

Other Accounts

Supplies Supplies Dr.


Dr.

$36,000 $800

Dr.
$650

(X)

Dr.

Acct. Ref.

Amount

$3,300

Additional Data:
The Sales Journal total was $45,000. A customer returned merchandise for credit for $360 and Norton 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.
Answer: N/A, SO: 3, Bloom: AN, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Work Book Foundation Level

246

Books of Account

Unit 9

Accounting

Work Book Foundation Level

247

Books of Account

Unit 9

Accounting

Solution 75
(a)

(15 min.)

The missing amounts can be determined by crossfooting the journals.


Cash Receipts
Credits ($6,400 + $29,000 + $1,000)
Debits

$36,400

600

Cash debit

$35,800

Cash Payments
Credits ($700 + $18,600) $19,300
Debits ($1,600 + $1,300 + $1,100)
Accounts payable debit

4,000

$15,300

Purchases
Debits ($36,000 + $800 + $650 + $3,300)
Credits

-0-

Accounts payable credit


(b)

Cash

$40,750

$40,750

Accounts Receivable
12,000 (CP)

18,600

200,000 (CR)

6,400
360

(CR)

35,800

(S)

45,000 (G)

Bal.

29,200

Bal.

238,240

Accounts Payable
(CP)

15,300

(G)

400

42,000
(P)

40,750

Bal.

67,050

Ex. 76
Easton Company began business on October 1. The 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.

Donna Miner

10001

275

11

Mike Barr

10002

335

16

Donna Miner

10003

818

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248

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Accounting

19

Laura Cher

10004

147

26

Myron Silas

10005

1,184
2,759

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.

Work Book Foundation Level

249

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Unit 9

Accounting

Answer: N/A, SO: 3, Bloom: AP, Difficulty: Hard, Min: 15, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 76
1.

(15 min.)

SALES JOURNAL

Page 1

Invoice Post
Date

Account Debited Number Ref.

Amount

Oct.

Donna Miner

10001

275

11

Mike Barr

10002

335

16

Donna Miner

10003

818

19

Laura Cher

10004

147

26

Myron Silas

10005

1,184

2,759
(112)/(401)
GENERAL LEDGER

SUBSIDIARY LEDGER

Accounts Receivable

112

10/31 (S1)

2,759

Sales

Cher, Laura

401

10/31 (S1)

Barr, Mike

2,759

10/11 (S1)

335

10/19 (S1)

147

Miner, Donna
10/5

(S1)

275

10/16 (S1)

818

1,093
Silas, Myron
10/26 (S1)

2.

1,184

SCHEDULE OF ACCOUNTS RECEIVABLE

Work Book Foundation Level

250

Books of Account

Unit 9

Accounting

Mike Barr

$ 335

Laura Cher

147

Donna Miner

1,093

Myron Silas

1,184

Total Accounts Receivable $2,759

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Accounting

Ex. 77
CASH PAYMENTS JOURNAL

Page 45

Other
Date

Accounts

Merchandise

Ck.

Account Post.

Accounts

Payable Inventory

No.

Debited Ref.

Dr.

Cr.

Dr.

Cash

Cr.

2011
Jan.

659

M. Tate (a)

11

660

Prepaid Rent

(b)

1,000

1,000

13

661

Merch. Inv.

(c)

565

565

14

662

Cash Dividends (d)

2,000

2,000

18

663

Welch

1,300

20

664

Merch. Inv.

(f)

450

29

665

Equipment

(g)

3,400

7,415

5,300

(h)

(i)

(j)

4,000

(e)

40

3,960

1,300
450
3,400
40

12,675

(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.

Answer: N/A, SO: 3, Bloom: C, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 77

(10 min.)

a.

g.

b.

h.

c.

i.

d.

j.

e.

k.

f.

Work Book Foundation Level

252

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Unit 9

Accounting

Ex. 78
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.

Date

Sales

Accounts

Other

Accounts

Post

Cash

Discounts

Receivable

Credited Ref.

Dr.

Dr.

Cr.

Cr.

Cr.

COGS Dr.
Sales

Accounts

Mer. Inv. Cr.

May

27

Ted Roth

28

Notes Receivable 113


Interest Revenue 416

29
31

980

20

3,000
3,360

360

370
Don Calb

1,000

370
400

260
400

5,110

20

1,400

370

3,360

260

(111)

(412)

(114)

(411)

(x)

(505)(120)

Answer: N/A, SO: 3, Bloom: C, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA-BB: Industry/Sector Perspective,
AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector: General,
IFRS: No
Solution 78

(10 min.)

1.

Cash receipts journal.

2.

May 27

Td Roth 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

May 29

A cash sale of merchandise is made for $370. The cost of the merchandise sold was $260.

May 31

Don Calb has paid $400 on account.

revenue.

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.

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Accounting

(b)

The checks in the posting reference column of the journal indicate 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

$4,000. The 416 indicates that account No. 416 in the general ledger, Interest Revenue, has been credited for $480.
(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.

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Accounting

COMPLETION STATEMENTS
79.

The accounts receivable _____________ provides detailed information about customer accounts which is

summarized in one ______________ account in the general ledger.


Answer: N/A, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector
Perspective, AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector:
General, IFRS: No
80.

If a certain type of transaction occurs with great frequency, it is more efficient to create a ______________

to record that type of transaction.


Answer: N/A, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector
Perspective, AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector:
General, IFRS: No
81.

If a company maintains special journals, sales of merchandise on credit should be recorded in a

_______________ whereas sales of merchandise for cash should be recorded in the _______________.
Answer: N/A, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector
Perspective, AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector:
General, IFRS: No
82.

The use of special journals often saves time in the _______________ process.

Answer: N/A, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector
Perspective, AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector:
General, IFRS: No
83.

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.
Answer: N/A, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector
Perspective, AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector:
General, IFRS: No
84.

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.
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Accounting

Answer: N/A, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector
Perspective, AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector:
General, IFRS: No
Answers to Completion Statements
79.

subsidiary ledger, control

80.

special journal

81.

sales journal, cash receipts journal

82.

posting

83.

individually, total

84.

general journal, dual

Work Book Foundation Level

256

Books of Account

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Accounting

MATCHING
85.

Match the items below by entering the appropriate code letter in the space provided.

A.

Accounts payable ledger D.

B.

Columnar journal E.

C.

Special journals

Subsidiary ledger

Control account

1.

A general ledger account that summarizes detailed information in a subsidiary ledger.

2.

A subsidiary ledger that contains accounts with individual creditors.

3.

A special journal with more than one column.

4.

Detailed information about a group of accounts with a common characteristic.

5.

Used to record high volume, similar type transactions.

Answer: N/A, SO: 2, Bloom: K, Difficulty: Easy, Min: 2, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector
Perspective, AICPA-FN: Measurement, AICPA-PC: Problem Solving/Decision Making, IMA: Business Applications, Sector:
General, IFRS: No
Answers to Matching
1.

2.

3.

4.

5.

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257

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Accounting

MULTIPLE-CHOICE QUESTIONS
1.

Bill payable book is a?


(a) Journal

2.

(b) Principal book

6.

(c) Goods account

(d) Accounts receivable

(b) Sales ledger

(c) Daily sales

(d) Sales day book

Which of the following is not a book of prime or original entry?


(a) Sales daybook

5.

(b) Return inward account

An alternative name for a sales journal is?


(a) Sales invoice

4.

(d) Memorandum book

The return of goods by a customer should be debited to?


(a) Return outward

3.

(c) Ledger

(b) Purchase daybook

(c) Debtors account

(d) Cashbook

X sends back Rs. 80 of faulty goods to Y. In which book of prime entry would Y record this transaction?
(a) General Journal

(b) Purchase Return Journal

(c) Sales Journal

(d) Sales Return Journal

A bookkeeper discovers that an amount paid to a supplier has been wrongly entered in another suppliers account. Which
book of original entry will the bookkeeper use when correcting this error?
(a) Cash Book

7.

8.

(b) General Journal

(d) Sales day book

There are two books of account they are?


(a) Journal & ledger

(b) Journal & trail balance

(c) Trail Balance & Ledger

(d) None of these

The basic principle of book-keeping decrease is debit and increase is credit is applicable?
(a) Revenue

9.

(c) Purchase day book

(b) Expenses

(c) Income

(d) a and c

Which of the followings are books of prime entry?


(a) Sales day book and trial balance

(b) Petty cash book and accounts receivable ledger

(c) Petty cash book and journal

(d) Cash book and assets register

10. Transactions are initially recorded in the?


(a) Book of prime entry

(b) Book of original entry

(c) Journal

(d) All of before

11. Record goods return inward?


(a) Debit sale account and credit payable account

(b) Debit returns inward account and credit payable account

(c) Debit returns inward account and credit receivable account


(d) Debit receivables account and credit return inward account
12. Cash book is a part of?
(a) Voucher

Work Book Foundation Level

(b) General Journal

(c) General Ledger

258

(d) Dual Book

Books of Account

Unit 9

Accounting

13. If a company uses special journals, purchase of supplies on account should be recorded in which journal?
(a) Cash receipts journal

(b) Purchases journal

(c) Cash disbursements journal

(d) General journal

14. Which of the following is the correct journal entry to record a credit note issued to a customer for goods returned?
(a) Debit Sales returns and Credit Cash

(b) Debit Cash and Credit Sales returns

(c) Debit Trade receivables and Credit Sales returns

(d) Debit Sales returns and Credit Trade receivables

15. Mr. Ali buys goods on credit from Star Co. but finds that some of them are faulty. What document would Mr. Ali return
to Star Co. with the faulty goods?
(a) Statement

(b) Debit note

(c) Sales invoice

(d) Purchase invoice

16. Which of the following book(s) is (are) a part of Journal?


(a) Cash Book

(b) Purchase Return Book

(c) Purchase Book

(d) All of the given options

17. Mr. Hussain sends a debit note to one of his suppliers. In which of Mr. Hussains books of prime entry would this be
recorded?
(a) Sales

(b) Purchases

(c) Purchase returns

(d) Sales returns

18. If a company uses special journals, credit sales should be recorded in which journal?
(a) General journal

(b) Purchases journal

(c) Sales journal

(d) Cash receipts journal

19. If a company uses special journals, purchase of a building financed by a mortgage payable should be recorded in which
journal?
(a) Sales journal

(b) General journal

(c) Cash receipts journal

(d) Purchases journal

20. In a firm that uses special journals, a sale of merchandise on credit is recorded in the?
(a) Cash payments journal

(b) Cash receipts journal

(c) Sales journal

(d) Purchases journal

21. In a firm that uses special journals, the sale of merchandise for cash is recorded in the?
(a) Cash payments journal

(b) Cash receipts journal

(c) Sales journal

(d) Purchases journal

22. If a firm does not have a sales returns and allowances journal, the entries for these transactions are made in?
(a) Sales journal

(b) General journal

(c) Cash receipts journal

(d) Cash payments journal

23. Sales returns refer to?


(a) Merchandise that customers return to the seller after the sale
(b) Reductions in the selling price of merchandise sold to customers
(c) Cash discounts taken by customers

(d) Merchandise inventory that is marked down

24. Bill receivable book is a part of the?


(a) Profit and Loss account

Work Book Foundation Level

(b) Ledger

259

(c) Journal

(d) Trial Balance

Books of Account

Unit 9

Accounting

25. At the end of accounting period, after all postings have been made, equality should exist between the balance of the
Account Receivable control account and ___________?
(a) Purchases Journal

(b) Cash Receipts Journal

(c) Sum of all the customer balances in the Accounts Receivable Subsidiary Ledger
(d) Sum of all the creditor balances in the Accounts Payable Subsidiary Ledger
26. If a company uses special journals, the general ledger sales revenue account will receive postings from the _________?
(a) Sales journal and cash receipts journal

(b) Purchases journal and cash disbursements journal

(c) Cash receipts journal and cash disbursements journal

(d) None of the above are correct

27. At the end of accounting period, after all postings have been made, equality should exist between the balance of the
Account Payable control account and __________________?
(a) Sum of all the customer balances in the Accounts Receivable Subsidiary Ledger
(c) Purchases Journal

(b) Cash Receipts Journal

(d) Sum of all the creditor balances in the Accounts Payable Subsidiary Ledger

28. _________________ for ABC business, when a commercial bank advances a fixed sum of money for a definite period of
time on some agreed interest rate?
(a) Advance

(b) Bank loan

(c) Saving account

(d) Overdraft account

29. Adjustment to record accrued salaries at the end of the year?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Revenue Journal

(d) General Journal

30. Receipt of cash from sale of office equipment recorded in?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) General Journal

31. Adjustment is to record depreciation at the end of the month in?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) General Journal

(d) Purchases Journal

32. Provided legal services on account will record?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

33. Corrected the balance in the prepaid insurance at the end of the month in?
(a) Cash Payments Journal

(b) General Journal

(c) Cash Receipts Journal

(d) Purchases Journal

34. Purchase of an office equipment on account?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

Work Book Foundation Level

260

Books of Account

Unit 9

Accounting

35. Providing accounting services for cash?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

36. Closing of drawing account at the end of the year in?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) General Journal

(d) Purchases Journal

37. Purchase of office equipment for cash?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

38. Receipt of cash of rent from an office building is?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

39. Billed a customer for landscaping work performed recorded in?


(a) Cash Receipts Journal

(b) Purchases Journal

(c) Revenue Journal

(d) General Journal

40. Purchase of office Supplies on account is?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

41. Receipt of cash refund from overpayment of taxes is?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Revenue Journal

(d) General Journal

42. Purchase of repair services on account?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

43. Advance payment of a one-year fire insurance policy on the office?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) General Journal

44. Receipt of cash on account from a customer is?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

45. Purchase of office supplies for cash?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

46. Investment of additional cash in the business by the owner is?


Work Book Foundation Level
261

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Accounting

(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Purchases Journal

(d) Revenue Journal

47. Sale of office supplies on account, at cost, to a neighboring business?


(a) Cash Payments Journal

(b) Cash Receipts Journal

(c) Revenue Journal

(d) General Journal

48. An exchange of supplies from one company to another company?


(a) General Journal

(b) Purchases Journal

(c) Revenue Journal

(d) Cash Receipts Journal

49. Purpose of Sales Book is?


(a) To record all sales made by the firm

(b) To record payment due to creditors

(c) To record credit sales of goods made by the firm

(d) None of above

50. Which of the following is not true regarding the use of special journals?
(a) Special journals are used to record repetitive, frequent transactions
(b) The use of the General Journal is eliminated by the use of special journals
(c) The Purchases Journal is used to record purchases or expenses on account
(d) The Revenue Journal is used only for recording revenues earned on account
51. Transactions involving customers payments are often recorded in prime entry in?
(a) General Journal

(b) Cash Receipts Journal

(c) T-account

(d) Revenue Journal

52. Chaman's Ice Cream purchased Rs. 500 worth of supplies on account from ICEE Inc. In which special journal
should this transaction be recorded?
(a) Purchases Journal

(b) Cash receipts Journal

(c) Cash payments Journal

(d) General Journal

53. Expenses are?


(a) Incurred only when cash is paid

(b) Costs incurred to generate revenues

(c) Increases to owner's equity

(d) Recorded as credits in journal entries

54. Merchandise is sold on credit for Rs. 600 plus 5 percent sales tax. The entry in the sales journal will include a debit
to Accounts Receivable for?
(a) Rs. 600.00

(b) Rs. 603.50

(c) Rs. 605.50

(d) Rs. 630.00

55. Accrued rent is recorded at the end of the period?


(a) Cash Payments Journal

(b) Purchases Journal

(b) Revenue Journal

(d) General Journal

The balance of a control account in the general ledger


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Accounting

a. must always be zero.


b. must equal the amount of total assets.
c. is always greater than the composite balance of individual accounts in a related
subsidiary ledger.
d. must equal the composite balance of individual accounts in a related subsidiary
ledger.

Answer: d, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

22.

A subsidiary ledger is
a. used in place of the general ledger if the general ledger is destroyed or stolen.
b. a group of accounts used by branches and subsidiaries of a corporate business.
c. a group of accounts with a common characteristic that provides detailed
information about a control account in the general ledger.
d. used to post excess transactions if a general ledger account becomes full during
an accounting period.

Answer: c, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

23.

A subsidiary ledger frees the general ledger from details of


a. individual balances.
b. external transactions.
c. internal transactions.
d. the control account.

Answer: a, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Reporting,
AICPA-PC: Project Management, IMA: Reporting, Sector: General, IFRS: No

24.

A company would not likely use subsidiary ledgers for


a. inventory.

Work Book Foundation Level

263

Books of Account

Unit 9

Accounting

b. retained earnings.
c. equipment.
d. accounts receivable.

Answer: b, SO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

25.

Postings are made daily to subsidiary ledgers so that


a. employees are kept busy.
b. debits equal credits.
c. individual account information is kept current.
d. the control account will balance to the subsidiary ledger.

Answer: c, SO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

26.

A sales journal is used to record


a. only cash sales of merchandise.
b. sales of all assets on credit and for cash.
c. only credit sales of merchandise.
d. credit sales of merchandise, sales returns and allowances, and sales discounts.

Answer: c, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

Work Book Foundation Level

264

Books of Account

Unit 9

Accounting

27.

If a transaction cannot be recorded in a special journal


a. the company must refuse to enter into the transaction.
b. it is recorded in the general journal.
c. it is recorded directly in the accounts in the general ledger.
d. it is recorded as an adjustment on the work sheet.

Answer: b, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

28.

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.

Answer: d, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

29.

A single-column purchases journal indicates that


a. only purchases of merchandise on account can be recorded.
b. all purchases of merchandise can be recorded.
c. all acquisitions on account can be recorded.
d. another column must be added so that debits and credits can be recorded.

Answer: a, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

30.

The one characteristic that all entries recorded in a multiple-column purchases


journal have in common is a
a. credit to the Cash account.

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b. debit to the Cash account.


c. debit to the Accounts Payable account.
d. credit to the Accounts Payable account.

Answer: d, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

31.

A company which uses special journals should record a transaction involving the
purchase of merchandise for cash in a
a. single-column purchases journal.
b. multiple-column purchases journal.
c. cash payments journal.
d. general journal.

Answer: c, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

32.

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.

Answer: c, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

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33.

Which of the following is not a special journal?


a. Sales journal
b. Purchases journal
c. General journal
d. Cash receipts journal

Answer: c, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

34.

Correcting entries are journalized in


a. a special journal.
b. the general journal.
c. the general ledger.
d. a correcting journal.

Answer: b, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

35.

Adjusting entries are recorded


a. only on the worksheet.
b. only in the general ledger.
c. in the general journal.
d. in the special journals.

Answer: c, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

36.

If a transaction cannot be recorded in a special journal, it is


a. not recorded.
b. a correcting entry.

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c. recorded in the general journal.


d. an error.

Answer: c, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

37.

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.

Answer: c, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

38.

The entries in a sales journal will show


a. all sales of merchandise.
b. the cash sales of the company.
c. the credit sales of merchandise.
d. all sales of the company.

Answer: c, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

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39.

Entries in a sales journal


a. are made from sales invoices.
b. will indicate the invoice number in the reference column of the sales journal.
c. will occupy two lines of the sales journal.
d. indicate either a cash debit or accounts receivable debit.

Answer: a, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

40.

Journalizing in a sales journal will not


a. require a debit to Accounts Receivable.
b. show a sales invoice number.
c. affect the reference column of the journal.
d. include a credit to the Sales account.

Answer: c, SO: 2, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

41.

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.

Answer: c, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: Retail, IFRS: No

42.

Cash from sales of merchandise will be recorded in the


a. purchases journal.
b. sales journal.

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c. cash receipts journal.


d. general journal.

Answer: c, SO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: Retail, IFRS: No

43.

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.

Answer: a, SO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

44.

Entries in a sales journal are


a. posted only to accounts in an accounts receivable subsidiary ledger.
b. posted only to accounts in the general ledger.
c. posted to accounts in an accounts receivable subsidiary ledger and to accounts
in the general ledger.
d. never posted.

Answer: c, SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

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45.

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 Discounts column
c. Accounts Receivable column
d. Other Accounts column

Answer: d, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

46.

The use of special journals to record transactions


a. eliminates the need for a general ledger.
b. can save time in the posting process.
c. eliminates the need for a general journal.
d. should only be used if the volume of transactions is small.

Answer: b, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

47.

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 Merchandise Inventory.
d. debit to Accounts Receivable and a credit to Sales.

Answer: d, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

48.

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.

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c. are not posted individually but are posted as a column total to the general
ledger.
d. do not require posting.

Answer: b, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

49.

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.

Answer: c, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: FSA, Sector: General, IFRS: No

50.

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.

Answer: c, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

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51.

Gable'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.

Answer: b, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

52.

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; Merchandise Inventory

Answer: c, SO: 3, Bloom: K, Difficulty: Medium, Min: 2, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

53.

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.

Answer: d, SO: 3, Bloom: K, Difficulty: Medium, Min: 2, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

54.

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.

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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.

Answer: c, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

55.

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

Answer: d, SO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

56.

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.

Answer: c, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

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57.

The process of totaling the columns of a journal is termed


a. ruling.
b. columnizing.
c. sizing.
d. footing.

Answer: d, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

58.

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.

Answer: b, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

59.

Crossfooting a cash receipts journal means


a. the equality of debits and credits in the journal has been proved.
b. each line of the journal has a horizontal total.
c. the columns of the journal have been cross-referenced.
d. all necessary postings have been completed.

Answer: a, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

60.

Which of the following would not be an appropriate heading for a column in the cash
receipts journal?
a. Cash
b. Accounts Payable

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c. Sales Discounts
d. Sales

Answer: b, SO: 3, Bloom: C, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

61.

Proving the postings of a single-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 posting to Accounts Payable to the general ledger 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.

Answer: c, SO: 3, Bloom: K, Difficulty: Medium, Min: 2, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

62.

If a company uses a multiple-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

Answer: a, SO: 3, Bloom: C, Difficulty: Medium, Min: 2, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

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63.

Entries in the cash payments journal are made from


a. sales invoices.
b. purchase invoices.
c. prenumbered checks.
d. canceled checks.

Answer: c, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN: Measurement,
AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

64.

The reference column of a multiple-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.

Answer: d, SO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

65.

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.

Answer: b, SO: 3, Bloom: K, Difficulty: Medium, Min: 1, AACSB: Reflective Thinking, AICPA-BB: Industry/Sector Perspective, AICPA-FN:
Measurement, AICPA-PC: Project Management, IMA: Business Applications, Sector: General, IFRS: No

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PROBLEMS

Illustration One
The following transactions were obtained from the records of Alhaji Ado Traveler
for the month of January, 2008:
35
Jan.1 Assets: Machinery N94, 000; Motor Vehicles N129, 000; Stock N82, 250;
Debtors N2, 975; Cash N385.
Liabilities: Creditors N4, 450; Bank overdraft N17, 250.
Jan. 3 Bought from Alh. Yusuf Isa & Sons Ltd:
50 bags of Millet @ N2,500 a bag
25 bags of Wheat @ N4,000 a bag
10 bags of Maize @ N3,000 a bag
Invoice subject to 20% trade discount.
Jan.8 Sold to B.B Jafaar & Co.
15 bags of Wheat @ N5,000 a bag
Jan.10 Returned to Alh. Yusuf Isa & Sons Ltd
3 bags of Millet
1 bag of Maize
All damaged in transit
Jan.12 B.B Jafaar & Co. returned
2 bags of Wheat
Jan.15 Bought from Idi Trader
60 bags of Maize @ N2,900 a bag
40 bags of Wheat @ N4,100 a bag
50 bags of Millet @ N2,450 a bag
Invoice subject to 15% trade discount
Jan.22 Sold to Musa Minjibir
40 bags of Millet @ N3,000 a bag
20 bags of Maize @ N3,500 a bag
Whole transaction subject to 20% trade discount
Jan.30 Musa Minjibir returned
2 bags of Maize
4 bags of Millet
All defective.
You are required to prepare the various journals to record the above transactions
for the month of January, 2008.

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The following transactions were obtained from the books of KANDE &
SONS for the month of August, 2008.
Aug. 5 Bought from D. Usman & Sons:
5 dining tables @ N3,200 each
20 armless chairs @ N4,000 each
Invoice subject to 25% trade discount.
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Aug. 7 Returned by D. Usman & Sons:


One dining table which was damaged in transit
Aug. 13 Sold to F. Johnson & Sons:
10 bags of Dangote Cement @ N1,800 per bag
80 bags of Dangote Flour @ N2,200 per bag
Invoice subject to 15% trade discount.
Aug. 25 F. Johnson returned 4 bags of Cement which coagulated.
Required:
You are required to prepare the purchases, sales and returns day books for
the month of August, 2008.
Alangubro is in business as a dealer in building materials. His
transactions in January, 2009 were as follows:
January 3 Bought on credit from Emmanson Trading Co.:
39
60 bags of cement @ N450 a bag.
January 6 Bought from Wuru-Wuru & Sons on credit:
6 pairs of louver frames @ N100 a pair
100 piece of louver blades @ N20 a piece.
January 10 Sold on credit to P. Paulinus:
10 bags of cement @ N550 a bag.
January 15 Sold to H. Hamzat on credit:
20 bags of cement @ N550 a bag
6 pairs of louver frames @ N120 a pair
50 pieces of louver blades @ N30 a piece
The whole transaction is subject to 15% trade discount.
January 20 Bought on credit from Deluxe Paints Ltd.:
100 tins of gloss star paints @ N85 a tin
20 tins of emulsion star paints @ N69 a tin, less 10% trade
discounts.
January 21 Returned to Deluxe Paints Ltd.:
2 tins of gloss star paints
2 tins of emulsion star paints.
January 25 Sold to M. Umar:
80 tins of gloss star paints @ N100 a tin
January 29 M. Umar returned:
2 tins of gloss star paints.
You are required to prepare:
(a) Purchases Journal;
(b) Sales Journal;
(c) Returns Outward Journal; and
(d) Returns Inward Journal.

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FILL IN THE BLACKS

1.

An account

Payable

is a liability created by buying goods or services on credit?

2.

An account

Receivable

3.

A BALANCE SHEET is a financial statement providing information that helps users understand a company's financial

is an asset created by selling products or services on credit?

status.
DIVIDENDS are distributions of assets by a corporation to its owners.
The statement of OWNER'S EQUITY reports the changes in equity over the reporting period.
A business with many

customers would set up the general ledger Accounts Receivable account for all credit

customers and a separate account for each credit customer.


17. The term

has long been used in accounting literature to describe all types of plant and equipment.

18. A journal may be a

journal or it may be a group of special journals.

19. The advantages of

ledger are as following1reduces ledger detail2permits better division of

labor3permits a different sequence of accounts4permits better internal control.


20. In a western accounting system, the information about each business transaction is initially recorded in an accounting
record called a

.
.
The balance in Accounts Payable is decreased with a _______debit__________ entry.
PO is the abbreviation for _____purchase order____________ _________________.
A form or record sometimes used to assemble the documentation and approvals necessary for paying a vendor's invoice is a
______voucher___________.
A Rs. 1,000 invoice from a supplier has terms of 2/10, n/30. The amount that should be remitted to the supplier if the amount
is paid within the discount period isRs. ____980_____________.
The seller of goods that is offering credit terms of net 30 days will likely be one of its customer's ____unsecured_________
creditors until it receives payment.
3. A journal entry can consist of no more than one account to be debited and one account to be credited.
True

False

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5. Transactions
True

are

recorded

in

either

journal

or

ledger,

but

not

in

both.

False

6. An amount debited to Cash in a journal entry should be posted as a credit to the Cash account in the ledger.
True

False

10. The
True

normal

balance

of

contra

asset

account

is

False

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debit.