CH-7 Accounting Systems – Accounting : Book Guide

Chapter 7: Accounting Systems Questions and solutions which have a GST version: • Exercise 7.7 • Problem 7.16 • Problem 7.20 • Problem 7.21 • Problem 7.22 • Problem 7.24 • Problem 7.29 Discussion questions 1. ‘Accountants should not concern themselves too much with elaborate administrative and accounting controls in an internal control system, since any such system is only as good as the human element in the system.’ Do you agree? Explain your answer. The primary role of internal control is to safeguard the assets of the entity against waste, fraud, inefficiency and incompetence. Cash, being a liquid asset, is very susceptible to robbery and fraud; therefore, safeguarding cash requires stringent internal control procedures. Clearly established lines of responsibility and separation of duties are important (see text p. 300). People, being naturally ingenious, often try to outsmart the system, and sometimes succeed; but a good internal control system should detect whenever there has been a breakdown in procedures, or collusion between employees. Employing competent staff to carry out internal control procedures is vital. However, the cost of a good internal control system may exceed the benefits, both economic and social, of having such a system; hence, costs and benefits must be carefully considered in the system’s design phase to ensure adequate but not excessive internal control procedures. Accountants should concern themselves to the point where they consider controls in an internal control system adequate. It is impossible to establish the ‘perfect control system’. 2. What is an internal control system? Discuss the principles involved in establishing a good internal control system. Discuss also the limitations of internal control systems. A system of internal control consists of all the measures used by a business: •to safeguard its resources against waste, fraud and inefficiency •to promote the reliability of accounting data •to encourage compliance with business policies and government regulations. Two aspects to internal control: (1) administrative controls and (2) accounting controls. Administrative controls are those established to provide operational efficiency and adherence to prescribed policies, such as a written directive identifying the standards to be followed in hiring new employees, manuals identifying purchasing and sales procedures, and various performance reports required from employees. Accounting controls are the methods and procedures used to protect assets and ensure the reliability of accounting records, such as procedures for the authorisation of transactions and the separation of record-keeping duties from custodianship of the entity’s assets. Principles of internal control which should be discussed are: •Clearly established lines of responsibility. •Separation of record keeping and custodianship. •Division of responsibility for related transactions. •Mechanical and electronic devices. •Adequate insurance. •Internal auditing. •Programming, physical and other controls. • 3. ‘In a system which uses several special journals, it is not necessary to have a general journal.’ Do you agree? Explain. In a system with several special journals, the need for a general journal remains to account for any unusual transactions or events which cannot be catered for by any of the special journals. Furthermore, the general journal is required for recording adjusting and closing entries. Different special journals may be omitted from an entity’s accounting system, but the general journal is always needed. In a sophisticated computerised accounting system, the general journal may be the only journal needed. Such a general journal will provide a chronological record of all transactions and events as they affect the entity. 4. During the month of October, credit sales for a business actually amounted to $963 534. However, an error of $10 000 had been made in totalling the sales column of the sales journal. When and how will this error be discovered? The error would be detected at the end of the month when cross-adds are performed in the sales journal. The total of the sales column and GST Payable column (credit columns) should equal the total of the accounts receivable column (debit), which would then be posted to the Accounts Receivable control account. If the error is not detected at this point, ultimately, the unadjusted trial balance of the general ledger at the end of the month will be out of balance by $10 000. The control account and subsidiary ledger balances will also not agree at the end of the month and the error could be flagged by this disagreement. 5. Identify the major sources of cash receipts recorded in a cash receipts journal. Identify the major transactions which involve cash payments in the cash payments journal. The major sources of cash receipts are cash sales, the collection of accounts receivable from customers, investments of capital by owners, sale of non-current assets and bank loans. The major transactions involving cash payments are cash purchases of inventories, payment of accounts payable, payments for various expenses including wages and taxes, and repayment of bank loans. 6. An inventory purchase on credit of $10 000 plus GST was correctly recorded in the purchases journal of a business. However, when postings were made to the accounts payable in the subsidiary ledger, the purchase was incorrectly recorded as $1100; however, the correct amount was posted to the inventory subsidiary ledger. When and how will this error be discovered? The amount that should have been posted to the accounts payable subsidiary ledger is $11 000. This error, which is called a ‘slide’, can be discovered in a couple of ways: 1. The balance of the Accounts Payable Control account at the end of the period will not agree with the total of the schedule of accounts payable subsidiary ledger accounts. 2. It may be discovered very quickly (!) by paying the incorrect amount owing to the particular creditor, who no doubt will query the size of the amount paid. 3. 7. Critically examine the following remark: ‘By having the post ref. column in all of the special journals, the recording process is slowed down, and too much unnecessary detail is provided for very little purpose’. An audit trail is necessary to ensure the completeness of the accounting records, and to safeguard the composition of an entity’s assets and liabilities. Discuss with the class the need for all businesses to provide an audit trail in order to trace the flow of all source documents and transactions into the accounting records. The post ref column is extremely important in that it represents the audit trail in the journals and ledgers. 8. Explain the treatment of sales returns and allowances and purchases returns and allowances in special journals, under both the periodic and perpetual inventory systems. How would these items be recorded on an inventory record in the subsidiary ledger? Why? Unless an entity has many sales returns and purchases returns, enough to require the establishment of special journals, such transactions are dealt with adequately in the general journal. Under a perpetual inventory system, two general journal entries are necessary for sales returns, and one entry is necessary for purchases returns. Sales returns are recorded as negative sales in that the inventory returned to the entity is then placed back into inventory if the goods are not faulty. Likewise, purchases returns are recorded as negative purchases in that the Inventory account is credited and Accounts Payable is debited. The reason for such treatment in the perpetual inventory inventory is so that the inventory records allow the entity to calculate the correct net purchases and correct cost of sales for that inventory item 9. Which journal(s) would be used to record the following transactions? The business is registered for GST. (a) The introduction of cash and office equipment by the owner on establishment of the business. (b) The cash payment of rent in advance. (c) The purchase of inventory on credit. (d) The purchase of office supplies on credit. (e) The sale of inventory on credit. (f) The sale of some pieces of office equipment on credit. (g) The collection of cash from a customer. (h) The return of part of the inventory purchased previously on credit from a supplier. (i) The adjusting entry for rent which is still prepaid at the end of the accounting period. (j) The adjusting entry for unused office supplies. (k) The closing entry for expenses at the end of the period. (a) Cash receipts journal for the cash, and the general journal for the office equipment. (b) Cash payment journal. (c) Purchases journal. (d) General journal; however, if a multipurpose purchases journal exists, the multipurpose purchases journal would be used. (e) Sales journal. (f) General journal. (g) Cash receipts journal. (h) General journal, or purchases returns journal if one exists. (i) General journal. (j) General journal. (k) General journal. 10. ‘Since nearly all accounting functions today are computerised, there is really no need for accountants to have an understanding of manual accounting systems.’ Do systems designers need to understand manual accounting systems? Discuss. Despite the growth in demand for computerised accounting packages being used in business, there is always demand for students and accountants who have an underlying basic accounting knowledge. For example, to understand how Xero, MYOB, Quicken and other computerised packages work, you need to understand the basic workings of a manual accounting system (on which these computerised programs are modelled). Manual accounting systems studied in introductory accounting courses form the basis for understanding accounting and the financial reporting process. For this reason the study of manual systems is paramount to understanding basic business transactions and the associated practice. As indicated in the chapter, computerised accounting systems make extensive use of control accounts/subsidiary ledgers, and adapt the principles underlying special journals. Exercises Exercise 7.1 Subsidiary ledger and control account J. Fry uses subsidiary ledgers and special journals in his accounting system. The accounts in the accounts payable subsidiary ledger for the most recent month are shown below: Required (a) Prepare the Accounts Payable Control account showing the final balance of the account, assuming that all transactions are reflected in the above accounts. (b) Prepare a schedule of accounts payable to reconcile the subsidiary ledger with the control account. (LO3) (a) Accounts Payable Control Account Date Explanation Post Ref. Debit Credit Balance Balance 865 Purchases PJ 1 225 2 090 Cash at bank CPJ 755 1 335 (b) Schedule of Accounts Payable E. Koumi $ 50 A. Packer 460 T. Trinh 515 Y. Yue 310 $1 335 Exercise 7.2 Reconciling a control account and a subsidiary ledger Assume that Xinshan’s China sold merchandise to three customers during June on credit, as shown in the following Accounts Receivable Control account. Required (a) Explain why the control account and related subsidiary ledger are not in balance. All postings to the subsidiary ledger were correct. Prepare the corrected control account. (LO3) (a) 1. 5/6 GJ8 credit posting to Accounts Receivable Control A/c should be for $360 not $630 as posted. Change amount in credit column of control a/c to $360. 2. 30/6 S9 debit posting to Accounts Receivable Control A/c should be for $5 725 not $5 275 as posted. Change amount in debit column of control a/c to $5 725. 3. 30/6 CR6 credit posting to Accounts Receivable Control A/c should be for $3 720 not $3 700 as posted. Change amount in credit column of control a/c to $3 720. Amended Accounts Receivable Control A/c Date Explanation Post Ref. Debit Credit Balance 1/6 Balance 4 000 5/6 Sales returns GJ8 360 3 640 30/6 Sales S9 5 725 9 365 30/6 Cash at bank CR6 3 720 5 645 Exercise 7.3 Reconciling a control account and a subsidiary ledger Cosimo’s Cookware bought merchandise from three suppliers during September on credit, as shown in the Accounts Payable Control account on the next page. Required (a) Determine the missing amount (?) in the control account and insert the correct posting reference in the Post Ref. Column. (b) Determine the ending balance in the account of O. Oldfield. (LO3) (a) Missing amount in the control account is $16 945 ($22 370 – 5425). The posting reference would be CPJ. (b) Since the control account shows that the closing balance for all payables is $5425 and the closing balance for the account of C. Cooper is $2 710 and G. Grocke $1 580, then the balance of O. Oldfield must be $1135 ($5425 – ($2 710 + $1 580)). Exercise 7.4 Reconciling a control account and a subsidiary ledger Overton’s Outdoor Centre is owned and run by Kym Overton, using the periodic inventory system and balancing her books at month-end. At 30 April 2019, the balances of the Accounts Receivable Control and Accounts Payable Control accounts were $59 560 and $34 570 respectively. Ignore GST. A summary of her dealings with customers and suppliers for May 2019 follows. The following additional information is available. 1. At Rainsford Ltd’s request, on 31 May, Kym Overton offset the amount owed by Rainsford Ltd against the amount owing to it. 2. Overton’s Outdoor Centre paid Rainsford Ltd on 6 May, sold goods to Rainsford Ltd on 10 May, and purchased goods from Rainsford Ltd on 19 May. Required (a) Prepare the Accounts Receivable Control and Accounts Payable Control ledger accounts for the month of May 2019. (b) Prepare Rainsford Ltd’s accounts payable subsidiary ledger account for the month of May 2019 in the accounting records of Overton’s Outdoor Centre. (c) Prepare schedules of accounts receivable and accounts payable as at 31 May 2019. (LO3) (a) General ledger: Accounts Receivable Control A/c Date Explanation Post Ref. Debit Credit Balance 1/5 Balance 59 560 9/5 Sales returns –Moses GJ 150 59 410 11/5 Sales returns – Nitshke GJ 60 59 350 16/5 Sales returns – Warner GJ 90 59 260 31/5 Sales SJ 26 450 85 710 31/5 Cash at bank and discount allowed CRJ 51 170 34 540 31/5 Contra – Rainsford GJ 2 120 32 420 Accounts Payable Control A/c Date Explanation Post Ref. Debit Credit Balance 1/5 Balance 34 570 8/5 Purchase returns – Aster GJ 230 34 340 18/5 Purchase returns – Rainsford GJ 280 34 060 31/5 Purchases PJ 16 830 50 890 31/5 Cash at bank and discount received CPJ 27 140 23 750 31/5 Contra – Rainsford GJ 2 120 21 630 (b) Subsidiary ledger: Accounts Payable – Rainsford Ltd Date Explanation Post Ref. Debit Credit Balance 1/5 Balance 13 900 19/5 Purchases PJ 7 600 21 500 18/5 Purchase returns GJ 280 21 220 6/5 Cash at bank and discount received CPJ 11 690 9 530 31/5 Contra GJ 2 120 7 410 (c) Note: both schedules below are prepared before the offset of the receivable and payable for Rainsford Ltd. Schedule of Accounts Receivable Moses & Co $7 410 T. Nitshke 2 740 Nguyen Traders 6 970 Sampson Sales 6 760 Warner Wholesalers 1 860 Saito Sales 5 000 Pfitzner Pty Ltd 1 680 Rainsford Ltd 2 120 $34 540 Schedule of Accounts Payable Aster Suppliers $9 930 Pekoe Products 2 470 Rainsford Ltd 9 530 R. Katspaw 1 820 $23 750 Exercise 7.5 Matching transaction types with journals Fiona Spottiswoode uses a purchases journal, a cash payments journal, a sales journal, a cash receipts journal and a general journal. Indicate in which journals the following transactions are most likely to be recorded. 1. Issue of shares for cash. 2. Purchased inventories on credit. 3. Cash purchase of inventories (cheque no. 32162). 4. Sale of marketable securities (shares) for cash. 5. Sales of inventory on credit. 6. Received payment of a customer’s account. 7. Received adjustment note for defective goods, which were purchased on credit and returned to the supplier. 8. Owner withdrew inventory for personal use. 9. Owner withdrew cash. 10. Payment of monthly rent by cheque. 11. Cash refund to a customer who returned inventory. 12. Year-end closing entries. (LO4) 1. Cash receipts journal 2. Purchases journal 3. Cash payments journal 4. Cash receipts journal 5. Sales journal 6. Cash receipts journal 7. General journal 8. General journal 9. Cash payments journal 10. Cash payments journal 11. Cash payments journal 12. General journal Exercise 7.6 Matching ledger accounts with journals The accounting system for Barker Ltd uses a general journal and special journals for sales, purchases, cash receipts and cash payments. Required (a) What journal would be the most probable source of the postings in the accounts? (b) Which of the above accounts would be affected if GST was recorded? (LO4) (a) (a) Cash receipts journal (h) Cash payments journal (b) Sales journal (i) Cash payments journal (c) Sales journal (j) Cash payments journal (d) Cash receipts journal (k) Purchases journal (e) Cash receipts journal (l) Purchases journal (f) Cash receipts journal (m) General journal (g) Cash payments journal (b) Accounts affected by GST would be: • Cash at Bank • Accounts Receivable Control • Accounts Payable Control. The amounts entered in all the other accounts would exclude GST since they are all income and expense accounts, and amounts are recorded net of GST in accordance with accounting practice. Exercise 7.7 Recording transactions in purchases and sales journals Non-GST version Casey Ltd’s accounting system uses special journals and subsidiary ledgers. The following transactions occurred during October 2019 (GST is ignored). All sales are n/30. Required (a) Ignoring GST, enter the appropriate transactions into the purchases and sales journals for October, and explain how each would be posted to accounts in the ledgers. (LO4) (a) Purchases Journal Date Date of Inv. Account Terms Post Ref. Purchases 2019 Oct. 3 P. Forza 2/15, n/30 1 030 24 C. Dixon 2/15, n/30 970 2 000 Sales Journal Date Inv. No. Account Terms Post Ref. Sales 2019 Oct. 11 435 B. Harley 750 750 Postings are: Purchases Journal: the accounts of Forza and Dixon in the accounts payable subsidiary ledger would be credited with the individual purchases on 3 October and 24 October respectively on those dates. The total of the journal would be debited to the Purchases account and credited to the Accounts Payable Control account in the general ledger on 31 October. Sales Journal: the account of Harley in the accounts receivable subsidiary ledger would be debited with the individual sale on 11 October on that date. The total of the journal would be debited to the Accounts Receivable Control account and credited to the Sales accounts in the general ledger on 31 October. Exercise 7.7 Recording transactions in purchases and sales journals GST version Casey Ltd’s accounting system uses special journals and subsidiary ledgers. The following transactions occurred during October 2019 (GST is ignored). All sales are n/30. Required (a) Assuming that the company is registered for the GST, enter the appropriate transactions into suitably ruled purchases and sales journals, and explain how each would be posted to accounts in the ledgers. (LO4) (a) Purchases Journal Date Date of Inv. Account Terms Post Ref. Purchases GST Receivable Accounts Payable 2019 Oct. 3 P. Forza 2/15, n/30 1 030 103 1 133 24 C. Dixon 2/15, n/30 970 97 1 067 2 000 200 2 200 Sales Journal Date Inv. No. Account Terms Post Ref. Sales GST Payable Accounts Receivable 2019 Oct. 11 435 B. Harley 750 75 825 750 75 825 Postings are: Purchases Journal: the accounts of Forza and Dixon in the accounts payable subsidiary ledger would be credited with the individual purchases on October 3 and October 24 respectively on those dates. The total of the journal would be posted on 31 October to the following accounts in the general ledger as follows: Purchases account debited with total of Purchases column, GST Receivable debited with the total of the GST Receivable column, and Accounts Payable Control Account credited for the total of the Accounts Payable column. Sales Journal: the account of Harley in the accounts receivable subsidiary ledger would be debited with the individual sale on October 11 on that date. The totals of the journal would be posted on 31 October to the following accounts in the general ledger as follows: Sales account credited with total of Sales column, GST Payable credited with the total of the GST Payable column, and Accounts Receivable debited for the total of the Accounts Receivable column. Exercise 7.8 Journals, subsidiary ledgers and control accounts Mazzone and Associates Accounts Receivable Control account in the general ledger on 1 September was $17 755. The subsidiary ledger contained the following accounts receivable accounts and balances at the same date: Quach $2330, Ridley $4277, Scafidi $3337, Talbot $7811. At 30 September, a summary of entries made in the journals shown were as follows. • General journal: Talbot returned goods for a credit of $178. • Sales journal: Recorded credit sales were: Talbot $1290, Quach $2180, Ubhey $1670, Scafidi $1780. • Cash receipts journal: Cash amounts received from accounts receivable were (no discounts were allowed): • Talbot $3730, Ubhey $660, Scafidi $2120, Ridley $2920, Quach $2013. Required (a) Enter the opening balances of the control account and subsidiary ledger accounts and post the September entries and totals in the three journals to the accounts (ignore GST). (b) Prepare a schedule of accounts receivable at 30 September and reconcile the total with the control account in the general ledger. (LO3 and LO4) (a) General Ledger Accounts Receivable Control A/c Date Explanation Post Ref. Debit Credit Balance Sep. 1 Balance 17 755 Sales return GJ 178 17 577 Sales SJ 6 920 24 497 Cash receipts CRJ 11 440 13 057 Accounts Receivable Subsidiary Ledger Quach Date Explanation Post Ref. Debit Credit Balance Sep. 1 Balance 2 330 Sale S 2 180 4 510 Cash receipt CR 2 010 2 500 Ridley Date Explanation Post Ref. Debit Credit Balance Sep. 1 Balance 4 277 Cash receipt CR 2 920 1 357 Scafidi Date Explanation Post Ref. Debit Credit Balance Sep. 1 Balance 3 337 Sale S 1 780 5 117 CR 2 120 2 997 Talbot Date Explanation Post Ref. Debit Credit Balance Sep. 1 Balance 7 811 Sales return GJ 178 7 633 Sale S 1 290 8 923 Cash receipt CR 3 730 5 193 Ubhey Date Explanation Post Ref. Debit Credit Balance Sep. Sale S 1 670 1 670 Cash receipt CR 660 1 010 (b) Schedule of Accounts Receivable as at 30 September Quach $ 2 500 Ridley 1 357 Scafadi 2 997 Talbot 5 193 Ubhey 1 010 $13 057 Exercise 7.9 Relating sales and cash receipts to the subsidiary ledger Model Trains Enthusiasts Shop’s sales and cash receipts journals for the month of April are presented below. The accounts receivable subsidiary ledger is reconciled with the general ledger account each month. On 1 April, the subsidiary ledger had four accounts: A. Tilden — $430; L. Tran — $520; N. Summers — $630; T. Schmidt — $450. Required (a) Establish a T account for each customer’s account in the subsidiary ledger and an Accounts Receivable Control account. Post the amounts to the accounts receivable subsidiary ledger and the general ledger using the information in the journals shown. (b) Prepare a schedule of the accounts in the subsidiary ledger and compare its total to the balance in the control account. (LO3 and LO4) (a) Subsidiary Ledger A. Tilden 1/4 Balance 430 4/4 CR14 220 6/4 SJ16 200 30/4 Balance 410 630 630 1/5 Balance 410 L. Tran 1/4 Balance 520 12/4 CRJ14 420 7/4 SJ16 320 30/4 Balance 420 840 840 1/5 Balance 420 N. Summers 1/4 Balance 630 24/4 CR14 320 18/4 SJ16 180 30/4 Balance 490 810 810 1/5 Balance 490 T. Schmit 1/4 Balance 450 26/4 CR14 460 10 30/4 Balance 450 450 1/5 Balance 1/5 Balance 10 J Wayne 1/4 SJ16 340 B. Pham 27/4 SJ16 290 General Ledger Accounts Receivable Control A/c 1/4 Balance 2 030 30/4 CRJ14 1 420 30/4 SJ16 1 330 30/4 Balance 1 940 3 360 3 360 1/5 Balance 1 940 (b) Schedule of Accounts Receivable as at 30 April A. Tilden $ 410 L. Tran 420 N. Summers 490 T. Schmit (10) J. Wayne 340 B. Pham 290 $1 940 Exercise 7.10 Relating purchases, cash payments and the general journal to the subsidiary ledger and control account At 1 February, the following information was extracted from the records of David Hendry (assume no GST). Extracts from the purchases, cash payments and general journals for February are presented below. Required (a) Establish running balance ledger accounts for each supplier in the subsidiary ledger and an Accounts Payable Control account in the general ledger. Post the amounts from the journals to the subsidiary and control accounts. (b) Prepare a schedule of accounts payable as at 28 February and compare the total with the balance in the control account. (LO3 and LO4) (a) D. Geelan Date Post Ref Debit Credit Balance 1/2 525 3/2 PJ1 520 1 045 18/2 CPJ1 1 045 0 Banks Ltd Date Post Ref Debit Credit Balance 1/2 5 250 5/2 CPJ1 5 100 150 9/2 PJ1 3 620 3 770 Nguyen Ltd Date Post Ref Debit Credit Balance 1/2 5 560 17/2 GJ 180 5 380 28/2 CPJ1 5 260 120 Peter Ltd Date Post Ref Debit Credit Balance 12/2 PJ1 2 430 2 430 G. Harker Date Post Ref Debit Credit Balance 22/4 PJ1 2 350 2 350 General Ledger Account Payable Control A/c Date Post Ref Debit Credit Balance 1/2 11 335 17/2 GJ1 180 11 155 28/2 PJ1 8 920 20 075 28/2 CPJ1 11 405 8 670 (b) Schedule of Accounts Payable as at 28 February 2019 D. Geelan — Banks Ltd 3 770 Nguyen Ltd 120 Peter Ltd 2 430 G. Harker 2 350 $8 670 Exercise 7.11 Accounting with several journals Di Ieso & Daughters uses sales, purchases, cash receipts, cash payments and a general journal (ignore GST). The following column totals were taken from the entity’s journals at the end of June. The balance in the Accounts Receivable Control account on 1 June was $3006 and the Accounts Payable Control account balance was $4260. Required (a) At the end of June, the total amount from the sales journal should be posted to what account or accounts? (b) At the end of June, the total amount from the purchases journal should be posted to what account or accounts? (c) For each column total in the cash receipts and the cash payments journals, specify whether it would be posted to the general ledger as a debit or a credit, and to which account. (d) After the amounts in the journals have been posted to the general ledger for June, what would be the balances in the Accounts Receivable Control and the Accounts Payable Control accounts? (LO3 and LO4) (a) Accounts Receivable Control A/c and Sales A/c (b) Purchases A/c and Accounts Payable Control A/c Cash receipts journal: • Cash at Bank – debit. • Accounts Receivable Control – credit. • Sales – credit. • Discount Allowed – debit. Cash payments journal: • Cash at Bank – credit. • Accounts Payable Control – debit. • Discount Received – credit. • Purchases – debit. (d) Accounts Receivable Control $5 316 ($3 006 + $7 520 – $5 210 = $5 316) Accounts Payable Control $3 260 ($4 260 + $4 010 – $5 010 = $3 260) Exercise 7.12 Accounting with several journals Crawford & Co. uses sales and purchases journals in its accounting system. The following transactions took place during April (ignore GST): Required (a) Establish all necessary general ledger accounts, accounts receivable subsidiary ledger accounts, and accounts payable subsidiary ledger accounts. Use the following account numbers: Accounts Receivable Control, 104; Accounts Payable Control, 201; Sales, 400; Purchases, 500. (b) Enter the April transactions in the appropriate journals. (c) Post the data from the journals to the appropriate general ledger and subsidiary ledger accounts. (d) Develop a schedule of accounts receivable and a schedule of accounts payable as at 30 April to prove the subsidiary ledger balances against the control accounts. (LO3 and LO4) (a) GENERAL LEDGER Accounts Receivable Control 104 30/4 SJ 3 670 Accounts Payable Control 201 30/4 PJ 1 815 Sales 400 30/4 SJ 3 670 Purchases 500 30/4 PJ 1 815 (b) Purchases Journal Date Inv. No Account Terms Post Ref. Purchases 2/4 567 Bryden Ltd 2/10, n/30  560 6/4 342 H Rider 2/10, n/30  580 21/4 1435 L Lambert 2/10, n/30  675 $1 815 (201)/ (500) Sales Journal Date Inv. No. Account Terms Post Ref. Sales 12/4 154 G. Pier  1 325 15/4 155 Sonic Ltd  1 120 25/4 156 Cavallaro Ltd  760 29/4 157 L. Burton  465 $3 670 (104)/(400) (c) Accounts Receivable Subsidiary Ledger G. Pier Date Post Ref Debit Credit Balance 12/4 SJ 1 325 1 325 Sonic Ltd Date Post Ref Debit Credit Balance 15/4 SJ 1 120 1 120 Cavallaro Ltd Date Post Ref Debit Credit Balance 25/4 SJ 760 760 L. Burton Date Post Ref Debit Credit Balance 29/4 SJ 465 465 Accounts Payable Subsidiary Ledger Bryden Ltd Date Post Ref Debit Credit Balance 2/4 PJ 560 560 H. Rider Date Post Ref Debit Credit Balance 5/4 PJ 580 580 L. Lambert Date Post Ref Debit Credit Balance 21/4 PJ 675 675 (d) Schedule of Accounts Receivable as at 30 April G. Pier $1 325 Sonic Ltd 1 120 Cavallaro Ltd 760 L. Burton 465 $3 670 Schedule of Accounts Payable as at 30 April Bryden Ltd $560 H. Rider 580 L. Lambert 675 $1 815 Exercise 7.13 Relating journals to the Accounts Payable Control account Hansford and Harding use purchases, cash payments and general journals with their accounting system. They also maintain an accounts payable subsidiary ledger, which contains the following accounts at 31 July. Required (a) Prepare an Accounts Payable Control account assuming all postings for the month of July have been made, showing the appropriate posting references. (b) Explain how each of the amounts which appear in the Accounts Payable account were obtained. (LO3 and LO4) (a) Accounts Payable Control A/c Date Post Ref Debit Credit Balance 1/7 Balance 17 840 15/7 GJ8 3 200 14 640 31/7 PJ6 6 840 21 480 31/7 CPJ4 12 830 8 650 Schedule of Accounts Payable as at 31 July L. Jessup $2 490 R. Kent 980 W. Lau 1 780 A. Machell 3 400 B. Nicholson — $8 650 (b) The amounts in the Accounts Payable Control A/c were obtained as follows: • Balance — add all opening balances in subsidiary ledger for 1/7. • 15/7 Entry from GJ8 Purchases — Return B. Nicholson posted on that date. • 31/7 PJ the total of all P6 entries which would have been posted at the end of month to Control A/c. • 31/7 CPJ the total of all CP4 entries which would have been posted in total at end of month to Control A/c. Exercise 7.14 Relating journals to the Accounts Receivable Control account Rowett and Sharrad uses sales, cash receipts and general journals in its accounting system. The firm also maintains an accounts receivable subsidiary ledger, which contained the following accounts on 31 August. Required (a) Prepare an Accounts Receivable Control account after all postings for the month of June have been made with the necessary posting references. (b) Explain how all the amounts which appear in the Accounts Receivable Control account were obtained. (LO3 and LO4) (a) Accounts Receivable Control A/c Date Post Ref Debit Credit Balance 1/8 12 220 17/8 GJ5 2 320 9 900 31//8 SJ7 7 500 17 400 31/8 CRJ5 9 130 8 270 Schedule of Accounts Receivable as at 31 August S. White $1 460 R. Riding 1 980 J. Bean 2 120 S. Lau 2 710 B. Beast — $8 270 (b) The amounts in the Accounts Receivable Control A/c were obtained as follows: • Balance — add all opening balances in subsidiary ledger for 1/8. • 17/8 Entry from GJ5 Sales Return B. Beast posted on that date. • 31/8 SJ the total of all S7 entries which would have been posted at the end of month to Control A/c. • 31/8 CRJ the total of all CR5entries which would have been posted in total at end of month to Control A/c. Exercise 7.15 Detecting errors in an accounting system Alana Szeqczyk’s accounting system that uses sales, purchases, cash receipts and cash payments journals and a general journal. At various times during the year, the following errors have occurred. (a) The amount column in the sales journal was incorrectly totalled. (b) The amount of a bank loan entered in the ‘other accounts’ column of the cash receipts journal was posted as a debit to bills payable. (c) A credit purchase for $700 was posted as $70 in the accounts payable subsidiary ledger. (d) A purchases return, journalised in the general journal, was posted to the Accounts Payable Control account and to the Purchases Returns and Allowances account but was not posted to the accounts payable subsidiary ledger. (e) A subtraction error was made in determining a customer’s account balance in the accounts receivable subsidiary ledger. (f) The purchases journal was incorrectly totalled. (g) An error was made in totalling the cash column in the cash payments journal. (h) A sales allowance for goods sold on credit was entered in the general journal. The entry was posted to only two accounts — the accounts receivable subsidiary account and to Sales Returns and Allowances. (i) A cheque to a supplier, net of the applicable discount received, was correctly entered in the cash at bank column at the net amount and in the accounts payable column at the gross amount. No entry was made in the discount received column. (j) Discount allowed was not entered in the cash receipts journal. The amount of the supplier’s invoice was entered in the accounts receivable column and the net amount of the cheque was entered in the cash at bank column. Required (a) Specify a procedure that would detect each error. (a) 1. Compare the balance of the Accounts Receivable Control account with the schedule of accounts receivable. 2. Prepare a trial balance for the general ledger. Compare the balance of the Accounts Payable Control account with the schedule of accounts payable. 3. Prepare a trial balance for the general ledger. 4. Compare the balance of the Accounts Payable Control account with the schedule of accounts payable. 5. Compare the balance of the Accounts Receivable Control account with the schedule of accounts receivable. 6. Compare the balance of the Accounts Payable Control account with the schedule of accounts payable. 7. Cross-add the cash payments journal. 8. Compare the balance of the Accounts Receivable Control account with the schedule of accounts receivable. 9. Cross-add the cash payments journal. 10. Cross-add the cash receipts journal. Problems Problem 7.16 Accounting with sales journal and purchases journal Non-GST version Tymonns Traders Ltd uses sales and purchases journals in its accounting system. The following transactions occurred during April 2019. Required (a) Complete the requirements below, assuming that the business is not registered for the GST. i. Establish all necessary general ledger accounts, accounts receivable subsidiary ledger accounts, and accounts payable subsidiary ledger accounts. Use the following account numbers: Accounts Receivable, 1200; Accounts Payable, 2200; Sales, 4100; Purchases 5100. ii. Enter the transactions for April in the appropriate special journals. iii. Post the data from the journals to the general ledger and subsidiary accounts. iv. Prepare a schedule of the accounts receivable subsidiary ledger and the accounts payable subsidiary ledger as at 30 April to prove that their totals are equal to the balances of the control accounts. (LO4) (a) (i) and (iii) GENERAL LEDGER Accounts Receivable Control 1200 30/4 S1 7 960 Accounts Payable Control 2200 30/4 P1 2 910 Sales 4100 30/4 S1 7 960 Purchases 5100 30/4 P1 2 910 Accounts Receivable Subsidiary Ledger B Morran Date Post Ref Debit Credit Balance 10/4 SJ 2 280 2 280 Bryde Ltd Date Post Ref Debit Credit Balance 16/4 SJ 2 640 2 640 29/4 SJ 1 200 3 840 G. Green Date Post Ref Debit Credit Balance 26/4 SJ 1 840 1 840 Accounts Payable Subsidiary Ledger Smythe Ltd Date Post Ref Debit Credit Balance 5/4 PJ 1 500 1 500 Ellis Ltd Date Post Ref Debit Credit Balance 8/4 PJ 780 780 R. Rober Date Post Ref Debit Credit Balance 19/4 PJ 630 630 (ii) Purchases Journal Date Date of Inv. Account Terms Post Ref. Purchases 5/4 5/4 Smythe Ltd 2/10, n/30  1 500 8/4 8/4 Ellis Ltd 2/10, n/30  780 19/4 19/4 R. Rober 2/10, n/30  630 $2 910 (2 200)/ (5 100) Sales Journal Date Inv. No. Account Terms Post Ref. Sales 10/4 345 B Morran  2 280 16/4 346 Bryde Ltd  2 640 26/4 347 G. Green  1 840 29/4 348 Bryde Ltd  1 200 7 960 (1200)/ (4 100) (iv) Schedule of Accounts Receivable as at 30 April 2019 B Morran $2 280 Bryde Ltd 3 840 G Gales 1 840 $7 960 Schedule of Accounts Payable as at 30 April 2019 Smythe Ltd $1 500 Ellis Ltd 780 R. Rober 630 $2 910 Problem 7.16 Accounting with sales journal and purchases journal GST version Tymonns Traders Ltd uses sales and purchases journals in its accounting system. The following transactions occurred during April 2019. Required (a) Complete the requirements below, assuming that the business is registered for the GST. i. Establish all necessary general ledger accounts, accounts receivable subsidiary ledger accounts, and accounts payable subsidiary ledger accounts. Use the following account numbers: Accounts Receivable, 1200; GST Receivable, 1300; Accounts Payable, 2200; GST Payable, 2300; Sales, 4100; Purchases 5100. ii. Enter the transactions for April in the appropriate special journals. iii. Post the data from the journals to the general ledger and subsidiary accounts. iv. Prepare a schedule of the accounts receivable subsidiary ledger and the accounts payable subsidiary ledger as at 30 April to prove that their totals are equal to the balances of the control accounts. (LO4) (a) (i) and (iii) Accounts Receivable Control 1200 30/4 S1 8 756 GST Receivable 1300 30/4 P1 291 Accounts Payable Control 2200 30/4 P1 3 201 GST Payable 2300 30/4 S1 796 Sales 4100 30/4 S1 7 960 Purchases 5100 30/4 P1 2 910 Accounts Receivable Subsidiary Ledger B Morran Date Post Ref Debit Credit Balance 10/4 SJ 2 508 2 508 Bryde Ltd Date Post Ref Debit Credit Balance 16/4 SJ 2 904 2 904 29/4 SJ 1 320 4 224 G. Green Date Post Ref Debit Credit Balance 26/4 SJ 2 024 2 024 Accounts Payable Subsidiary Ledger Smythe Ltd Date Post Ref Debit Credit Balance 5/4 PJ 1 650 1 650 Ellis Ltd Date Post Ref Debit Credit Balance 8/4 PJ 858 858 R. Rober Date Post Ref Debit Credit Balance 19/4 PJ 693 693 (ii) Purchases Journal Date Date of Inv. Account Terms Post Ref. Purchases GST Receivable Accounts Payable 5/4 5/4 Smythe Ltd 2/10, n/30  1 500 150 1 650 8/4 8/4 Ellis Ltd 2/10, n/30  780 78 858 19/4 19/4 R. Rober 2/10, n/30  630 63 693 $2 910 291 3 201 (5 100) (1 300) (2 200) Sales Journal Date Inv. No. Account Terms Post Ref. Sales GST Payable Accounts Receivable 10/4 345 B Morran  2 280 228 2 508 16/4 346 Bryde Ltd  2 640 264 2 904 26/4 347 G. Green  1 840 184 2 024 29/4 348 Bryde Ltd  1 200 120 1 320 7 960 796 8 756 (4 100) (2 300) (1 200) (iv) Schedule of Accounts Receivable as at 30 April 2019 B. Morran $2 508 Bryde Ltd 4 224 G. Gales 2 024 $8 756 Schedule of Accounts Payable as at 30 April 2019 Smythe Ltd $1 650 Ellis Ltd 858 R. Rober 693 $3 201 Problem 7.17 Determining an appropriate accounting system Bush Basher Bikes sells off road motorbikes on both a credit and cash basis. They stock a full range of spare parts and accessories. The business also employs a full-time mechanic who carries out servicing and repairs on motorbikes — those sold by Bush Basher Bikes as well as those purchased from other suppliers. Prenumbered invoices are issued for all sales and services provided. Terms are strictly n/30 and no discounts are offered. Total revenues last financial year amounted to $820 000 — $680 000 from the sale of motorbikes, $42 000 for parts and accessories, and $98 000 for servicing and repairs. All receipts are banked daily, and a petty cash system is in operation. Cash discounts are offered by all suppliers, and the business ensures that all discounts on offer are taken. All payments are made by online bank transfers with frequent payments made to suppliers, transport companies for delivery costs on purchases, sponsorships and advertising. The mechanic is paid on every second Friday. The office manager is paid an annual salary for managing the office, and for performing the manual accounting duties. The business currently has a manual system of accounting using special journals and subsidiary ledgers. Rev Head, the owner of Bush Basher Bikes, is considering implementing a tried and tested integrated accounting package. Required (a) Identify the subsidiary ledger or ledgers that would be used in the current system. (b) Identify the special journals that would be appropriate in the current system, and suggest appropriate columns that would be used in each of them. (c) Should a computer-based accounting system be implemented? Explain the reasons for your decision. (LO1, LO3 and LO4) (a) Accounts Receivable Subsidiary Ledger — for all sales on credit to customers Accounts Payable Subsidiary Ledger — for all purchases on credit from suppliers. (b) Special journals implemented: Cash Receipts Journal p. 1. Date Account Post. Ref. Cash at Bank Dis. All’d Sales Accts. Rec. GST Payable Other Cash Payments Journal p. 1. Date Account Ch. No. Post. Ref. Other Acc/s Payable Purchases GST Receivable Cash at Bank Dis. Rec’d GST Receivable Sales Journal p. 1. Date Inv. No. Account Terms Post Ref. Sales GST Payable Accounts Receivable Purchases Journal p. 1. Date Date of Inv. Account Terms Post Ref. Purchases GST Receivable Accounts Payable General Journal Date Description Post Ref. Debit Credit (c) Rev head should utilise a computer-based accounting system like MYOB. The business has sufficient turnover, i.e. total revenue of $820 000 from three major business activities. The business also has a high volume of transactions. Banking is done daily and all payments are made by online bank transfers. A computerised accounting system can include the requirement for a password, or passwords, to be entered before payments can be made. Rev head can also set up a system of electronic payments. Such systems will assist greatly in recording and accounting for GST. The total income, the distinct three business activities and the volume of transactions would easily justify the implementation of a computerised accounting system. This will speed up the record-keeping process and assist in preparing financial statements. It will also help in the review of the accounts for audit or tax preparation purposes. The relatively low cost of the computer software will also make it economical for the business to implement such a system. Problem 7.18 Control accounts for receivables and payables Ravilero Ltd uses the periodic inventory system and has control accounts and subsidiary ledgers for trade receivables and payables. The general ledger control account balances at 1 June 2019 were: The following transactions took place during June. Required (a) Prepare the accounts receivable control and accounts payable control ledger accounts for the month of June 2019. (LO3) (a) Accounts Receivable Control 1/6 Balance b/d 116 480 8/6 Sales returns GJ 11 100 30/6 Sales SJ 152 800 21/6 Accnts payable GJ 11 200 30/6 Cash at Bank CR 155 400 30/6 Discount allowed CR 2 800 30/6 Balance c/d 88 780 269 280 269 280 30/6 Balance b/d 88 780 Accounts Payable Control 11/6 Bill payable GJ 3 290 1/6 Balance b/d 136 600 21/6 Accnts receivable GJ 11 200 30/6 Purchases PJ 77 400 28/6 Purchase returns GJ 10 400 30/6 Cash at Bank CPJ 152 000 30/6 Discount received CPJ 3 600 30/6 Balance c/d 33 510 214 000 214 000 30/6 Balance b/d 33 510 Problem 7.19 Reconciling monthly statement – accounts payable You are the person responsible for the accounts payable ledger of Cameron Ltd. You are concerned that the statement of account for the month ending 30 June 2019 received from Deveson Ltd does not agree with the records shown for Deveson Ltd in the accounts payable subsidiary ledger. As a valued customer of Deveson Ltd, Cameron Ltd receives a trade discount of 5% off the marked price of all goods purchased. In addition, a 2% discount is allowed for payments made within 10 days of the statement date. Ignore GST. Deveson Ltd records all sales to Cameron Ltd net of trade discount. The statement dated 30 June shows that Cameron Ltd owes $19 680 to Deveson Ltd. An examination of the account of Deveson Ltd in the subsidiary ledger and other records reveals the following discrepancies. 1. Because of a clerical error, the credit side of the account of Deveson Ltd had been overstated by $585. 2. The cash discount of $660, which had been deducted when making the May payment, had been disallowed by Deveson Ltd because the payment was received more than 10 days after the statement date. 3. Invoice no. D443 for a gross amount (before trade discount) of $820 had been entered on the statement twice. 4. Invoice no. D452 for a gross amount (before trade discount) of $1080 had been correctly entered on the statement but no records of the invoice had been recorded in the books of Cameron Ltd even though the goods had been received. 5. Invoice no. D587 for $150 had been incorrectly debited on the statement as $510, and this invoice had not been entered in the purchases journal or the subsidiary ledger as the goods had not yet been received. 6. Adjustment (credit) note no. C321 for $125 received from Deveson Ltd had not been entered in the subsidiary ledger, and had been entered on the statement as an invoice. Required (a) Prepare a reconciliation memo which reconciles the amount owing on the statement of account from Deveson Ltd to the amount which Cameron Ltd actually owes at 30 June. Assuming that payment will be made on 9 July 2019, what is the amount of interbank transfer to Deveson Ltd’s bank account to pay the amount owing? (LO3) (a) Statement amount adjustments $19 680 1. Deveson’s statement reflects correct position — 2. Deveson’s statement reflects correct position — 3. Statement amount needs to be reduced by $861, a credit of $820 for the duplication on invoices plus the trade discount of $41 not deducted by Deveson Ltd on the first invoice. –861 4. Deveson’s statement amount needs to be reduced by $54, the amount of the trade discount not deducted –54 5. Statement amount needs to be reduced by $360, the amount incorrectly overstated on the statement –360 6. Statement amount needs to be reduced by $125 to remove the effect of incorrectly recording an invoice, plus a further reduction to take account of the adjustment note –250 Correct amount of the statement should be $18 155 The amount of the interbank transfer to Deveson Ltd should be $18 155 less 2% discount ($363.10) = $17 791.90. Problem 7.20 Accounting with sales, cash receipts and general journals Non-GST version Galluzo Ltd uses a sales journal, a cash receipts journal, a general journal and an accounts receivable subsidiary ledger within a periodic inventory system. The terms of all credit sales are 2/10, n/30. Where necessary, round amounts to the nearest dollar. The accounts receivable subsidiary ledger balances on 31 May 2019 were as follows. The trial balance as at 1 June included, among others, the following accounts. The following transactions during June were recorded in the sales, cash receipts or general journals (ignore GST). Required (a) Record the June transactions in the appropriate journals. Make all postings to the appropriate general ledger accounts and to the accounts receivable subsidiary ledgers. (b) Reconcile the subsidiary ledger with the Accounts Receivable Control account in the general ledger. (LO3 and LO4) (a) Sales Journal p. 1. Date Invoice Account Post Ref. Amount 2/6 671 A Guthrie  1 930 7/6 672 G Lindvelt  270 10/6 673 C Haigh  430 26/6 674 E Katsambit  540 3 170 (1-1200/ 4-4100) Cash Receipts Journal p. 1. Date Account Post. Ref. Cash at Bank Dis. All’d Sales Accts. Rec’ble Other 8/6 E Katsambit  750 750 12/6 K Coldwell  1 810 1 810 14/6 A Guthrie  1 930 1 930 17/6 Bills Pay. 2 2200 20 000 20 000 20/6 Cash Sales 295 295 23/6 Market Sec. 1 1150 12 000 12 000 25/6 C Haigh  4 410 4 410 30/6 E Katsambit  540 540 41 735 295 9 440 32 000 (1-1100) (5-5200) (4-4100) (1-1200) (x) General Journal Date Description Post Ref. Debit Credit 4/6 Sales Returns & Allowances 4-4150 180 Accts. Rec’ble Control – K Coldwell 1-1200/ 180 Return of defective goods. 24/6 Bills Receivable 1-1300 3 586 Accts Rec’ble Control – G Lintvelt 1200 3 586 Receipt of promissory note. General Ledger Cash at Bank 1-1100 1/6 Balance 17 950 30/6 CRJ1 41 734 59 685 Marketable Securities 1-1150 1/6 Balance 30 485 21/6 CRJ1 12 000 Balance 18 485 30 485 30 485 18 485 Accounts Receivable Control 1-1200 1/6 Balance 13 220 4/6 GJ1 180 30/6 SJ1 3 170 24/6 GJ1 3 586 30/6 CRJ1 9 440 30/6 Balance c/d 3 184 16 390 16 390 30/6 Balance b/d 3 184 Bills Receivable 1-1300 24/6 GJ1 3 586 Bills Payable 2-2200 1/6 Balance 2 400 17/6 CRJ1 20 000 22 400 Sales 4-4100 1/6 Balance 207 030 30/6 SJ1 3 170 30/6 CRJ1 295 210 495 Sales Returns and Allowances 4-4150 1/6 Balance 2 572 4/6 GJ1 180 2 752 Dividend Revenue 4-4200 1/6 Balance 1 005 Interest Revenue 4-4300 1/6 Balance 905 Gain on Sale of Marketable Securities 4-4400 1/6 Balance 280 Discount Allowed 5-5200 1/6 Balance 1 930 30/6 CRJ1 0 1 930 Accounts Receivable Subsidiary Ledger A. Guthrie Date Post Ref Debit Credit Balance 2/6 SJ1 1 930 1 930 14/6 CRJ1 1 930 — C. Haigh Date Post Ref Debit Credit Balance 31/5 3 980 10/6 SJ1 430 4 410 25/6 CRJ1 4 410 — E. Katsambit Date Post Ref Debit Credit Balance 31/5 750 4/6 CR1 750 — 26/6 SJ1 540 540 30/6 CR1 540 — G. Lintvelt Date Post Ref Debit Credit Balance 31/5 3 316 7/6 SJ1 270 3 586 25/6 GJ1 3 586 — I. Dowden Date Post Ref Debit Credit Balance 31/5 3 184 K. Coldwell Date Post Ref Debit Credit Balance 31/5 1 990 4/6 GJ1 180 1 810 12/6 CR1 1 810 — (b) Schedule of Accounts Receivable as at 30 June 2019 A. Guthrie $ — C. Haigh — E. Katsambit — G. Lintvelt — I. Dowden 3 184 K. Coldwell — Total $3 184 Problem 7.20 Accounting with sales, cash receipts and general journals GST version Galluzo Ltd uses a sales journal, a cash receipts journal, a general journal and an accounts receivable subsidiary ledger within a periodic inventory system. The terms of all credit sales are 2/10, n/30. Where necessary, round amounts to the nearest dollar. The accounts receivable subsidiary ledger balances on 31 May 2019 were as follows. The trial balance as at 1 June included, among others, the following accounts. The following transactions during June were recorded in the sales, cash receipts or general journals. Assume further that Galluzo Ltd and its suppliers are registered for the GST. The following additional accounts are in the general ledger and appear in the trial balance — 2-2300 GST Receivable and 1-1300 GST Payable. Assume both accounts had a zero opening balance. Required (c) Record the June transactions in the appropriate journals. Make all postings to the appropriate general ledger accounts and to the accounts receivable subsidiary ledgers. (d) Reconcile the subsidiary ledger with the Accounts Receivable Control account in the general ledger. (LO3 and LO4) (a) Sales Journal p. 1. Date Inv. No. Account Terms Post Ref. Sales GST Payable Accounts Receivable 2019 2/6 671 A Guthrie  1 930 193 2 123 7/6 672 G Lindvelt  270 27 297 10/6 673 C Haigh  430 43 473 26/6 674 E Katsambit  540 54 594 3 170 317 3 487 (4-4100) (1-1300) (1-1200) Cash Receipts Journal p. 1. Debits Credits Date Account Post Ref. Cash at Bank Disc. All’d GST Rec. Sales GST Pay. A/cs. Rec’able Other A/cs. 2019 8/6 E Katsambit  750 750 12/6 K Coldwell  1 792 1 792 14/6 A Guthrie  2 123 2 123 17/6 Bills Pay. 2 2200 20 000 20 000 20/6 Cash Sales 325 295 30 23/6 Market Sec. 1 1150 12 000 12 000 25/6 C Haigh  4 410 4 410 30/6 E Katsambit  594 594 41 994 295 30 9 669 32 000 (1-1100) (5-5200) (1-3000) (4-4100) (1-1300 (1-1200) (x) General Journal Date Description Post Ref. Debit Credit 4/6 Sales Returns & Allowances 4-4150 180 GST Payable 1 1300 18 Accts. Rec’ble Control – K Coldwell 1-1200/ 198 Return of defective goods. 24/6 Bills Receivable 1-1300 3 613 Accts Rec’ble Control – G Lintvelt 1-1200/ 3 613 Receipt of promissory note. General Ledger Cash at Bank 1-1100 1/6 Balance 17 950 30/6 CRJ1 41 994 59 944 Marketable Securities 1-1150 1/6 Balance 30 485 21/6 CRJ1 12 000 Balance 18 485 30 485 30 485 18 485 Accounts Receivable Control 1-1200 1/6 Balance 13 220 4/6 GJ1 198 30/6 SJ1 3 487 24/6 GJ1 3 613 30/6 CRJ1 9 669 30/6 Balance c/d 3 227 16 707 16 707 30/6 Balance b/d 3 227 Bills Receivable 1-1300 24/6 GJ1 3 613 Bills Payable 2-2200 1/6 Balance 2 400 17/6 CRJ1 20 000 22 400 GST Receivable 2-2300 GST Payable 1-1300 4/6 GJ1 18 30/6 CR1 30 30/6 Balance 329 30/6 SJ1 317 347 347 Balance 329 Sales 4-4100 1/6 Balance 207 030 30/6 SJ1 3 170 30/6 CRJ1 295 210 495 Sales Returns and Allowances 4-4150 1/6 Balance 2 572 4/6 GJ1 180 2 752 Dividend Revenue 4-4200 1/6 Balance 1 005 Interest Revenue 4-4300 1/6 Balance 905 Gain on Sale of Marketable Securities 4-4400 1/6 Balance 280 Discount Allowed 5-5200 1/6 Balance 1 930 30/6 CRJ1 0 1 930 Accounts Receivable Subsidiary Ledger A. Guthrie Date Post Ref Debit Credit Balance 2/6 SJ1 2 123 2 123 14/6 CRJ1 2 123 — C. Haigh Date Post Ref Debit Credit Balance 31/5 3 980 10/6 SJ1 473 4 453 25/6 CRJ1 4410 43 E. Katsambit Date Post Ref Debit Credit Balance 31/5 750 4/6 CR1 750 — 26/6 SJ1 594 594 30/6 CR1 594 — G. Lintvelt Date Post Ref Debit Credit Balance 31/5 3 316 7/6 SJ1 297 3 613 25/6 GJ1 3 613 — I. Dowden Date Post Ref Debit Credit Balance 31/5 3 184 K. Coldwell Date Post Ref Debit Credit Balance 31/5 1 990 4/6 GJ1 198 1 792 12/6 CR1 1 792 — (b) Schedule of Accounts Receivable as at 30 June 2019 A. Guthrie $ — C. Haigh 43 E. Katsambit — G. Lintvelt — I. Dowden 3 184 K. Coldwell — Total $3 227 Problem 7.21 Accounting for transactions with several journals Non-GST version Elliott started business on 1 July 2019. The accounting system includes a sales journal, a purchases journal, a cash receipts journal, a cash payments journal and a general journal. The chart of accounts shows the following titles. During June, the transactions were as follows (ignore GST). Required (a) Record the transactions in the appropriate journals. Indicate how the postings would be made from the journals by entering the relevant posting references. (LO3 and LO4) (a) Cash Receipts Journal p. 1. Date Account Post. Ref. Cash at Bank Dis. All’d Sales Accts. Rec’ble Other 1/7 A.Elliott, Capital 300 50 000 50 000 4/7 Loan Payable 210 30 000 30 000 13/7 Cash Sales 1 575 1 575 25/7 Leschev Ltd  4 620 4 620 30/7 B Bear  3 087 63 3 150 89 282 63 1 575 7 770 80 000 (100) (510) (400) (110) (x) Cash Payments Journal p. 1. Date Account Ch. No. Post. Ref. Other Acc/s Payable Purchases Cash at Bank Dis. Rec’d 3/7 Rent Expense BPay 550 8 800 8 800 8/7 Off. Equip. BPay 150 2 520 2 520 10/7 Hendry Ltd BPay  11 300 11 074 226 12/7 Kelly Ltd 977  4 150 4 067 83 16/7 Prepaid Ins. Auto Dr 115 3 150 3 150 28/7 F Nunn 978  3 690 3 616 74 30/7 Sundry Exp. 979 570 320 320 14 790 19 140 33 547 383 (x) (2 01) (100) (420) Sales Journal p. 1. Date Invoice Account Post. Ref. Amount 8/7 532 Leschev Ltd  4 620 23/7 533 B Bear  3 150 28/7 534 Nottage Ltd  5 250 13 020 (110/400) Purchases Journal p. 1. Date Account Terms Post. Ref. Amount 5/7 Hendry Ltd 2/10, n/30  11 300 6/7 Kelly Ltd 1/10, n/30  4 400 17/7 L Mihai n/60  6 720 20/7 F Nunn 2/10, n/60  3 690 26 110 (500/201) General Journal p. 1. Date Account Post Ref. Debit Credit 12/7 Accts Payable Control – Kelly Ltd 201/ 250 Purchases Returns 503 250 30/7 Sales Allowances 410 125 Accts Rec’ble Control – Nottage Ltd 110/ 125 375 375 (x) (x) Problem 7.21 Accounting for transactions with several journals GST version Elliott started business on 1 July 2019. The accounting system includes a sales journal, a purchases journal, a cash receipts journal, a cash payments journal and a general journal. The chart of accounts shows the following titles: 100 110 112 115 150 201 205 210 300 400 Cash at Bank Accounts Receivable Control GST Receivable Prepaid Insurance Office Equipment Accounts Payable Control GST Payable Loan Payable A. Elliott, Capital Sales 410 420 500 503 510 550 560 570 SalesReturns and Allowances Discount Received Purchases Purchases Returns Discount Allowed Rent Expense Insurance Expense Sundry Expenses During June, the transactions were as follows (include GST where relevant). Required (a) Record the transactions in the appropriate journals. Indicate how the postings would be made from the journals by entering the relevant posting references. (LO3 and LO4) (a) Cash Receipts Journal p. 1. Date Account Post. Ref. Cash at Bank Dis. All’d GST Payable Sales GST Payable Accts. Rec’ble Other 1/7 A.Elliott, Capital 300 50 000.00 50 000 4/7 Loan Payable 210 30 000.00 30 000 13/7 Cash Sales 1 732.50 1 575 157.50 25/7 Leschev Ltd  5 082.00 5 082 30/7 B Bear  3 395.70 63 6.30 3 465 90 210.20 63 6.30 1 575 157.50 8 547 80 000 (100) (510) (205) (400) (205) (110) (x) Cash Payments Journal p. 1. Date Account Ch. No. Post. Ref. Other Acc/s Payable Purch GST Rec Cash at Bank Dis Rec’d GST Rec 3/7 Rent Expense BPay 550 8 800 880 9 680.00 8/7 Off. Equip. BPay 150 2 520 252 2 772.00 10/7 Hendry Ltd BPay  12 430 12 181.40 226.00 22.60 12/7 Kelly Ltd 977  4 565 4 473.70 83.00 8.30 16/7 Prepaid Ins. Auto Dr 115 3 150 315 3 465.00 28/7 F Nunn 978  4 059 3 977.82 73.80 7.38 30/7 Sundry Exp. 979 570 320 32 352.00 14 790 21 054 1 479 33 901.92 382.80 38.28 (x) (201) (500) (112) (100) (420) (112) Sales Journal p. 1. Date Invoice Account Post. Ref. Sales GST Payable Accounts Receivable 8/7 532 Leschev Ltd  4 620 462 5 082 23/7 533 B Bear  3 150 315 3 465 28/7 534 Nottage Ltd  5 250 525 5 775 13 020 1 302 14 322 (400) (205) (110) Purchases Journal p. 1. Date Account Terms Post. Ref. Purchases GST Receivable Accounts Payable 5/7 Hendry Ltd 2/10, n/30  11 300 1 130 12 430 6/7 Kelly Ltd 1/10, n/30  4 400 440 4 840 17/7 L Mihai n/60  6 720 672 7 392 20/7 F Nunn 2/10, n/60  3 690 369 4 059 26 110 2 611 28 721 (500) (112) (201) General Journal p. 1. Date Account Post Ref. Debit Credit 12/7 Accts Payable Control – Kelly Ltd 201/ 275.00 GST Receivable 112 25.00 Purchases Returns 503 250.00 30/7 Sales Allowances 410 125.00 GST Payable 205 12.50 Accts Rec’ble Control – Nottage Ltd 110/ 137.50 412.50 412.50 (x) (x) Problem 7.22 Journalising transactions, posting and preparation of a trial balance Non-GST version Zhang Ltd uses sales, purchases, cash receipts, cash payments and a general journal along with subsidiary ledgers for accounts receivable and accounts payable. Zhang Ltd’s financial year ends on 31 December 2019. The post-closing trial balance as at 30 June 2019 and schedules of balances of the subsidiary ledgers are presented below. The following transactions occurred in July 2019. Required (a) (i) Journalise the transactions in the appropriate journals. (ii) Make all necessary postings for the month. (iii) Prepare a trial balance of the general ledger as at 31 July 2019, and reconcile subsidiary ledgers with their control accounts. (LO3 and LO4) (a)(i) General Journal p. 1. Date Account Post Ref. Debit Credit 2019 10/7 Accounts Payable Control – F Falla 2-200/ 200 Purchases and returns 5-505 200 To record purchases returns. Purchases Journal p. 1. Date Date of Inv. Account Terms Post Ref. Purchases 2019 5/7 5/7 F Falla 2/10, n/30  4 900 $4 900 (5-500)/(2-200) Sales Journal p. 1. Date Inv. No. Account Terms Post Ref. Sales 2019 3/7 620 Kemp Ltd 2/10, n/30  4 200 19/7 621 Moorman Ltd 2/10, n/30  4 430 20/7 622 C Gable 2/10, n/30  2 200 $10 830 (1-110)/(4-400) Cash Receipts Journal p. 1. Debits Credits Date Account Post Ref. Cash at Bank Dis. All’d Sales A/cs. Rec’able Other A/cs. 2019 1/7 Moorman Ltd  3 600 3 600 7/7 Kemp Ltd  4 116 84 4 200 15/7 Lo Ltd  3 600 3 600 18/7 Cash Sales 2 620 2 620 25/7 Cash Sales 2 800 2 800 30/7 North Ltd  4 630 4 630 30/7 C Gable  2 156 44 2 200 $23 522 $128 $5 420 $18 230 — (1-100) (5-512) (4-400) (1-110) (x) Cash Payments Journal p. 1. Date Account Ch. No. Post. Ref. Other Acc/s Payable Purchases Cash at Bank Dis. Rec’d 2019 2/7 Rent BPay 5-530 3 700 3 700 7/7 G McClure BPay  5 150 5 150 11/7 F Falla BPay  4 700 4 606 94 12/7 Comm. Exp. Trf 5-550 9 580 9 580 16/7 Office Equip. 304 1-170 14 000 14 000 24/7 Ventura Ltd 305 8 240 8 240 26/7 Sundry Exp. 306 5-540 1 280 1 280 $28 560 $18 090 — $46 556 $94 (x) (2-200) (1-100) (4-410) (a)(ii) General Ledger Cash at Bank 1-100 30/6 Balance 26 680 31/7 CP1 46 556 31/7 CR1 23 522 Accounts Receivable Control 1-110 30/6 Balance 15 440 31/7 CR1 18 230 31/7 S1 10 830 Inventory 1-150 30/6 Balance 25 280 Office Equipment 1-170 30/6 Balance 53 000 16/7 CP1 14 000 Accum. Depreciation – Office Equipment 1-175 30/6 Balance 7 800 Accounts Payable Control 2-200 10/7 GJ1 200 30/6 Balance 20 590 31/7 CP1 18 090 31/7 P1 4 900 Share Capital 3-300 30/6 Balance 60 000 Retained Earnings 3-350 30/6 Balance 32 010 Sales 4-400 31/7 CR1 5 420 31/7 S1 10 830 Sales Returns 4-405 Discount Received 4-410 31/7 CP1 94 Purchases 5-500 31/7 P1 4 900 Purchases Returns 5-505 10/7 GJ1 200 Discount Allowed 5-512 31/7 CR1 128 Rent Expense 5-530 31/7 CP1 3 700 Sundry Expenses 5-540 26/7 CP1 1 280 Commission Expense 5-550 12/7 CP1 9 580 Accounts Receivable Subsidiary Ledger Kemp Ltd Date Post Ref Debit Credit Balance 3/7 S1 4 200 4 200 7/7 CR1 4 200 — C Gable Date Post Ref Debit Credit Balance 20/7 S1 2 200 2 200 30/7 CR1 2 200 — Lo Ltd Date Post Ref Debit Credit Balance 30/6 7 210 15/7 CR1 3 600 3 610 Moorman Ltd Date Post Ref Debit Credit Balance 30/6 3 600 1/7 CR1 3 600 — 19/7 S1 4 430 4 430 North Ltd Date Post Ref Debit Credit Balance 30/6 S1 4 630 30/7 CR1 4 630 — Accounts Payable Subsidiary Ledger F Falla Date Post Ref Debit Credit Balance 5/7 P1 4 900 4 900 10/7 GJ1 200 4 700 11/7 CP1 4 700 — Higgins Ltd Date Post Ref Debit Credit Balance 30/6 7 200 G McClure Date Post Ref Debit Credit Balance 30/6 5 150 7/7 CP1 5 150 — Ventura Ltd Date Post Ref Debit Credit Balance 30/6 8 240 24/7 CP1 8 240 — (a)(iii) Subsidiary Ledgers Schedule of Accounts Receivable as at 31 July 2019 Schedule of Accounts Payable As at 31 July 2019 Lo Ltd $3 610 Higgins Ltd $7 200 Moorman Ltd 4 430 $7 200 $8 040 ZHANG LTD Trial Balance as at 31 July 2019 Account Dr Cr Cash at bank 1-100 3 646 Accounts receivable 1-110 8 040 Inventory 1-150 25 280 Office equipment 1-170 67 000 Accum. depr. – office equipment 1-175 7 800 Accounts payable control 2-200 7 200 Share capital 3-300 60 000 Retained earnings 3-350 32 010 Sales 4-400 16 250 Discount received 4-410 94 Purchases 5-500 4 900 Purchases returns 5-505 200 Discount allowed 5-512 128 Rent expense 5-530 3 700 Sundry expenses 5-540 1 280 Commission expense 5-550 9 580 $123 554 123 554 Problem 7.22 Journalising transactions, posting and preparation of a trial balance GST version Zhang Ltd uses sales, purchases, cash receipts, cash payments and a general journal along with subsidiary ledgers for accounts receivable and accounts payable. Zhang Ltd’s financial year ends on 31 December 2019. The post-closing trial balance as at 30 June 2019 and schedules of balances of the subsidiary ledgers are presented below. The following transactions occurred in July 2019. Required (a) (i) Journalise the transactions in the appropriate journals. (ii) Make all necessary postings for the month. (iii) Prepare a trial balance of the general ledger as at 31 July 2019, and reconcile subsidiary ledgers with their control accounts. (b) Rework requirements A.1, A.2 and A.3 assuming that recording of GST is required. Add 1-800 GST Receivable and 2-250 GST Payable to the post-closing trial balance (assume both accounts have zero balances). Round amounts to the nearest dollar. Sales commissions do not incur GST. (LO3 and LO4) (b)(i) General Journal p. 1. Date Account Post Ref. Debit Credit 2019 10/7 Accounts Payable Control – F Falla 2-200/ 220 Purchases Returns 5-505 200 GST Receivable 1-800 20 To record purchases returns. Purchases Journal p. 1. Date Date of Inv. Account Terms Post Ref. Purchases GST Receivable Accounts Payable 2019 5/7 5/7 F Falla 2/10, n/30  4 900 490 5 390 $4 900 $490 $5 390 (5-500) (1-800) (2-200) Sales Journal p. 1. Date Inv. No. Account Terms Post Ref. Sales GST Payable Accounts Receivable 2019 3/7 620 Kemp Ltd 2/10, n/30  4 200 420 4 620 19/7 621 Moorman Ltd 2/10, n/30  4 430 443 4 873 20/7 622 C Gable 2/10, n/30  2 200 220 2 420 $10 830 $1 083 $11 913 (4-400) (2-250) (1-110) Cash Receipts Journal p. 1. Debits Credits Date Account Post Ref. Cash at Bank Disc. All’d GST Payable Sales GST Rec. A/cs. Rec’able Other A/cs. 2019 1/7 Moorman Ltd  3 600 3 600 7/7 Kemp Ltd  4 528 84 8 4 620 15/7 Lo Ltd  3 600 3 600 18/7 Cash Sales 2 882 2 620 262 25/7 Cash Sales 3 080 2 800 280 30/7 North Ltd  4 630 4 630 30/7 C Gable  2 372 44 4 2 420 $24 692 $128 $12 $5 420 $542 $18 870 - (1-100) (5-512) (2-250) (4-400) (2-250) (1-110) (x) (b)(ii) General Ledger Cash at Bank 1-100 30/6 Balance 26 680 31/7 CP1 48 915 31/7 CR1 24 692 Accounts Receivable Control 1-110 30/6 Balance 15 440 31/7 CR1 18 870 3/7 S1 11 913 Inventory 1-150 30/6 Balance 25 280 Office Equipment 1-170 30/6 Balance 53 000 16/7 CP1 14 000 Accum. Depreciation – Office Equipment 1-175 30/6 Balance 7 800 GST Receivable 1-800 31/7 PJ1 490 10/7 GJ1 20 31/7 CP1 1 898 31/7 CP1 9 31/7 CR1 542 Accounts Payable Control 2-200 10/7 GJ1 220 30/6 Balance 20 590 31/7 CP1 18 560 31/7 P1 5 390 GST Payable 2-250 31/7 CR1 12 31/7 SJ1 1 083 31/7 CR1 Share Capital 3-300 30/6 Balance 60 000 Retained Earnings 3-350 30/6 Balance 32 010 Sales 4-400 31/7 CR1 5 420 31/7 S1 10 830 Sales Returns 4-405 Discount Received 4-410 31/7 CP1 94 Purchases 5-500 31/7 P1 4 900 Purchases Returns 5-505 10/7 GJ1 200 Discount Allowed 5-512 31/7 CR1 128 Rent Expense 5-530 31/7 CP1 3 700 Sundry Expenses 5-540 26/7 CP1 1 280 Commission Expense 5-550 12/7 CP1 9 580 Accounts Receivable Subsidiary Ledger Kemp Ltd Date Post Ref Debit Credit Balance 4/7 S1 4 620 4 620 8/7 CR1 4 620 - C Gable Date Post Ref Debit Credit Balance 20/7 S1 2 420 2 420 30/7 CR1 2 420 - Lo Ltd Date Post Ref Debit Credit Balance 30/4 7 210 15/5 CR1 3 600 3 610 Moorman Ltd Date Post Ref Debit Credit Balance 30/6 3 600 1/7 CR1 3 600 - 19/7 S1 4 873 4 873 North Ltd Date Post Ref Debit Credit Balance 30/6 S1 4 630 30/7 4 630 - Accounts Payable Subsidiary Ledger F Falla Date Post Ref Debit Credit Balance 5/7 P1 5 390 5 390 10/7 GJ1 220 5 170 11/7 CP1 5 170 - Higgins Ltd Date Post Ref Debit Credit Balance 30/6 7 200 G McClure Date Post Ref Debit Credit Balance 30/6 5 150 7/7 CP1 5 150 - Ventura Ltd Date Post Ref Debit Credit Balance 30/4 8 240 24/5 CP1 8 240 - (b)(iii) Subsidiary Ledgers Schedule of Accounts Receivable as at 31 July 2019 Moorman Ltd $4 873 Lo Ltd 3 610 $8 483 Schedule of Accounts Payable as at 31 July 2019 Higgins Ltd $7 200 $7 200 ZHANG LTD Trial Balance as at 31 July 2019 Account Dr Cr Cash at bank 1-100 $2 457 Accounts receivable 1-110 8 483 Inventory 1-150 25 280 Office equipment 1-170 67 000 Accum. depr. – office equipment 1-175 7 800 GST Receivable 1-800 1 817 Accounts payable control 2-200 7 200 GST Payable 2-250 1 071 Share capital 3-300 60 000 Retained earnings 3-350 32 010 Sales 4-400 16 250 Discount received 4-410 94 Purchases 5-500 4 900 Purchases returns 5-505 200 Discount allowed 5-512 128 Rent expense 5-530 3 700 Sundry expenses 5-540 1 280 Commission expense 5-550 9 580 124 625 124 625 Problem 7.23 Special journals, subsidiary ledgers, perpetual inventory system James Schroeder uses sales, purchases, cash receipts, cash payments and general journals along with subsidiary ledgers for accounts receivable and accounts payable in the accounts of his business. The business has adopted the perpetual inventory system. The post-closing trial balance as at 31 May 2020 and the subsidiary ledger schedules follow. Ignore GST. The following transactions took place during June 2020. Required (a) Enter the transactions in the appropriate journals. (b) Make all necessary postings for the month to both the general and subsidiary ledgers. (c) Prepare schedules of accounts receivable and accounts payable as at 30 June 2020. (d) Prepare the trial balance as at 30 June 2020. (LO3 and LO4) (a) Cash Receipts Journal Date Account Credited Post Ref. Cash at Bank Disc. Allow Sales Accts. Recvbl. Cost of Sales/ Inventory 2020 June 1 B. Walker.  1 760 1 760 6 Cheng Ltd  2 224.60 45.40 2 270 12 Thorne Ltd  1 760 1 760 16 Cash Sale 1 410 1 410 980 23 Cash Sale 1 575 1 575 1 040 28 Slatter Ltd  2 270 2 270 30 Grifoni Ltd  1 107.40 22.60 1 130 12 107 68 2 985 9 190 2 020 Cash Payments Journal Date Account Debited Cheq No Post Ref Other Accounts Accounts Payable Inventory Cash at Bank Disc. Rec’d 2020 June 3 Rent Exp. BPay 1 890 1 890 4 Abdul-Ahad Ltd BPay  2 520 2 520 10 J. Dabowski 235  2 530 2 479.40 50.60 11 Comm.Exp Trf 5 170 5 170 14 Equipment 236 7 560 7 560 22 Cavallaro Ltd BPay  4 030 4 030 26 Sundry Exp 237 690 690 15 310 9 080 24 339.40 50.60 Sales Journal Date Invoice Account Post Ref. Sales Cost of sales/ Inventory 2020 June 2 534 Cheng Ltd  2 270 1 260 18 535 B. Walker  2 400 1 400 19 536 Grifoni Ltd  1 130 890 5 800 3 550 Purchases Journal Date Account Post Ref. Amount 2020 June 6 J. Dabowski  2 650 2 650 General Journal Date Particulars Post Ref. Debit Credit 2020 June 9 Accounts Payable Control – J. Dabowski  120 Inventory 120 (Returned goods) (b) GENERAL LEDGER Cash at Bank 2020 2020 May 31 Balance b/d 15 120 June 30 CPJ 24 339.40 June 30 CRJ 12 107 June 30 Balance c/d 2 887.60 27 227 27 227.00 June 30 Balance b/d 2 887.60 Accounts Receivable Control 2020 2020 May 31 Balance b/d 7 560 June 30 CRJ 9 190 June 30 SJ 5 800 June 30 Balance c/d 4 170 13 360 13 360 June 30 Balance b/d 4 170 Inventory 2020 2020 May 31 Balance b/d 12 600 June 9 GJ 120 June 30 PJ 2 650 June 30 CRJ 2 020 June 30 SJ 3 550 June 30 Balance c/d 9 560 15 250 15 250 June 30 Balance b/d 9 560 Equipment 2020 2020 May 31 Balance b/d 25 200 June 14 CPJ 7 560 June 30 Balance c/d 32 760 32 760 32 760 June 30 Balance b/d 32 760 Accumulated Depreciation — Equipment 2020 May 31 Balance b/d 2 520 Accounts Payable Control 2020 2020 June 9 GJ 120 May 31 Balance b/d 10 080 June 30 CPJ 9 080 June 30 PJ 2 650 June 30 Balance c/d 3 530 12 730 12 730 June 30 Balance b/d 3 530 J. Schroeder, Capital 2020 May 31 Balance b/d 47 880 Sales 2020 2020 June 30 SJ 5 800 June 30 Balance c/d 8 785 June 30 CRJ 2 985 8 785 8 785 June 30 Balance b/d 8 785 Discount Received 2020 June 30 CPJ 50.60 Cost of Sales 2020 2020 June 30 SJ 3 550 June 30 CRJ 2 020 June 30 Balance c/d 5 570 5 570 5 570 June 30 Balance b/d 5 570 Discount Allowed 2020 June 30 CRJ 68 Rent Expense 2020 June 30 CPJ 1 890 Sundry Expenses 2020 June 26 CPJ 690 Commissions Expense 2020 June 11 CPJ 5 170 ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER Slatter Ltd Date Debit Credit Balance 2020 May 31 Balance 2 270 June 28 CRJ 2 270 — Thorne Ltd Date Debit Credit Balance 2020 May 31 Balance 3 530 June 12 CRJ 1 760 1 770 B. Walker Date Debit Credit Balance 2020 May 31 Balance 1 760 June 1 CRJ 1 760 — 18 SJ 2 400 2 400 Cheng Ltd Date Debit Credit Balance 2020 June 2 SJ 2 270 6 CRJ 2 270 — Grifoni Ltd Date Debit Credit Balance 2020 June 19 SJ 1 130 1 130 30 CRJ 810 — ACCOUNTS PAYABLE SUBSIDIARY LEDGER Abdul-Ahad Ltd Date Debit Credit Balance 2020 May 31 Balance 2 520 June 4 CPJ 2 520 — P. Bengasi Date Debit Credit Balance 2020 May 31 Balance 3 530 Cavallaro Ltd Date Debit Credit Balance 2020 May 31 Balance 4 030 June 22 CPJ 4 030 — J. Dabowski Date Debit Credit Balance 2020 June 6 PJ 2 650 2 650 9 GJ 120 2 530 10 CPJ 2 530 — (c) Schedule of Accounts Receivable as at 30 June 2020 Slatter Ltd $ — Thorne Ltd 1 770 B. Walker 2 400 Cheng Ltd — $4 170 Schedule of Accounts Payable as at 30 June 2020 P. Bengasi 3 530 Cavallaro Ltd — J. Dabowski — $3 530 (d) JAMES SCHROEDER Trial Balance as at 30 June 2020 Account Dr Cr Cash at bank $2 887.60 Accounts receivable control 4 170 Inventory 9 560 Equipment 32 760 Accumulated depreciation – equipment $2 520 Accounts payable control 3 530 James Schroeder, Capital 47 880 Sales 8 785 Discount received 50.60 Cost of sales 5 570 Discount allowed 68 Rent expense 1 890 Sundry expense 690 Commissions expense 5 170 $62 765.60 $62 765.60 Problem 7.24 Special journals, periodic inventory system Non-GST version Chee Yong Chaw began his business on 1 July 2019. The business balances its books at month-end and uses special journals and the periodic inventory system. Transactions for July 2019 were as follows: Required (a) Prepare journal entries for July 2019, using appropriate journals. (b) Prepare the following ledger accounts (T format) for July 2019: i. Accounts Receivable Control ii. Accounts Payable Control iii. Cash at Bank iv. Purchases. (LO3 and LO4) (a) Special journals: Cash Receipts Journal p. 1. Debits Credits Date Account Post Ref. Cash at Bank Disc. All’d Sales A/cs. Rec’able Other A/cs. 2019 July 1 Capital 36 000 36 000 7 Rent rev 900 900 19 J. Ellis ü 2 156 44 2 200 21 Giola Ltd ü 4 851 99 4 950 26 Sales 2 900 2 900 46 807 143 2 900 7 150 36 900 Cash Payments Journal p. 1. Date Account Ch. No. Post. Ref. Other Accounts Acc/s Payable Purchases Cash at Bank Disc. Rec’d 2019 July 2 Rent exp BPay 3 600 3 600 8 Stationery exp 124 2 000 2 000 10 Purchases - 1 980 1 980 15 L. Cao BPay ü 9 000 8 820 180 22 O. Hee 125 ü 6 000 5 880 120 30 Salary exp Trf 3 200 3 200 8 800 15 000 1 980 25 480 300 General Journal p. 1. Date Account Post Ref. Debit Credit 2019 July 1 Office Equipment 21 000 C Y Chaw, Capital 21 000 Equipment contributed by owner. 28 Accounts Payable – L. Cao 1 200 Purchases Returns 1 200 Return of defective goods. Purchases Journal p. 1. Date Account Terms Post Ref. Purchases 2019 July 2 L. Cao 2/15, n/30 ü 9 000 3 Difabio Ltd n/30 ü 7 300 14 O. Hee 2/10, n/30 ü 6 000 23 L. Cao 2/15, n/30 ü 5 500 30 A. Romeo 1/10, n/30 ü 1 800 29 600 Sales Journal p. 1. Date Account Terms Post Ref. Sales 2019 July 6 J. Ellis 2/15, n/30 ü 2 000 13 Giola Ltd 2/10, n/30 ü 4 500 19 O. Kaddish 2/10, n/30 ü 4 600 21 Modra Ltd 2/10, n/30 ü 3 600 28 I. Nizic 2/10, n/30 ü 8 200 22 900 (b) Ledger T accounts: Cash at Bank 2019 2019 July 31 Cash rec. CRJ 46 807 July 31 Cash pay. CPJ 25 480 31 Balance c/d 21 327 46 807 46 807 31 Balance b/d 21 327 Accounts Receivable Control 2019 2019 July 31 Accounts 22 900 July 31 Cash receipts CRJ 7 150 Receivable SJ 31 Balance c/d 15 750 22 900 22 900 31 Balance b/d 15 750 Accounts Payable Control 2019 2019 July 28 Purchase returns GJ 1 200 July 31 Accounts Payable PJ 29 600 31 Cash payment CPJ 15 000 31 Balance c/d 13 400 29 600 29 600 31 Balance b/d 13 400 Purchases 2019 2019 July 31 Purchases PJ 29 600 31 Cash payments CPJ 1 800 July 31 Balance c/d 31 400 31 400 31 400 31 Balance b/d 31 400 Problem 7.24 Special journals, periodic inventory system GST version Chee Yong Chaw began his business on 1 July 2019. The business balances its books at month-end and uses special journals and the periodic inventory system. Transactions for July 2019 were as follows. July 1 2 3 6 7 8 10 13 14 15 19 21 22 23 26 28 29 30 Chee Yong Chaw invested $36 000 cash and $21 000 office equipment into the business. Purchased inventory from L. Cao on account for $9000 plus GST; terms 2/15, n/30. Paid July rental of $3600 plus GST; by interbank transfer to Prime Properties Ltd. Purchased inventory from Difabio Ltd on account for $7300 plus GST; terms n/30. Sold inventory to J. Ellis on account for $2000 plus GST; terms 2/15, n/30. Received July rental of $900 plus GST for space sublet to Perth Services. Purchased stationery supplies for $2000 plus GST; cheque no. 124. Purchased inventory for cash $1980 plus GST. Sold inventory to Giola Ltd on account for $4500 plus GST; terms 2/10, n/30. Purchased inventory from O. Hee on account for $6000 plus GST; terms 2/10, n/30. Paid L. Cao for 2 July purchase with an interbank transfer. Received $2156 from J. Ellis in payment of her account. Sold inventory to O. Kaddish on account for $4600 plus GST; terms 2/10, n/30. Received $4851 from Giola Ltd in payment of its account. Sold inventory to Modra Ltd on account for $3600 plus GST; terms 2/10, n/30. Paid O. Hee for 14 July purchase; cheque no. 125. Purchased inventory from L. Cao on account for $5500 plus GST; terms 2/15, n/30. Sold inventory for cash, $2900 plus GST. Returned defective inventory that cost $1200 to L. Cao. Sold merchandise to I. Nizic on account for $8200 plus GST; terms 2/10, n/30. Purchased merchandise from A. Romeo on account for $1800 plus GST; terms 1/10, n/30. Paid month’s salary of office assistant, $3200 by interbank transfer. Required (a) Prepare journal entries for July 2019, using appropriate journals. (b) Prepare the following ledger accounts (T format) for July 2019: i. Accounts Receivable Control ii. Accounts Payable Control iii. Cash at Bank iv. Purchases. (LO3 and LO4) (a) Special journals: General Journal p. 1. Date Account Post Ref. Debit Credit 2019 July 1 Office Equipment 21 000 C Y Chaw, Capital 21 000 Equipment contributed by owner. 28 Accounts Payable – L. Cao 1 320 Purchases Returns 1 200 GST Receivable 120 Return of defective goods. Purchases Journal p. 1. Date Account Terms Post Ref. Purchases GST Receivable Accounts Payable 2019 July 2 L. Cao 2/15, n/30 ü 9 000 900 9 900 3 Difabio Ltd n/30 ü 7 300 730 8 030 14 O. Hee 2/10, n/30 ü 6 000 600 6 600 23 L. Cao 2/15, n/30 ü 5 500 550 6 050 30 A. Romeo 1/10, n/30 ü 1 800 180 1 980 29 600 2 960 32 560 Sales Journal p. 1. Date Account Terms Post Ref. Sales GST Payable Accounts Receivable 2019 July 6 J. Ellis 2/15, n/30 ü 2 000 200 2 200 13 Giola Ltd 2/10, n/30 ü 4 500 450 4 950 19 O. Kaddish 2/10, n/30 ü 4 600 460 5 060 21 Modra Ltd 2/10, n/30 ü 3 600 360 3 960 28 I. Nizic 2/10, n/30 ü 8 200 820 9 020 22 900 2 290 25 190 (b) Ledger T accounts: Cash at Bank 2019 2019 July 31 Cash rec. CRJ 47 187 July 31 Cash pay. CPJ 27 708 31 Balance c/d 19 479 47 187 47 187 31 Balance b/d 19 479 Accounts Receivable Control 2019 2019 July 31 Accounts 25 190 July 31 Cash receipts CRJ 7 150 Receivable SJ 31 Balance c/d 18 040 25 190 25 190 31 Balance b/d 18 040 Accounts Payable Control 2019 2019 July 28 Purchase returns GJ 1 320 July 31 Accounts Payable PJ 32 560 31 Cash payment CPJ 16 500 31 Balance c/d 14 740 32 560 32 560 31 Balance b/d 14 740 Purchases 2019 2019 July 31 Purchases PJ 29 600 31 Cash payments CPJ 1 980 July 31 Balance c/d 31 580 31 580 31 580 31 Balance b/d 31 580 Problem 7.25 Special journals and financial statements On 1 June 2020, Aaron Draper began trading as a landscape material supplier. The transactions for the month of June 2020 were as follows (ignore GST): The following additional information is available. 1. A physical inventory count held at the close of business on 30 June 2020 revealed that the cost price of inventory on hand amounted to $12 000. 2. The June salary of a part-time sales representative amounting to $800 was not paid until 2 July 2020. 3. Depreciation on shop fittings for the month of June amounted to $152. Required (a) Record the above transactions in the appropriate journals for the business of Aaron Draper. (b) Post the entries in the journals to the general ledger as well as to the debtors and creditors subsidiary ledgers. (c) Prepare the trial balance of Aaron Draper at 30 June 2020. (d) Prepare schedules of debtors and creditors at 30 June 2020, and reconcile the totals with the balances of the related control accounts in the trial balance. (e) Prepare the income statement of Aaron Draper for the month ended 30 June 2020. (f) Prepare the balance sheet of Aaron Draper at 30 June 2020. (LO3 and LO4) (a) Cash Receipts Journal ournal Date Invoice Account Post Ref. Amount 2020 June 4 543 G. Horwood  1 520 9 544 M. Kruger  1 960 19 545 C. Charles  2 120 5 600 Purchases Journal Date Account Post Ref. Amount 2020 June 2 Ailmore Ltd.  10 000 8 Bachleda Ltd.  4 800 17 Cirocco Ltd.  12 000 26 800 General Journal Date Account Post Ref. Debit Credit 2020 June 30 Salaries Expense 800 Salaries Payable 800 Accrual of June salary paid in July June 30 Depreciation Expense 152 Accumulated Depreciation: Shop Fittings 152 Being depreciation of shop fittings for June 2020. (b) GENERAL LEDGER Aaron Draper, Capital 2020 June 1 CRJ 120 000 Aaron Draper, Drawings 2020 June 24 CPJ 2 400 Cash at Bank 2020 2020 June 30 CRJ 144 130 June 30 CPJ 106 004 30 Balance c/d 38 126 144 130 144 130 30 Balance b/d 38 126 Shop Fittings 2020 June 1 CPJ 80 000 Accounts Receivable Control 2020 2020 June 30 SJ 5 600 June 30 CRJ 1 520 30 Bal c/d 4 080 5 600 5 600 30 Balance b/d 4 080 Accounts Payable Control 2020 2020 June 30 CPJ 10 000 June 30 PJ 26 800 30 Bal c/d 16 800 26 800 26 800 30 Bal b/d 16 800 Purchases 2020 2020 June 30 PJ 26 800 June 11 CRJ 380 30 CPJ 3 400 30 Bal c/d 29 820 30 200 30 200 30 Bal b/d 29 820 Salaries Payable 2020 June 30 GJ 800 Sales 2020 2020 June 30 CRJ 22 260 June 30 Bal c/d 27 860 June 30 SJ 5 600 27 860 27 860 30 Bal b/d 27 860 Discount Received 2020 June 30 CPJ 300 Sales Returns 2020 June 16 CPJ 680 Rent Expense 2020 June 1 CPJ 3 000 Stationery Expense 2020 June 10 CPJ 480 Miscellaneous Expenses 2020 June 14 CPJ 720 Freight Inwards 2020 June 18 CPJ 260 Discount Allowed 2020 June 23 CRJ 30 Salaries Expense 2020 2020 June 26 CPJ 2 240 June 26 CPJ 2 600 June 30 GJ 800 June 30 Bal c/d 5 640 5 640 5 640 Bal b/d 5 640 Electricity Expense 2020 June 30 CPJ 300 Telephone Expense 2020 June 30 CPJ 224 Depreciation Expense – Shop Fittings 2020 June 30 GJ 152 Accum. Depn.– Shop Fittings 2020 June 30 GJ 152 (c) AARON DRAPER Trial Balance as at 30 June 2020 Debit Credit Aaron Draper, Capital $120 000 Aaron Draper, Drawings $2 400 Cash at bank 38 126 Shop fittings 80 000 Accumulated depreciation – shop fittings 152 152 Accounts receivable 4 080 Accounts payable 16 800 Salaries payable 800 Purchases 29 820 Sales 27 860 Sales returns 680 Discount received 300 Rent expense 3 000 Stationery expense 480 Miscellaneous expenses 720 Freight inwards 260 Discount allowed 30 Salaries expense 5 640 Electricity expense 300 Telephone expense 224 Depreciation expense – shop fittings 152 $165 912 $165 912 (d) ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER G. Horwood Date Debit Credit Balance 2020 June 4 Sales SJ 1 520 1 520 23 Cash CRJ 1 520 Nil M. Kruger Date Debit Credit Balance 2020 June 9 Sales SJ 1 960 1 960 C. Charles Date Debit Credit Balance 2020 June 19 Sales SJ 2 120 2 120 ACCOUNTS PAYABLE SUBSIDIARY LEDGER Ailmore Ltd Date Debit Credit Balance 2020 June 2 Purchases PJ 10 000 10 000 22 Cash CPJ 10 000 Nil Bachleda Ltd Date Debit Credit Balance 2020 June 8 Purchases PJ 4 800 4 800 Cirocco Ltd Date Debit Credit Balance 2020 June 17 Purchases PJ 12 000 12 000 Schedule of Accounts Receivable as at 30 June 2020 M. Kruger 1 960 C. Charles 2 120 $4 080 Schedule of Accounts Payable as at 30 June 2020 Bachleda Ltd 4 800 Cirocco Ltd 12 000 $16 800 (e) AARON DRAPER Income Statement for the month ended 30 June 2020 INCOME Sales Revenue $27 860 Less: Sales returns and allowances 680 Net sales revenue 27 180 Cost of sales: Beginning inventory — Add: Purchases 29 820 Freight inwards 260 Cost of goods available for sale 30 080 Less: Ending inventory 12 000 Cost of sales 18 080 GROSS PROFIT 9 100 Other income: Discount received 300 9 400 EXPENSES (unclassified) Salaries expense 5 640 Rent expense 3 000 Miscellaneous expense 720 Electricity expense 300 Stationery expense 480 Depreciation expense 152 Telephone expense 224 Discount allowed 30 10 546 LOSS $(1 146) (f) AARON DRAPER Balance Sheet as at 30 June 2020 CURRENT ASSETS: Cash at bank $38 126 Accounts receivable 4 080 Inventory 12 000 $54 206 NON-CURRENT ASSETS: Shop fittings 80 000 Less: Accumulated depreciation (152) 79 848 TOTAL ASSETS 134 054 CURRENT LIABILITIES: Accounts payable 16 800 Salaries payable 800 17 600 TOTAL LIABILITIES 17 600 NET ASSETS $116 454 EQUITY Aaron Draper, Capital* 116 454 TOTAL EQUITY $116 454 * Aaron Draper’ capital account has been determined as follows: Capital introduced $120 000 Less Drawings (2 400) Less Loss for the month (1 146) Problem 7.26 Correction of errors The accountant for House of Hardware, Ricky Hammer, was unable to complete the trial balance of the business’s general ledger. The total of the credit column was less than the total of the debit column by $1760. In addition, the balance of the Accounts Receivable Control account in the general ledger was greater than the total of the schedule of accounts receivable by $1280, and the schedule of accounts payable was more than the credit balance of the Accounts Payable Control account by $520. Ricky’s analysis identified the following errors. 1. A purchase invoice for $540 was recorded in the purchases journal as $450. The purchase was duly posted to the ledgers. 2. There was an error of addition in the debit column in the trial balance, which resulted in the total of the debits being $250 more than it should be. 3. An error of addition had occurred in the sales journal that resulted in the total of the sales journal being recorded and posted as $32 765 instead of the correct figure of $32 675. 4. An allowance of $425 on a sale to a customer was correctly recorded in the general journal and correctly posted to the general ledger. However, the amount was posted to the debit side of the customer’s account in the accounts receivable ledger, instead of being credited. 5. Interest revenue of $860 had been correctly recorded in the cash receipts journal, but had been posted as $680 to the debit of the Interest Expense account. 6. A major supplier, Richard Manning, had also bought goods to the value of $520 during the last week of the financial year. A general journal entry to off-set the $520 against the amount owing by Manning was recorded in the general journal and correctly posted to the general ledger subsidiary ledger control accounts. However, the set-off was not recorded in the subsidiary ledgers. Required (a) Ricky believes that after the above are taken into account, the trial balance will balance. Show your calculations to verify that he is correct. (b) Which of errors 1–6 need to be corrected for the reconciliation of the schedules of accounts receivable and accounts payable to their respective control accounts? Explain, showing calculations, how the adjustments for the errors will achieve reconciliation. (LO1, LO3 and LO4) (a) Transaction: 1. The posting from the Purchases Journal would have resulted in both Purchases and Accounts Payable accounts being debited and credited respectively for $90 ($720 – $270) less than they should have been. Therefore $90 is added back to both debit and credit. 2. Debits in trial balance overstated – therefore reduce debits by $250. No effect on ledgers. 3. The error would have resulted in an additional debit to A/R Control, and an additional credit to Sales of $90. Therefore both debit and credit totals are understated, and $90 needs to be added back to both debits and credits in the trial balance. 4. No effect on general ledger — no effect on trial balance, but affects subsidiary ledgers. 5. The cash at bank debit of $860 is correct. A credit to Interest Revenue for $680 is required, and a further credit of $680 is necessary to offset the incorrect debit to Interest Expense, requiring an additional credit of $1510 (860 + 680) to the trial balance. 6. No effect on general ledger, hence no effect on trial balance, but affects subsidiary ledgers. Reconciliation — Trial Balance Debit Credit Difference + 1 760 Trans 1 + 90 + 90 2 – 250 3 + 90 + 90 5 + 1 510 + 1 690 + 1 690 Trial Balance will balance after the effects of the errors are adjusted. (b) Only transactions 3, 4, and 6 affect the receivables subsidiary ledger. Transaction: 3. Debit to A/R Control $90 less than it should have been – add back to adjust. 4. Since and allowance for $425 was debited instead of being credited, the total of the schedule of receivables needs to be credited (reduced) by $850 ($425 to offset the incorrect debit, plus $425 to achieve the required credit. 6. Since general ledger is correct, the total of the accounts receivable schedule has to be reduced by $520. Reconciliation – A/R Control and A/R Subsidiary Ledger A/R Control A/R Schedule Difference + 1 280 Trans 3 + 90 4 – 850 6 – 520 + 1 370 – 1 370 Only transactions 1 and 6 affect the payables subsidiary ledger. Transaction: 1. The error of $450 affects both the Control account and the Schedule of Accounts Payable, and therefore both need to be increased by $450. 6. The offset requires a debit to the account of Richard Manning, which will reduce the account balance by $520, and hence the total of the schedule of accounts payable needs to be reduced. Reconciliation – A/P Control and A/R Subsidiary Ledger A/P Control A/P Schedule Difference + 520 Trans 1 + 450 + 450 Trans 6 – 520 + 450 – 450 Problem 7.27 Detecting errors in an accounting system On 30 June 2019 the following information appeared in the accounting records of Ndung and Mkoka. • Balance of Accounts Receivable Control account, $3725 • Total of schedule of accounts receivable, $1970 • Balance of Accounts Payable Control account, $5010 • Total of schedule of accounts payable, $2745 Because the schedules and control account balances do not agree, an investigation was carried out. The following errors and omissions were discovered. 1. The schedule of accounts payable was understated by $545 because of error in addition. 2. The balance of a debtor was accidentally left out of the schedule of accounts receivable, $25. 3. The total of the accounts payable column in the cash payments journal is overstated by $200 because of an addition error. 4. $108 owed by a debtor was written off as uncollectable. The write-off was recorded in the general journal, but the entry was never posted. 5. The total payment of $1955 made to creditors was debited to the Accounts Receivable Control account in error. 6. The sales journal was incorrectly added and posted as $2139. The total should have been $2319. 7. A credit note given for $40 was recorded as $60 in the general journal and posted as such. 8. An invoice for $125 was recorded correctly in the purchases journal but posted to the creditor’s account as $152. 9. A cheque received from a debtor for $65 was dishonoured. To record the dishonoured cheque, an entry was made in the cash payments journal but included in the accounts payable column in error. The posting to the debtor’s account in the subsidiary ledger was done correctly. Required (a) Rule columns as shown below. Indicate how the errors and omissions should be corrected by inserting the amounts in the correct columns. Obtain totals for the columns and reconcile the control totals to the respective schedule totals. (LO1, LO2 and LO4) (a) No. Accounts Receivable Control Schedule of Accounts Receivable Accounts Payable Control Schedule of Accounts Payable Dr Cr Dr Cr Dr Cr Dr Cr 1 545 2 25 3 200 4 108 108 5 1 955 1 955 6 180 7 20 20 8 27 9 65 65 265 2 063 45 108 1 955 265 27 545 Old 3 725 1 970 5 010 2 745 New 1 927 1 907 3 320 3 263 3 990 3 990 2 015 2 015 5 275 5 275 3 290 3 290 Problem 7.28 Comprehensive accounting system Salmon Swim Centre uses a sales journal, purchases journal, cash receipts journal, cash payments journal and a general journal. The business also maintains subsidiary ledgers for accounts receivable and accounts payable, in addition to the related control accounts (ignore GST). The relevant account balances as of 31 December 2019 were as follows. The accounts receivable and accounts payable subsidiary ledger balances were as follows. The following transactions occurred during the first quarter of 2020. Required (a) Enter the first quarter’s transactions in the appropriate journals. (b) Open the necessary general ledger accounts, the accounts receivable subsidiary ledger accounts, and the accounts payable subsidiary ledger accounts. (c) Post the data from the journals to the appropriate general ledger and subsidiary ledger accounts. (d) Prepare a schedule of accounts receivable and accounts payable as at 31 March 2020, to confirm the balances in the control accounts. (e) Prepare a trial balance as at 31 March 2020. (LO1, LO4 and LO5) (a) Purchases Journal p. 1 Date Date of Inv. Account Terms Post Ref. Purchases 2020 15/1 Pellham & Co 2/10, n/30  6 000 4/3 Nelligan Ltd n/30  8 000 $14 000 (600)/(300) Sales Journal p. 1 Date Inv. No. Account Terms Post Ref. Sales 2020 11/1 401 K. Mezzini  2 000 23/2 402 K. Mezzini  1 000 16/3 403 A. Khalil  100 $3 100 (120)/(500) General Journal Date Account Post Ref. Debit Credit 27/3 Sales Returns & Allowances 510 100 Accounts Receivable – A. Khalil 110/ 100 (Sales allowance given) Cash Receipts Journal p. 1 Debits Credits Date Account Post Ref. Cash at Bank Dis. All’d Sales A/cs. Rec’able Other A/cs. 2020 3/1 S H Guan  1 725 35 1 760 19/1 M Falzon  1 200 1 200 10/2 Cash Sales 4 000 4 000 13/2 R. Jamal  2 200 2 200 $9 125 $35 $4 000 $5 160 (100) (610) (500) (120) (x) Cash Payments Journal p. 1. Date Account Ch. No. Post. Ref. Acc/s Payable Purchases Cash at Bank Dis. Rec’d 2020 20/1 Pellham & Co  2 200 2 200 25/1 Pellham & Co  6 000 5 880 120 28/2 Yap United Ltd  4 400 4 400 22/3 Nelligan Ltd  4 400 4 400 $17 000 $16 880 $120 (300) (100) (520) (b) and (c) General Ledger Cash at Bank 100 31/12 Balance 10 800 31/3 CPJ 16 880 31/3 CRJ 9 125 Accounts Receivable Control 120 31/12 Balance 13 200 27/3 GJ 100 31/3 SJ 3 100 31/3 CRJ 5 160 Inventory 140 31/12 Balance 19 000 Equipment 200 31/12 Balance 250 000 Accounts Payable Control 300 31/3 CPJ 17 000 31/12 Balance 11 000 31/3 PJ 14 000 Bank Loan 330 31/12 Balance 120 000 S. Salmon, Capital 400 31/12 Balance 162 000 Sales 500 31/3 CRJ 4 000 31/3 SJ 3 100 Sales Returns and Allowances 510 27/3 GJ 100 Discount Received 520 31/3 CPJ 120 Purchases 600 31/3 PJ 14 000 Discount Allowed 610 31/3 CRJ 35 Accounts Receivable Subsidiary Ledger M. Falzon Date Post Ref Debit Credit Balance 31/12 2 640 19/1 CRJ 1 200 1 440 S. H. Guan Date Post Ref Debit Credit Balance 31/12 1 760 3/1 CRJ 1 760 — R. Jamal Date Post Ref Debit Credit Balance 31/12 4 400 13/2 CRJ 2 200 2 200 A. Khalil Date Post Ref Debit Credit Balance 31/12 3 300 16/3 SJ 100 3 400 27/3 GJ 100 3 300 K. Mezzini Date Post Ref Debit Credit Balance 31/12 1 100 11/1 SJ 2 000 3 100 23/2 SJ 1 000 4 100 Accounts Payable Subsidiary Ledger Nelligan Ltd Date Post Ref Debit Credit Balance 31/12 2 200 4/3 PJ 8 000 10 200 22/3 CPJ 4 400 5 800 Concepts-R-U Date Post Ref Debit Credit Balance 31/12 2 200 15/1 PJ 6 000 8 200 20/1 CPJ 2 200 6 000 25/1 CPJ 6 000 — Yap United Ltd Date Post Ref Debit Credit Balance 31/12 6 600 28/2 CPJ 4 400 2 200 (d) Subsidiary Ledgers Schedule of Accounts Receivable as at 31 March 2020 Schedule of Accounts Payable as at 31 March 2020 J. Dicks $1 440 Nelligan Ltd $5 800 K. Morehead — Concepts-R-U — R. Jamal 2 200 Yap United Ltd 2 200 R. Robbie 3 300 K. Mezzini 4 100 $11 040 $ 8 000 (e) TRAVELLER RESORT Trial Balance as at 31 March 2020 Account Dr Cr Cash at bank 100 $3 045 Accounts receivable 120 11 040 Inventory 140 19 000 Equipment 200 250 000 Accounts payable control 300 $8 000 Bank loan 330 120 000 S. Salmon, Capital 400 162 000 Sales 500 7 100 Sales returns and allowances 510 100 Discount received 520 120 Purchases 600 14 000 Discount allowed 610 35 $297 220 $297 220 Problem 7.29 Comprehensive problem Non-GST version The post-closing trial balance of Raschella Ltd as at 1 November 2019 contained the following normal balances. Subsidiary ledger balances at 31 October 2019 were as follows. Transactions for the month of November 2019 were as follows. Required (a) Record the November transactions (round amounts to the nearest dollar) in appropriate special journals and the general journal. (b) Open running balance accounts in the subsidiary ledgers and their control accounts in the general ledger, and enter the opening details of these accounts. (c) Post relevant data from the journals to the appropriate running balance subsidiary ledger accounts. (d) Prepare schedules of accounts receivable and accounts payable as at 30 November 2019, and reconcile to the appropriate subsidiary ledger control accounts in the general ledger. (LO1, LO3 and LO4) (a) Purchases Journal p. 1. Date Date of Inv. Account Terms Post Ref. Purchases 2019 1/11 B. Lau n/30  2 400 4/11 Warnes Ltd 1/10, n/60  2 400 13/11 Gent Ltd 1/15, n/30  3 960 30/11 Gent Ltd 1/15, n/30  3 630 $12 390 (5110) (2110) Sales Journal p. 1. Date Inv. No. Account Terms Post Ref. Sales 2019 10/11 M. Menz 2/10, n/30  4 500 12/11 M. Peterson 2/10, n/30  4 800 18/11 D. Temby 2/10, n/30  4 650 $13 950 (4110) (1120) Cash Payments Journal p. 1. Date Account Ch. No. Post. Ref. Other A/cs. Payable Purchases Cash at Bank Dis. Rec’d 2019 1/11 Prepaid Ins. 400 1150 900 900 4/11 Gent Ltd 401  1 490 1 475 15 5/11 B. Lau 402  1 650 1 650 8/11 Rent Exp. 403 5130 540 540 8/11 Warnes Ltd 404  1 640 1 624 16 14/11 Salaries Exp. 405 5150 1 200 1 200 20/11 Cash Pur. 407 5 400 5 400 26/11 Gent Ltd 408  3 883 3 844 39 27/11 Salaries Exp. 409 5150 1 200 1 200 28/11 Elect. Exp. 410 5140 210 210 $4 050 $8 663 $5 400 $18 043 $70 (x) (2110) (5110) (1100) (4120) Cash Receipts Journal p. 1. Debits Credits Date Account Post Ref. Cash at Bank Dis. All’d Sales A/cs. Rec’able Other A/cs. 2019 3/11 M. Peterson  2 058 42 2 100 10/11 Share Cap. 3110 30 000 30 000 11/11 D. Temby  1 430 1 430 14/11 Cash Sales 9 200 9 200 20/11 M. Menz  1 320 1 320 21/11 M. Peterson  660 660 21/11 D. Temby  4 557 93 4 650 30/11 Cash Sales 9 000 9 000 $58 225 $135 $18 200 $10 160 $30 000 (1100) (5120) (4110) (1120) (x) General Journal Date Description Post Ref. Debit Credit 2019 3/11 Sales Returns and Allowances 4115 110 Accounts Receivable – N. Mobius 1120/ 110 Return of goods from N. Mobius 5/11 Accounts Payable – B. Lau 2110/ 1 000 Bills Payable 2120 1 000 Bills sent in part payment. 11/11 Bills Receivable 1130 1 430 Accounts Receivable – T Trimble 1120/ 1 430 Promissory note received from T Trimble. 18/11 Accounts Payable – Gent Ltd 2110/ 77 Purchases Returns & Allowances 5115 77 Returned goods to Gent Ltd. 19/11 Bills Receivable – M. Peterson 1130 4 140 Accounts Receivable 1120/ 4 140 Promissory note received from M. Peterson. (b) and (c) Accounts Receivable Subsidiary Ledger M. Menz Date Post Ref Debit Credit Balance 2019 10/11 SJ1 4 500 4 500 20/11 CRJ1 1 320 3 180 M. Peterson Date Post Ref Debit Credit Balance 2019 31/10 2 100 3/11 CRJ1 2 100 — 13/11 SJ1 4 800 4 800 19/11 CRJ1 660 4 140 19/11 GJ1 4 140 — D Temby Date Post Ref Debit Credit Balance 2019 31/10 2 860 11/11 CRJ1 1 430 1 430 11/11 GJ1 1 430 — 18/11 SJ1 4 650 4 650 26/11 CRJ1 4 650 — N. Mobius Date Post Ref Debit Credit Balance 2019 31/10 2 310 3/11 GJ1 110 2 200 Accounts Payable Subsidiary Ledger Warnes Ltd Date Post Ref Debit Credit Balance 2019 31/10 1 640 4/11 PJ1 2 400 4 040 9/11 CPJ1 1 640 2 400 Gent Ltd Date Post Ref Debit Credit Balance 2019 31/10 1 490 4/11 CPJ1 1 490 — 13/11 PJ1 3 960 3 960 18/11 GJ1 77 3 883 26/11 CPJ1 3 883 — 30/11 PJ1 3 630 3 630 B. Lau Date Post Ref Debit Credit Balance 2019 31/10 2 650 1/11 PJ1 2 400 5 050 5/11 CPJ1 1 650 3 400 5/11 GJ1 1000 2 400 Accounts Receivable 1120 Date Post Ref Debit Credit Balance 2019 1/9 7 270 2/11 GJ1 110 7 160 11/11 GJ1 1 430 5 730 21/11 GJ1 4 140 1 590 30/11 S1 13 950 15 540 30/11 CR1 10 160 5 380 Accounts Payable 2110 Date Post Ref Debit Credit Balance 2019 1/11 5 780 5/11 GJ1 1 000 4 780 18/11 GJ1 77 4 703 30/11 PJ1 12 390 17 093 30/11 CP1 8 663 8 430 (d) Subsidiary Ledgers Schedule of Accounts Receivable as at 30 November 2019 Schedule of Accounts Payable as at 30 November 2019 M. Menz 3 180 Warnes Ltd $2 400 N. Mobius $2 200 Gent Ltd 3 630 M. Merlin 2 400 $5 380 $8 430 Problem 7.29 Comprehensive problem GST version The post-closing trial balance of Raschella Ltd as at 1 November 2019 contained the following normal balances. Account no. Account title Account balance 1100 1120 1130 1140 1150 1160 1210 1215 1220 1225 2110 2120 2150 3110 3120 4110 4115 4120 5110 5115 5120 5130 5140 5150 Cash at Bank Accounts Receivable Bills Receivable Inventory Prepaid Insurance GST Receivable Delivery Vehicle Accumulated Depreciation – Delivery Vehicle Office Equipment Accumulated Depreciation – Office Equipment Accounts Payable Bills Payable GST Payable Share Capital Retained Earnings Sales Sales Returns and Allowances Discount Received Purchases Purchases Returns and Allowances Discount Allowed Rent Expense Electricity Expense Salaries Expense $ 60 000 7 270 750 80 000 — 2 000 40 000 4 000 24 000 4 000 5 780 — 3 500 192 000 4 740 — — — — — — — — — Subsidiary ledger balances at 31 October 2019 were as follows. Transactions for the month of November 2019 were as follows. Nov. 1 3 4 5 8 10 11 12 13 14 18 19 20 21 26 27 28 30 Bought inventory from B. Lau on credit, $2400 plus GST; terms n/30. Purchased 1 year’s insurance cover for $900 plus GST, cheque no. 400. Inventory sold to N. Mobius last month was returned. Issued an adjustment note for the amount of $110 (including GST). Received a cheque from M. Peterson to cover the sale made on 28 October. Paid Gent Ltd cheque no. 401 for purchase of 23 October. Purchased inventory from Warnes Ltd on credit, $2400 plus GST; terms 1/10, n/60. Issued cheque no. 402 for $1650 to B. Lau on account, and issued a 60-day 10% bill payable for the balance due on the purchase of 10 October. Paid November rent of premises $540 plus GST, cheque no. 403. Paid Warnes Ltd for the purchase of 19 October, cheque no. 404. Sold inventory on account to M. Menz, $4500 plus GST; terms 2/10, n/30. Received cash for the issue of additional share capital, $30 000 (GST-free). Received cheque for $1430 from D. Temby in part payment of the sale made on 18 October, together with a bill receivable for the balance due. Sold merchandise to M. Peterson on account, $4800 plus GST; terms 2/10, n/30. Purchased goods on credit from Gent Ltd, $3960; terms 1/15, n/30 (including GST). Paid fortnightly salaries by cheque no. 405, $1200. Cash sales from 1 November to 14 November, $9200 plus GST. Sold goods to D. Temby on account, $4650 plus GST; terms 2/10, n/30. Received an adjustment note from Gent Ltd for $77 for defective goods returned (includes GST). Forwarded cheque no. 406 to ATO to cover GST owing from previous month, $1500. M. Menz forwarded a cheque for $1320 on account; no discount was allowed. Purchased goods for cash. Issued cheque no. 407 for $5400 plus GST. Received a cheque from M. Peterson for $660 and a promissory note (bill receivable) for the balance of his account; no discount was allowed. D. Temby forwarded a cheque for the goods sold on 18 November. Paid Gent Ltd for the purchase made on 13 November, cheque no. 408. Paid fortnightly salaries with cheque no. 409, $1200 (GST-free). Electricity account paid by cheque no. 410, $210 plus GST. Cash sales from 15 November to 30 November, $9000 plus GST. Purchased inventory on credit from Gent Ltd, $3630; terms 1/15, n/30 (includes GST). Required (a) Record the November transactions (round amounts to the nearest dollar) in appropriate special journals and the general journal. (b) Open running balance accounts in the subsidiary ledgers and their control accounts in the general ledger, and enter the opening details of these accounts. (c) Post relevant data from the journals to the appropriate running balance subsidiary ledger accounts. (d) Prepare schedules of accounts receivable and accounts payable as at 30 November 2019, and reconcile to the appropriate subsidiary ledger control accounts in the general ledger. (e) Prepare the GST Payable and GST Receivable accounts as they would appear at 30 November 2019. (LO1, LO3 and LO4) (a) Purchases Journal p. 1. Date Date of Inv. Account Terms Post Ref. Purchases GST Receivable Accounts Payable 2019 1/11 B. Lau n/30  2 400 240 2 640 4/11 Warnes Ltd 1/10, n/60  2 400 240 2 640 13/11 Gent Ltd 1/15, n/30  3 600 360 3 960 30/11 Gent Ltd 1/15, n/30  3 300 330 3 630 $11 700 $1 170 $12 870 (5110) (1160) (2110) Sales Journal p. 1. Date Inv. No. Account Terms Post Ref. Sales GST Payable Accounts Receivable 2019 10/11 M. Menz 2/10, n/30  4 500 450 4 950 12/11 M. Peterson 2/10, n/30  4 800 480 5 280 18/11 D. Temby 2/10, n/30  4 650 465 5 115 $13 950 $1 395 $15 345 (4110) (2150) (1120) General Journal Date Description Post Ref. Debit Credit 2019 3/11 Sales Returns and Allowances 4115 100 GST Payable 2150 10 Accounts Receivable – N. Mobius 1120/ 110 Return of goods from N. Mobius 5/11 Accounts Payable – B. Lau 2110/ 1 000 Bills Payable 2120 1 000 Bills sent in part payment. 11/11 Bills Receivable 1130 1 430 Accounts Receivable – T Trimble 1120/ 1 430 Promissory note received from T Trimble. 19/11 GST Payable 2150 2 000 GST Receivable 1160 2 000 Transfer GST Receivable from October to GST Payable. 18/11 Accounts Payable – Gent Ltd 2110/ 77 Purchases Returns & Allowances 5115 70 GST Receivable 1160 7 Returned goods to Gent Ltd. 21/11 Bills Receivable – M. Peterson 1130 4 620 Accounts Receivable 1120/ 4 620 Promissory note received from M. Peterson. (b) and (c) Accounts Receivable Subsidiary Ledger M. Menz Date Post Ref Debit Credit Balance 2019 10/11 SJ1 4 950 4 950 20/11 CRJ1 1 320 3 630 M. Peterson Date Post Ref Debit Credit Balance 2019 31/10 2 100 3/11 CRJ1 2 100 — 13/11 SJ1 5 280 5 280 21/11 CRJ1 660 4 620 21/11 GJ1 4 620 — T Trimble Date Post Ref Debit Credit Balance 2019 31/10 2 860 11/11 CRJ1 1 430 1 430 11/11 GJ1 1 430 — 18/11 SJ1 5 115 5 115 26/11 CRJ1 5 115 — N. Mobius Date Post Ref Debit Credit Balance 2019 31/10 2 310 3/11 GJ1 110 2 200 Accounts Payable Subsidiary Ledger Warnes Ltd Date Post Ref Debit Credit Balance 2019 31/10 1 640 4/11 PJ1 2 640 4 280 9/11 CPJ1 1 640 2 640 Gent Ltd Date Post Ref Debit Credit Balance 2019 31/10 1 490 4/11 CPJ1 1 490 — 13/11 PJ1 3 960 3 960 19/11 GJ1 77 3 883 27/11 CPJ1 3 883 — 30/11 PJ1 3 630 3 630 B. Lau Date Post Ref Debit Credit Balance 2019 31/10 2 650 1/11 PJ1 2 640 5 290 5/11 CPJ1 1 650 3 640 5/11 GJ1 1000 2 640 Accounts Receivable 1120 Date Post Ref Debit Credit Balance 2019 1/9 7 270 2/11 GJ1 110 7 160 11/11 GJ1 1 430 5 730 21/11 GJ1 4 620 1 110 30/11 S1 15 345 16 455 30/11 CR1 10 625 5 830 Accounts Payable 2110 Date Post Ref Debit Credit Balance 2019 1/11 5 780 5/11 GJ1 1 000 4 780 18/11 GJ1 77 4 703 30/11 PJ1 12 870 17 969 30/11 CP1 8 663 8 910 (d) Subsidiary Ledgers Schedule of Accounts Receivable as at 30 November 2019 Schedule of Accounts Payable as at 30 November 2019 M. Menz 3 630 Warnes Ltd $2 640 N. Mobius $2 200 Gent Ltd 3 630 M. Merlin 2 640 $5 830 $8 910 (e) GST Receivable 1160 Date Post Ref Debit Credit Balance 2019 1/11 2 000 19/11 GJ1 7 1 993 19/11 GJ1 2 000 (7) 30/11 PJ1 1 170 1 163 30/11 CPJ1 705 1 868 30/11 CPJ1 6 1 862 GST Payable 2150 Date Post Ref Debit Credit Balance 2019 1/11 3 500 3/11 GJ1 10 3 490 19/11 GJ1 2 000 1 490 19/11 CPJ1 1 500 (10) 30/11 CRJ1 1 820 1 810 30/11 CRJ1 13 1 797 30/11 SJ1 1 395 3 192 Case studies Decision analysis Designing an accounting system Silvertail Petroleum Ltd is a distributor of a range of petroleum products including petrol, oils and grease in a rural area of Australia from its depot based at Gubbo. Petrol is stored in bulk storage tanks at the depot and these tanks are refilled twice weekly by bulk tankers from the refinery. At each refuelling, a receiving report is prepared and sent to the accounting department. Other bulk supplies are replenished as required. The refinery sells on the basis of net 30 days and does not allow discount. Silvertail Petroleum Ltd operates several delivery trucks that travel to customers in the surrounding district to deliver supplies of fuel and other products. For each delivery a sales docket is prepared on which is recorded the number of litres delivered at each drop. These sales dockets are returned to the accounting department at the end of each day, invoices are prepared by pricing quantities shown on the dockets, and these are mailed to customers. Customers are allowed a discount for payment within 10 days. The business has twelve employees who are paid on the fifteenth and the last day of each month. Supplies and other expenses are charged to Silvertail Petroleum Ltd as they are incurred. Required You have been asked for an opinion on the accounting system that would be most suited to the needs of this company. Give your response to the following queries: (a) Should the company use a sales journal? Why or why not? If a sales journal is used, what procedures would you recommend to record entries in it and to send invoices to customers as soon as possible after deliveries? (b) Is a purchases journal needed, or can all purchases be recorded in the general journal? Explain. (c) Should the company use a cash receipts journal, considering that some 30 to 50 cheques are received by mail each week? If so, what special columns would you use? (d) Should the company use a cash payments journal? Explain. (a) From the information supplied, weekly sales are made to numerous customers who may buy a variety of products, e.g. petrol, oil, grease. It would be advantageous to use a sales journal. Since a subsidiary ledger for accounts receivable should be used, this would enable posting to be done daily for individual customers, and posting from the sales journal to the accounts would be done more conveniently and speedily. The sales journal could be subdivided to enable an analysis of sales by product lines, and total sales per product would be posted to a specific sales account for each product. Speeding up the preparation of invoices could be achieved by using a computer package to do invoicing. This would improve both speed and accuracy of processing invoices. (b) Since biweekly deliveries are made, it may be possible to record purchases directly through the general journal. However, since a range of products is being purchased, it may be advantageous to use a multi-column purchases journal where a separate column would be maintained for each class of product being purchased. This type of journal would enable records of the cost of all supplies to be summarised in the journal while allowing total costs of purchases to be posted to the general ledger accounts. (c) Yes. Given the number of receipts, such a journal would provide an adequate record of receipts and show daily deposits to the bank account. Discount allowed to customers could also be conveniently handled. the posting process would be greatly improved by at least making use of Cash at Bank, Discount Allowed, Accounts Receivable, Sales (for cash sales) and Other (to handle the other types of receipts). (d) There are few regular payments for petroleum supplies and wages are paid only twice per month. If other payments were not numerous, payments could be handled from cheque butts through the general journal to the appropriate ledger accounts. A slight advantage could be gained through the payments journal in summarising payment into categories and enabling posting of total amounts for each of these categories. Critical thinking Information technology has changed traditional accounting Teresa Greene owns and manages a craft and material shop called All Sewn Up. Most of the revenue of All Sewn Up is from the sale of craft materials, although some revenue is made by giving craft lessons to groups of six customers at a time. As Teresa’s shop relies on a large number of suppliers of small amounts of different craft materials, she has difficulty keeping track of all her accounts payable. Teresa is not very well organised and so struggles to send out accounts to her customers or collect money from them. Teresa is considering implementing a computerised accounting system as she has been doing a computer course at a local college and feels that it could help her to be more organised. Required (a) What source documents would be required in a manual accounting system in order to record the sales to customers and receipt of cash, and to ensure correct payment of money to suppliers? (b) In her computer course Teresa learnt that the focus in accounting should not be on bookkeeping but on the use of the information ‘inside the computer’ to make better decisions and to better manage the business. In what ways could a computerised accounting package help Teresa make better decisions and manage her business better? (a) To record sales to customers, both credit and cash, use a tax invoice and record in the appropriate journal. Compare tax invoices and adjustment (credit) notes given. To be aware of customer accounts that are due and overdue, file invoices in terms of due date and keep subsidiary records up-to-date by updating at least daily. To ensure correct payment to suppliers, use tax invoices received filed chronologically in terms of any discount receivable, in conjunction with the purchase order and receiving report. (b) An integrated accounting package can assist by providing up-to-date information for all customer accounts that are due, and for adjustment (credit) notes as recorded in the accounts receivable master file (updated regularly from tax invoices and adjustment (credit) notes). The accounts payable master file (updated regularly from tax invoices received and adjustment (debit) notes) should provide details of all accounts that must be paid in order to claim discounts and to pay when due. Computerisation enables all transactions to be analysed via enquiries at any time to ensure all necessary approvals have been given before any payment is authorised. Integrated packages can update the general ledger at the same time as the transaction is recorded in the master files for receivables and payables, as well as updating inventory records for all items purchased and sold. By better managing accounts receivable and accounts payable, Teresa will be able to improve the cash position of the business. A computerised system will also answer questions about which inventory items are the bestselling and which ones sit on the shelves for long periods with minimal sales. This will help Teresa better target the needs of her customers and to avoid running out of popular inventory items and to avoid wasting space and investment in unpopular inventory items. By having information on what regular customers purchase, Teresa can better serve their needs and hopefully increase the amount of business she generates from her key customers. A computerised system will help Teresa keep track of what inventory items she orders from each supplier and ensure that she minimises the number of orders placed. When an inventory item is running low, she can easily see what other inventory is supplied by the same supplier and check the levels of inventory of those items before placing an order. This can significantly reduce the number of orders and freight costs involved. Such a system will also assist in recording and reporting the effects of the GST, and the preparation of Business Activity Statements (BAS). Ethics and governance Computerised shipping documents Fremantle Fisheries (FF) operates a fleet of fishing boats out of three ports in Western Australia — Fremantle, Bunbury and Geraldton. Each port has its own fishing fleet and all seafood caught is sold through the Fish Marketing Board, a board established by the state government. The accounting procedures for all sales to the Board are centralised and handled by a computerised accounting system at FF’s head office in Perth. The majority of the company’s employees work on the fishing boats, and are paid bonuses from head office, depending on the volume, type and quality of seafood caught. This means that head office must be able to identify the source of each shipment sent to the Board. John Dorey, who was originally based in Geraldton and handled the accounting procedures at Geraldton before computerisation, is now based in Perth as manager of the computerised accounting system. His father and two sisters are still based in Geraldton and work for the company on the fishing boats, as do many friends of the family. Shipping documents are sent to the Perth head office from all three ports, and the source of the shipment is clearly marked in the top right-hand corner of the documents. Occasionally, however, details of the source are missing, and it is not easy to trace the source quickly. Dorey, in his capacity as manager of the system, is keen to keep the system fully operational and up to date, and has instructed the keyboard operator to insert any one of three Geraldton source codes, namely those of his father and two sisters, whenever the source code is missing from the shipping document. The keyboard operator knows that the codes given are those belonging to his boss’s family, but nevertheless complies with the request for fear that non-compliance may lead to his own dismissal. Required (a) Who are the stakeholders in this situation? (b) What are the ethical issues involved here as a result of Dorey’s request and the action taken by the keyboard operator? (c) If you were the keyboard operator, what action (if any) would you take to prevent this situation occurring? Why? (a) The stakeholders in this situation are: • John Dorey, manager of the computerised accounting system in FF • the keyboard operator • all employees on fishing boats, including Dorey’s father and brothers • the top management of FF. (b) It is not ethical for Dorey to add employee bonuses of others on to the bonuses of his father and brothers, even if he is merely trying to keep the system fully operational without wasting time trying to find the original source of the shipment. It is not ethical also to instil fear of dismissal into the keyboard operator’s mind if he does not carry out his boss’s instructions. (c) Alternative actions for the keyboard operator are: 1. Comply with Dorey’s request and say nothing, thus covering up the wrongdoing, but keeping the system operating smoothly. ‘After all, it only happens occasionally!’. 2. Blow the whistle by reporting Dorey to the chief executive officer (or to the media?). 3. Endeavour to trace the source of the shipment with or without Dorey knowing, in order to be fair to the employees concerned, even if the system is forced to slow down, thus incurring Dorey’s wrath. 4. Reject any invoices without the appropriate number and send them back to their source for a number to be provided. 5. Resign, or request a transfer to another area within the company. 6. Whisper about Dorey in the corridors of the office. Financial analysis Refer to the latest financial report of JB Hi-Fi Limited on its web site, www.jbhifi.com.au, and answer the following questions. 1. JB Hi-Fi Limited is one of Australia’s major retail organisations. After reviewing the financial report, what types of different accounting journals, if any, would you expect the company to use? 2. From the statement of cash flows, name the journal(s) or journal summaries in which you would expect to find the following transactions recorded: (a) cash receipts from customers (b) cash paid to suppliers and employees (c) dividends paid (d) payments for plant and equipment. 3. From the notes in relation to revenues and expenses, name the journal(s) or journal summaries in which you would expect to find the following transactions recorded: (a) depreciation and amortisation expenses (b) employee benefits expense (c) financial services fees revenue (d) lease and occupancy expenses. 4. In general journal format, provide entries which could be made by the company to account for all the items in (2) and (3) above. The solution below is based on the JB Hi-Fi Limited Annual Report for 2016, available on the JB Hi-Fi website: www.jbhifi.com.au. 1. Since JB Hi-Fi Limited is a large retail organisation, with considerable levels of trade receivables (see note 12 to the annual financial report) and trade payables (see note 19), the company would most likely have the following journals or some variation thereof: sales journal, purchases journal, cash receipts journal, cash payments journal, and general journal. The company may also use special journals for sales returns and purchases returns in some segments of the business, because JB Hi-Fi Limited handles returns from customers and to suppliers. Because of the quantities of property plant and equipment held, the company may also have a special journal for equipment purchases. Since a computerised accounting system is being used, these journals would probably be optional ‘transaction summary’ reports only. 2. (a) Cash receipts (b) Cash payments (c) Cash payments (d) Cash payments 3. (a) General journal – adjusting entry (b) Cash payments journal and general journal for any adjusting entry (c) Cash receipts journal and general journal for any adjusting entry (d) Cash payments and general journal for any adjusting entry. 4. Receipts from customers: Cash at Bank Accounts Receivable/Sales Payments to suppliers and employees: Accounts Payable, Wages Expense/Various Expenses Cash at Bank Dividends paid: Dividend Payable Cash at Bank Payment for plant and equipment: Plant and Equipment Cash at Bank Depreciation and amortisation expenses: Depreciation/Amortisation Expense Accumulated Depreciation/Amortisation Employee benefits expense: Wages and Salaries Expense Cash at Bank For the adjusting entry, the credit in the general journal would be to Wages and Salaries Payable Lease and occupancy expense: Lease Rental Expense Cash at Bank Or a credit to Rent Payable if an accrual adjusting entry is needed in the general journal. Solution Manual for Accounting John Hoggett, John Medlin, Claire Beattie, Keryn Chalmers, Andreas Hellmann, Jodie Maxfield 9780730344568