Principles of Accounting Volume 1: Financial Accounting
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Prepare a Subsidiary Ledger
Now that you have seen four special journals and two special ledgers, it is time to put all the pieces together.
Record the following transactions for Store Inc. in the special journals and post to the general ledger provided. Also post to the subsidiary ledgers provided. Beginning account balances are shown below. Use the perpetual inventory method and the gross method of dealing with sales terms.
First, enter these transactions manually by creating the relevant journals and subsidiary ledgers. Then enter them using QuickBooks.
Example: Transactions for Store Inc.
|Jan. 2||Issued check #629 for January store rent: $350.00|
|Jan. 3||Received check from PB&J in payment for December sale on credit, $915.00|
|Jan. 4||Issued check #630 to D & D in payment for December purchase on credit of $736.00|
|Jan. 5||Sold goods for $328.00 to Jones Co. on credit, Invoice #234 (Note: COGS is $164)|
|Jan. 6||Bought goods from BSA for $4,300.00, Purchase Order #71, terms: 2/10, net/30|
|Jan. 8||Sold goods on credit to Black & White Inc. for $2,100, Invoice #235, terms: 1/10, net/30 (Note: COGS is $1,050)|
|Jan. 9||Issued check #63 for telephone bill received today, $72.00|
|Jan. 10||Issued check #632 to pay BSA in full, PO 71.|
|Jan. 15||Received full payment from Black & White, Inc., Invoice #235|
|Jan. 20||Bought merchandise from Dow John, $525.00 payable in 30 days, Purchase Order #72|
|Jan. 26||Returned $100 of merchandise to Dow John, relating to Purchase Order #72|
|Jan. 31||Recorded cash sales for the month of $3,408 (Note: COGS is $1,704)|
|Jan. 31||Recognized that half of the Prepaid Insurance has been consumed|
Record all transactions using the sales journal, purchases journal, cash receipts journal, cash disbursements journal, and the general journal and post to the accounts receivable and accounts payable subsidiary ledgers. Then prepare a schedule of accounts receivable and a schedule of accounts payable.
|Jan. 3||The company received payment from PB&J; thus, a cash receipt is recorded.|
|Jan. 15||The company received payment on goods that were sold on Jan. 8 with credit terms if paid within the discount period. The payment was received within the discount period.|
|Jan. 31||Cash sales are recorded.|
|Jan. 26||The company returns merchandise (inventory) previously purchased. Since the company is using the perpetual method, a credit is made to Inventory.|
|Jan. 31||An adjusting entry is made to recognize insurance expense for the current month that had previously been prepaid.|
|Jan. 8||Sales on credit are recorded|
|Jan. 2||Rent for the month is paid.|
|Jan. 4||Payment is made for inventory purchased on account in a prior month.|
|Jan. 9||Paid the telephone bill.|
|Jan. 10||Paid for inventory purchased earlier on account. The payment arrangement had credit terms; the invoice was paid within the time allowed, and the discount was taken.|
|Jan. 6||Inventory is purchased on account.|
|Jan. 20||Inventory is purchased on account.|
At the end of the month, each of the previous journal totals are posted to the appropriate account in the general ledger, and any individual account postings, such as to Rent Expense (Jan. 2 transaction) would also be posted to the general ledger. Note that each account used by the company has its own account section in the general ledger.
If you check Accounts Receivable in the general ledger, you see the balance is $2,989, and the balance in Accounts Payable is $6,071. If the numbers did not match, we would have to find out where the error was and then fix it.
The purpose of keeping subsidiary ledgers is for accuracy and efficiency. They aid us in keeping accurate records. Since the total of the accounts receivable subsidiary ledger must agree with the balance shown in the accounts receivable general ledger account, the system helps us find mistakes. Since bookkeeping using ledgers is older than the United States, it was an ingenious way to double-check without having to actually do everything twice. It provided an internal control over record keeping. Today, computerized accounting information systems use the same method to store and total amounts, but it takes a lot less time.