1. The individual accounts receivable ledger accounts provide business managers with information on
the status of individual customer accounts, which is necessary for managing collections. Managers
need to know which customers owe money, how much they owe, and how long the amount owed has
b
een outstanding.
5. a. Sometime following the end of the current month, one of two things may happen: (1) an
overdue notice will be received from Kelly Co., and/or (2) a letter will be received from
Kelley Co., informing the buyer of the overpayment. (It is also possible that the error will be
discovered at the time of making payment if the original invoice is inspected at the time the
check is being written.)
b. The schedule of accounts payable would not agree with the balance of the accounts payable
account. The error might also be discovered at the time the invoice is paid.
c. The creditor will call the attention of the debtor to the unpaid balance of $800.
d. The error will become evident during the verification process at the end of the month. The
total debits in the purchases journal will be less than the total credits by $3,600.
8. Transactions are posted when they are entered into the computerized system. Thus, balances are
updated continuously as transactions occur.
9. For automated systems that use electronic forms, the special journals are not used to record original
transactions. Rather, electronic forms capture the original transaction detail from an invoice, for
example, and automatically post the transaction details to the appropriate ledger accounts.
CHAPTER 5
ACCOUNTING SYSTEMS
DISCUSSION QUESTIONS
CHAPTER 5 Accounting Systems
PE 5-1A
PE 5-1B
Apr. 6 78 BlueBird Co. 1,710
11 79 Hitchcock Inc. 3,320
19 80 Fletcher Inc. 550
PE 5-2A
Feb. 22. Collected cash of $200 from Central Entertainment (Invoice No. 422).
Amount posted from Page 106 of the cash receipts journal.
27. Provided $280 of services on account to Central Entertainment,
itemized on Invoice No. 445. Amount posted from Page 92 of the revenue
journal.
PE 5-2B
Accounts Rec. Dr.
Fees Earned Cr.
Date
Invoice
No.
Post.
Ref.Account Debited
PRACTICE EXERCISES
REVENUE JOURNAL
REVENUE JOURNAL
Date
Invoice
No. Account Debited
Post.
Ref.
Accounts Rec. Dr.
Fees Earned Cr.
CHAPTER 5 Accounting Systems
PE 5-3A
PE 5-3B
Mar. 11 Gift Pack Supplies Inc. 820 820
Accounts
Payable
Cr.
Party
Supplies
Dr.
Other
Accounts
Dr.
PURCHASES JOURNAL
Other
Accounts
Post.
Post.
Accounts
Payable
Office
Supplies
Date
Account Credited
PURCHASES JOURNAL
Post.
Ref.
Post.
Ref.
Amount
CHAPTER 5 Accounting Systems
PE 5-4A
Nov. 11. Made purchases of $1,680 on account from Sunstar Technology
(Invoice No. 85). Amount posted from Page 8 of the purchases journal.
22. Paid $2,980 to Sunstar Technology on account (Invoice No. 43).
Amount posted from Page 46 of the cash payments journal.
PE 5-5A
Horizontal analysis:
Vertical analysis:
Amount Percent Amount Percent
Retail $145,400 45.7% $138,500 42.3%
Wholesale 173,100 54.3% 189,300 57.7%
Total revenues $318,500 100.0% $327,800 100.0%
20Y5 20Y4
Increase/(Decrease)
CHAPTER 5 Accounting Systems
PE 5-5B
Horizontal analysis:
20Y3 20Y2 Amount Percent
Vertical analysis:
Amount Percent Amount Percent
Camping $336,900 66.7% $288,800 60.0%
Fishing 168,500 33.3% 192,500 40.0%
Total revenues $505,400 100.0% $481,300 100.0%
Increase/(Decrease)
20Y3 20Y2
CHAPTER 5 Accounting Systems
Ex. 5-1
1. General ledger accounts: (e)
2. Subsidiary ledger accounts: (a), (b), (c), (d)
Ex. 5-2
a., b., and c.
May 20 5,110 May 1 3,740
31 Bal. 5,110 31 Bal. 3,740
31 Bal. 3,340
d.
Alpha GenCorp
Hazmat Safety Co.
Ex. 5-3
a. Cash receipts journal f. Cash receipts journal
b. General journal g. Cash receipts journal
EXERCISES
Masco Co. Jordan Inc.
Accounts Receivable
Alpha GenCorp Hazmat Safety Co.
3,740
Westside Cleaners Inc.
Accounts Receivable Customer Balances
May 31, 20Y3
$ 5,110
CHAPTER 5 Accounting Systems
Ex. 5-4
a. Cash payments journal g. General journal
b. Purchases journal h. Cash payments journal
c. Purchases journal i. General journal
Ex. 5-5
Apr. 3. Provided service on account; posted from revenue journal Page 44.
6. Granted an invoice adjustment or corrected an error related to sale of
24. Received cash for balance due; posted from cash receipts journal Page 81.
Ex. 5-6
a.
Oct. 2 Pryor Corp. 1,625
c. $565 ($0 + $1,625 + $565 – $1,625)
REVENUE JOURNAL
Account Debited
Accounts Rec. Dr.
Fees Earned Cr.
Post.
Ref.
Date
Invoice
No.
321
CHAPTER 5 Accounting Systems
Ex. 5-7
a. and b.
July 1 Bal. 625 July 4 1,890
18 950 22 3,660
31 Bal. 1,575 31 Bal. 5,550
d.
Aladdin Co.
Clearmark Co.
Life Star Inc.
Total accounts receivable
The total in the schedule above agrees with the T account balance for the
accounts receivable controlling account in part (c).
Accounts Receivable Customer Balances
Aladdin Co. Clearmark Co.
Sapling Consulting Inc.
$10,535
July 31, 20Y2
$ 1,575
5,550
3,410
CHAPTER 5 Accounting Systems
Ex. 5-8
Amber Communications Inc. $ 4,550
Note: The balances are determined by adding the debits and subtracting the credits
for each subsidiary receivable account.
Balance, January 1, 20Y4 $ 4,720
Ex. 5-9
Invoice Post.
No. Ref.
20Y8
Mar. 2 512 Santorini Co.
31
20Y8
Mar. 4 CMI Inc.
19 Yarnell Inc.
2,135
Accounts Rec. Dr.
Account Debited Fees Earned Cr.
Birmingham Productions Inc.
Accounts Receivable Customer Balances
January 31, 20Y4
Accounts Receivable
(Controlling)
REVENUE JOURNAL
5,095
Cash
Dr.
Post.
Ref.Account Credited
Fees Earned
Cr.
Accts.
Rec. Cr.
CASH RECEIPTS JOURNAL
Date
Date
475
1,305
475
1,305
CHAPTER 5 Accounting Systems
Ex. 5-10
a.
20Y5
Oct. 3 622 Palace Corp.
20Y5
Oct. 5 Champion Co. 1,060
12 Wayfarer Co. 1,450
b.
Amex Services Inc. $2,970
Sunny Style Inc. 1,940
The total of the customer accounts on October 31, 20Y5, $5,810, equals the
balance of the accounts receivable controlling account, shown as follows:
REVENUE JOURNAL
Account Debited
Post.
Ref.
Date
2,890
Accounts Rec. Dr.
Fees Earned Cr.
Invoice
No.
CASH RECEIPTS JOURNAL
Date
Cash
Dr.
Accts.
Rec.
Cr.
Fees
Earned
Cr.
1,060
1,450
Accounts Receivable
Lasting Summer Inc.
Accounts Receivable Customer Balances
October 31, 20Y5
Post.
Ref.
Account
Credited
CHAPTER 5 Accounting Systems
Ex. 5-10 (Concluded)
c. The accounts receivable subsidiary ledger is needed to track customer services
provided on account and customer collections. Without the subsidiary ledger,
Lasting Summer Inc. would not know who owes how much for services rendered.
Ex. 5-11
1. General ledger account: (g), (h), (i), (j), (k), (l)
2. Subsidiary ledger account: (a), (b), (c), (d), (e), (f)
3. No posting required: (m)
Ex. 5-13
June 6. Purchased services, supplies, equipment, or other commodities on
account; posted from purchases journal Page 49.
CHAPTER 5 Accounting Systems
Ex. 5-14
a.
Apr. 4 825 825
9 4,890 Office Equipment 4,890
Accts.
Payable
Cr.
Office
Supplies
Dr.
Other
Accounts
Dr.
Post.
Ref. Amount
PURCHASES JOURNAL
Post.
Ref.
Date
Account Credited
Officemate Inc.
Tek Village Inc.
CHAPTER 5 Accounting Systems
Ex. 5-15
a. and b.
Mar. 4 690 Mar. 1 Bal. 580
26 385 15 325
31 Bal. 1,075 31 Bal. 905
Mar. 20 3,860
31 Bal. 3,860
d.
Enviro-Wash Supplies Inc.
Nicely Co.
Office Mate Inc.
Total accounts payable
The total in the schedule above agrees with the T account balance for the
accounts payable control account in (c).
March 31, 20Y2
$1,075
905
3,860
$5,840
Accounts Payable Creditor Balances
Enviro-Wash Supplies Inc. Nicely Co.
Office Mate Inc.
Newmark Exterior Cleaners Inc.
CHAPTER 5 Accounting Systems
Ex. 5-16
Augusta Sod Co. $10,380
Concrete Equipment Co. 10,790
Note: The account balances are determined by subtracting the debits from the credits
for each account.
Balance, June 1, 20Y1 $ 3,590
Accounts Payable
(Controlling)
Magnolia Landscaping
Accounts Payable Creditor Balances
June 30, 20Y1
CHAPTER 5 Accounting Systems
Ex. 5-17
20Y5
May 3
20Y5
May 1 57 Bio Safe Supplies Inc. 345
8 58 Equipment 18 2,860
2,860
345
Other
Accounts
Dr.
Accounts
Payable
Dr.
Cash
Cr.
CASH PAYMENTS JOURNAL
Ck.
No.
Account Debited
PURCHASES JOURNAL
Date
Post.
Ref.
Accounts
Payable
Cr.
200
Date
Account Credited
Brite N’ Shine Products Inc.
Post.
Ref.
Post.
Ref.
Amount
Cleaning
Supplies
Dr.
Other
Accounts
Dr.
200
CHAPTER 5 Accounting Systems
Ex. 5-18
a.
20Y4
Sept. 4
20Y4
Sept. 6 345 Labradore Inc. 320
18 346 Meow Mart Inc. 300
Post.
Ref.
Amount
Pet
Supplies
Dr.
Other
Accounts
Dr.
Post.
Ref.
Date
Account Credited
Best Friend Supplies Inc.
Ck.
No.
Account Debited
PURCHASES JOURNAL
Date
Post.
Ref.
Accounts
Payable
Cr.
295
CASH PAYMENTS JOURNAL
295
Other
Accounts
Dr.
Accounts
Payable
Dr.
Cash
Cr.
320
300
CHAPTER 5 Accounting Systems
Ex. 5-18 (Concluded)
b.
Meow Mart Inc. $ 450
The total of the creditor accounts on September 30, 20Y4, $3,750, equals the
balance of the accounts payable controlling account, shown as follows:
Sept. 30 915 Sept. 1 Bal.
30
30 Bal.
Ex. 5-19
a. Two errors were made in balancing the accounts in the subsidiary ledger:
(1) The Carbon Supplies Inc. transaction of March 9 should have resulted in a
balance of $15,300 instead of $14,000, and the account balance at March 12
should have been $15,000 instead of $13,700. The account balance at March 20
should have been $9,200 instead of $7,900.
4,045
3,750
Accounts Payable
Happy Tails Inc.
Accounts Payable Creditor Balances
September 30, 20Y4
620
CHAPTER 5 Accounting Systems
Ex. 5-19 (Concluded)
b.
C. D. Greer and Son $15,750
Carbon Supplies Inc. 9,200
Cutler and Powell 7,800
Ex. 5-20
Cash receipts journal: (a)
Cash payments journal: (b)
Revenue journal: (c)
Purchases journal: (d)
General journal: (e)
Ex. 5-21
1. The Cash column is for debits (not credits).
A recommended and corrected cash receipts journal is as follows:
Page 12
Post.
Ref.
Account
Credited
Accts.
Rec.
Cr.
Other
Accounts
Cr.
Fees
Earned
Cr.
CASH RECEIPTS JOURNAL
Bunker Hill Assay Services Inc.
Accounts Payable Creditor Balances
March 31, 20Y4
Date
Cash
Dr.
CHAPTER 5 Accounting Systems
Ex. 5-22
a. In the electronic invoice form from QuickBooks
®
shown above, typical
fields for data input can be identified as follows:
1. Customer name and address
b. The customer Accounts Receivable is debited, and Fees Earned is credited.
A computerized accounting system does not require posting to a separate
accounts receivable control account. In this case, the total accounts receivable
reported on the balance sheet is merely the sum of the balances of the individual
customer account balances. That is, the accounts receivable account summarizes
the customer accounts automatically.
c. Controlling accounts are not posted at the end of the month in a computerized
accounting system. Transactions are recorded through data input into electronic
forms, into electronic special journals, or for infrequent transactions, by an
electronic general journal. Balances of affected accounts are automatically posted
and updated from the information recorded on the form. If desired, the computer
CHAPTER 5 Accounting Systems
Ex. 5-23
a. iTunes is an example of a B2C, or business-to-consumer, e-commerce application.
The B, or business, is Apple. The C, or consumers, would mostly be individuals
who purchase digital products from the iTunes Store.
d. The electronic invoice form could be used for either transactions on account, as
illustrated in the chapter, or for cash sales. The invoice form used for sales on
account is different from the one used for cash sales. The latter invoice form
makes a debit to Cash, rather than a debit to a customer account.
Ex. 5-24
a. Amazon.com B2C and B2B. Sells books, DVDs, and other products
to individual consumers. Businesses can also set up
pages on Amazon for a small fee.
b. Dell Inc. B2C and B2B. Sells computer products to both
individuals and corporations. Its site separates
individual and corporate sales.
c. DowDuPont Inc. B2B. Specialt
y
chemicals. DuPont Direc
t
® is its B2B