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APPENDIX G
SUBSIDIARY LEDGERS AND SPECIAL JOURNALS
SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES
True-False Statements
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True-False Statements
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Multiple Choice Questions
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Brief Exercises
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Exercises
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Completion Statements
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Matching
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Short-Answer Essay
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SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE
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Learning Objective 1
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Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
G - 2
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Learning Objective 2
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Learning Objective 3
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TF
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Note: TF = True-False C = Completion Ma = Matching
MC = Multiple Choice Ex = Exercise SA = Short-Answer Essay
CHAPTER LEARNING OBJECTIVES
1. Describe the nature and purpose of a subsidiary ledger. A subsidiary ledger is a group of
accounts with a common characteristic. It facilitates the recording process by freeing the
general ledger from details of individual balances.
2. Explain how special journals are used in journalizing. A special journal is used to group
similar types of transactions. In a special journal, generally only one line is used to record a
complete transaction.
3. Indicate how a multi-column journal is posted. In posting a multi-column journal:
(a) All column totals except for the Other Accounts column are posted once at the end of
the month to the account title specified in the column heading.
(b) The total of the Other Accounts column is not posted. Instead, the individual amounts
comprising the total are posted separately to the general ledger accounts specified in
the Account Credited column.
(c) The individual amounts in a column posted in total to a control account are posted daily
to the subsidiary ledger accounts specified in the Account Credited column.
Subsidiary Ledgers and Special Journals
G - 3
TRUE-FALSE STATEMENTS
1. A subsidiary ledger is a group of control accounts which provides information to the
managers for controlling the operation of the company.
2. An accounts receivable subsidiary ledger has all the detailed information about the cash
sales to individual customers.
3. The accounts payable subsidiary ledger provides detailed information about amounts
owed to creditors.
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.
5. Control accounts are always located in the general ledger.
6. A control account and subsidiary ledger can be established for inventory.
7. A subsidiary ledger provides up-to-date information on specific account balances.
8. An advantage of using a subsidiary ledger is that one employee must post to both the
subsidiary ledger and the general ledger.
9. Special journals are used to record unique transactions which do not occur very often.
10. A cash receipts journal can be used to record all transactions involving cash coming into
the business, regardless of the source.
11. The cash payments journal only has one column because all entries recorded in this
journal require a credit to the Cash account.
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
G - 4
12. A cash payments journal should not be used to record transactions which require
payment by check.
13. If a transaction cannot be recorded in a special journal, it indicates that the company
should adopt an electronic accounting system.
14. A debit column for Sales Returns and Allowances may be found in the cash payments
journal.
15. A single-column purchases journal is used to record purchases of merchandise on
account.
16. Using special journals can save time in posting because column totals are often posted
rather than individual entries.
17. The reference column in a sales journal is used to indicate the general ledger account
number when the entry is posted.
FSA
18. Postings are generally made more frequently to the general ledger control accounts than
to the individual accounts in the subsidiary ledgers.
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.
20. Transaction amounts recorded in the general journal are never posted to accounts in the
subsidiary ledger.
Answers to True-False Statements
Subsidiary Ledgers and Special Journals
G - 5
MULTIPLE CHOICE QUESTIONS
21. The balance of a control account in the general ledger
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.
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.
23. A subsidiary ledger frees the general ledger from details of
a. individual balances.
b. external transactions.
c. internal transactions.
d. the control account.
24. A company would not likely use subsidiary ledgers for
a. inventory.
b. retained earnings.
c. equipment.
d. accounts receivable.
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.
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.
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
G - 6
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.
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.
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.
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.
b. debit to the Cash account.
c. debit to the Accounts Payable account.
d. credit to the Accounts Payable account.
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.
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.
Subsidiary Ledgers and Special Journals
G - 7
33. Which of the following is not a special journal?
a. Sales journal
b. Purchases journal
c. General journal
d. Cash receipts journal
34. Correcting entries are journalized in
a. a special journal.
b. the general journal.
c. the general ledger.
d. a correcting journal.
35. Adjusting entries are recorded
a. only on the work sheet.
b. only in the general ledger.
c. in the general journal.
d. in the special journals.
36. If a transaction cannot be recorded in a special journal, it is
a. not recorded.
b. a correcting entry.
c. recorded in the general journal.
d. an error.
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.
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.
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.
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
G - 8
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 Revenue account.
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.
42. Cash from sales of merchandise will be recorded in the
a. purchases journal.
b. sales journal.
c. cash receipts journal.
d. general journal.
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.
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.
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
Subsidiary Ledgers and Special Journals
G - 9
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.
47. Posting a sales journal to the accounts in the general ledger requires a
a. debit to Cash and a credit to Sales Revenue.
b. debit to Sales Revenue and a credit to Inventory.
c. debit to Accounts Receivable and a credit to Inventory.
d. debit to Accounts Receivable and a credit to Sales Revenue.
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.
c. are not posted individually but are posted as a column total to the general ledger.
d. do not require posting.
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 cross-footing.
d. updating the master file.
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.
51. Wiggins Inc. uses a sales journal. An entry in this journal represents a
a. debit to Cash; credit to Sales Revenue.
b. debit to Accounts Receivable; credit to Sales Revenue.
c. debit to Sales Discounts; credit to Cash.
d. debit to Accounts Payable; credit to Sales Returns and Allowances.
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
G - 10
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 Revenue
c. Accounts Receivable; Sales Revenue
d. Accounts Receivable; Inventory
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.
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.
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.
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
56. In this text 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.
57. The process of totaling the columns of a journal is termed
a. ruling.
b. columnizing.
c. sizing.
d. footing.
Subsidiary Ledgers and Special Journals
G - 11
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.
59. Cross-footing 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.
60. Which of the following would not be an appropriate heading for a column in the cash
receipts journal?
a. Cash
b. Accounts Payable
c. Sales Discounts
d. Sales Revenue
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 Inventory.
c. general ledger credit posting to Accounts Payable to the general ledger debit posting
to Inventory.
d. debit postings to the accounts receivable subsidiary ledger to the credit postings to the
accounts payable subsidiary ledger.
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. Inventory
c. Supplies
d. Other Accounts
63. Entries in the cash payments journal are made from
a. sales invoices.
b. purchase invoices.
c. prenumbered checks.
d. canceled checks.
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
G - 12
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.
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.
Answers to Multiple Choice Questions
BRIEF EXERCISES
Be. 66
Presented below is information related to Walnut Company for its first month of operations.
Identify the balances that appear in the accounts receivable subsidiary ledger and the accounts
receivable balance that appears in the general ledger at the end of January.
_____________Credit Sales_________ ______Cash Collections_______
Jan. 5 Wang Co. $8,000 Jan. 15 Wang Co. $6,500
15 Mumua Co. 6,000 22 Mumua Co. 4,000
24 Lopez Co. 10,000 29 Lopez Co. 10,000
Subsidiary Ledgers and Special Journals
G - 13
Be. 67
Waco Auto Company maintains four special journals and a general journal to record its
transactions. Using the code below, indicate in the space provided the appropriate journal for
recording the transactions listed.
Code Journals
S Sales journal
CR Cash receipts journal
CP Cash payments journal
P Single-column purchases journal
G General journal
____ 1. Stockholders invested cash in the business.
____ 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 on account.
____ 9. Purchased office equipment for cash.
____ 10. Made an adjusting entry for store supplies used during the period.
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
G - 14
Be 68
Landrum Electronics 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 $3,600; it should have been $3,690.
2. A remittance of $500 from Dale Mitchell was correctly recorded in the cash receipts
journal, but the amount was posted incorrectly to the account of customer Darin Mitchell in
the subsidiary ledger.
3. A purchase of merchandise on account from Walt’s Electronics 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 $24,280; it should have been $24,820.
Instructions
Indicate how each of the above errors might be discovered.
Be. 69
Below are some typical transactions incurred by Dryden Manufacturing Company.
____ 1. Purchase of merchandise on account.
____ 2. Collection on account from customers.
____ 3. Sales of merchandise for cash.
____ 4. Adjusting entry for depreciation on machinery.
____ 5. Payment of creditors on account.
____ 6. Sales discount taken on goods sold on credit.
____ 7. Sales of merchandise on account.
____ 8. Purchase of office supplies for cash.
Subsidiary Ledgers and Special Journals
G - 15
Be. 69 (Cont.)
For each transaction, indicate by the code letter the appropriate journal where the transaction
would be journalized.
CR — Cash Receipts Journal
CP — Cash Payments Journal
S — Sales Journal
P — Single-Column Purchases Journal
G — General Journal
Be. 70
Circle the correct answer to each situation.
(a) A sales journal will be used for:
Credit Sales Cash Sales Sales Discounts
Yes No Yes No Yes No
(b) A single-column purchases journal will be used for:
Purchase Returns
Cash Purchases Purchases on Account and Allowances
Yes No Yes No Yes No
(c) A multiple-column purchases journal will be used for:
Supplies Purchased Equipment Purchases
Cash Purchases on Account on Account
Yes No Yes No Yes No
(d) A cash payments journal will be used for:
Payments to Purchases Payment of
Creditors Discounts Dividends
Yes No Yes No Yes No
(e) A cash receipts journal will be used for:
Sale of Stock Purchases Discounts Cash Sales
Yes No Yes No Yes No
Test Bank for Accounting: Tools for Business Decision Making, Fifth Edition
G - 16
Be. 71
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
S = Sales journal I = Individual posting
P = Single-column purchases journal T = Total posting
CR = Cash receipts journal B = Both individual and total posting
CP = Cash payments journal
Heading Special Journal Posting
1. Accounts Payable—Cr. ___________ ___
2. Sales Revenue—Cr. ___________ ___
3. Inventory—Dr. ___________ ___
4. Accounts Receivable—Dr. ___________ ___
5. Inventory—Cr. ___________ ___
Ans: N/A, LO: 3, Bloom: AP, Difficulty: Medium, Min: 8, AACSB: Analytic, AICPA BB: Industry/Sector Perspective, AICPA FN: Measurement, AICPA PC:
Problem Solving, IMA: Business Applications
Solution 71 (8 min.)
Subsidiary Ledgers and Special Journals
G - 17
EXERCISES
Ex. 72
After Crown Candy Company had completed all posting for the month of December, the sum of
the balances in the following accounts payable subsidiary ledger did not agree with the balance of
the control account in the general ledger.
Name Lawton
Address 286 Buck Avenue
——————————————————————————————————————————
Date Item Post. Ref. Debit Credit Balance
——————————————————————————————————————————
Dec. 2 P25 2,400 2,400
Name Leno’s Company
Address 818 Western Avenue
——————————————————————————————————————————
Date Item Post. Ref. Debit Credit Balance
——————————————————————————————————————————
Dec. 1 Balance 7,600
10 CP23 7,600 —
20 P32 3,300 3,300
29 J15 100 3,400
Name Gordons Company
Address 90210 Baker Boulevard
——————————————————————————————————————————
Date Item Post. Ref. Debit Credit Balance
——————————————————————————————————————————
Dec. 1 Balance 9,900
18 CP28 9,900 —
29 P34 13,600 13,060
Name Jose Gonzalez
Address 2720 Sommers Avenue
——————————————————————————————————————————
Date Item Post. Ref. Debit Credit Balance
——————————————————————————————————————————
Dec. 8 P27 6,000 6,000
27 P33 8,000 14,000
Name Wilcox Supplies
Address 1560 Puckett Street
——————————————————————————————————————————
Date Item Post. Ref. Debit Credit Balance
——————————————————————————————————————————
Dec. 1 Balance 8,200
7 P26 5,600 12,800
12 J11 420 12,380
20 CP29 5,000 17,380
