4. $4,319 Accounts Receivable account in the General Ledger (5 min.) S 8-8

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1 Inventory Accounts Payable Jan Marks, Capital Jan Marks, Drawings Service Revenue Depreciation Expense (5 min.) S 8-4 (5 min.) S $1,718 Inventory account in the General Ledger 2. $3,927 Posted to Sales Revenue on November $ 907 Susan Lu account in the Accounts Receivable Subsidiary Ledger 4. $4,319 Accounts Receivable account in the General Ledger (5 min.) S Accounts Receivable Subsidiary Ledger 2. General Ledger Accounts Receivable debit balance... $4,319 From the Accounts Receivable Subsidiary Ledger Customer Balance Maria Galway... $ 935 Brent Harmon Susan Lu Clay Schmidt... 1,783 Total accounts receivable... $4,319 (10 min.) S 8-9

2 1. Cash receipts during November.. $6, Cash collections on account: Nov $ Total... 1,200 Total discounts Decrease in accounts receivable... $1, Cash sales during November $2,883 Reqs. 1 and 4 General Ledger ACCOUNT CASH AT BANK ACCOUNT NO. 111 Mar. 31 CR.3 13,863 13, CP.9 11,078 2,785 ( min.) P 8-5 ACCOUNT ACCOUNTS RECEIVABLE ACCOUNT NO. 112 Mar. 17 J S.8 12,965 12, CR.3 10,425 1,800 ACCOUNT SUPPLIES ACCOUNT NO. 116 Mar. 24 CR P

3 ACCOUNT PREPAID INSURANCE ACCOUNT NO. 117 Mar. 22 CP.9 1,345 1,345 ACCOUNT INVENTORY ACCOUNT NO. 118 Mar. 10 CP J , J P.6 8,470 9, S.8 7,070 2, CR.3 1, CP ACCOUNT FURNITURE ACCOUNT NO. 151 Mar. 5 CP.9 1,080 1, P ,855 ACCOUNT ACCOUNTS PAYABLE ACCOUNT NO. 211 Mar. 29 J P.6 9,925 9, CP.9 6,580 2,925

4 ACCOUNT SALES REVENUE ACCOUNT NO. 411 Mar. 31 CR.3 3,410 3, S.8 12,965 16,375 ACCOUNT SALES DISCOUNTS ACCOUNT NO. 412 Mar. 31 CR ACCOUNT SALES RETURNS AND ACCOUNT NO. 413 ALLOWANCES Mar. 17 J ACCOUNT INTEREST REVENUE ACCOUNT NO. 419 Mar. 8 CR ACCOUNT COST OF SALES ACCOUNT NO. 511 Mar. 17 J S.8 7,070 6, CR.3 1,820 8,480

5 ACCOUNT SALARY EXPENSE ACCOUNT NO. 531 Mar. 31 CP.9 1,100 1,100 ACCOUNT ELECTRICITY AND GAS EXPENSE ACCOUNT NO. 541 Mar. 25 CP Reqs. 2 and 4 Accounts Receivable Subsidiary Ledger ACCOUNT CANBERRA ASSOCIATES Mar. 9 S.8 6,250 6, CR.3 6, S.8 1,800 1,800 ACCOUNT J.R. WAKELAND Mar. 15 S J ACCOUNT L.E. WOOTEN Mar. 2 S.8 2,350 2, CR.3 2, S.8 1,825 1, CR.3 1,825-0-

6 Accounts Payable Subsidiary Ledger ACCOUNT DELWOOD PLAZA Mar. 3 P.6 5,900 5, CP.9 5, P ACCOUNT HOUGHTON SUPPLIES Mar. 13 P P , J CP ACCOUNT JASPER SALES Mar. 20 P.6 2,150 2,150

7 Reqs. 3 and 5 Sales Journal Page 8 Accounts Cost of Goods Receivable Dr. Sold Dr. Date Invoice No. Account Debited Post. Ref. Sales Revenue Cr. Inventory Cr. Mar L.E. Wooten 2,350 1, Canberra Associates 6,250 3, J.R. Wakeland L.E. Wooten 1, Canberra Associates 1,800 1, Total 12,965 7,070 (112/411) (511/118) Req. 6 Debit balance of Accounts Receivable control account in General Ledger $1,800 Total of balances in Accounts Receivable Ledger.. $1,800 Credit balance of Accounts Payable control account in General Ledger $2,925 Total of balances in Accounts Payable Ledger ($775 + $2,150).. $2,925

8 (continued) P 8-5 Cash Receipts Journal Page 3 DEBITS CREDITS COST OF OTHER ACCOUNTS GOODS SOLD DR. CASH AT SALES ACCOUNTS SALES POST. INVENTORY DATE BANK DISCOUNTS RECEIVABLE REVENUE ACCOUNT TITLE REF. AMOUNT CR. Mar. 4 3,410 3,410 1, Interest Revenue , ,350 L.E. Wooten 19 6, ,250 Canberra Associates Supplies ,825 1,825 L.E. Wooten 31 13, ,425 3,410 Totals 200 1,820 (111) (412) (112) (411) (X) (511/118) 14,035 14,035 Purchases Journal Page 6 CREDITS DEBITS OTHER ACCOUNTS DATE ACCOUNT CREDITED TERMS POST. REF. ACCOUNTS PAYABLE INVENTORY SUPPLIES ACCOUNT TITLE POST. REF. AMOUNT Mar. 3 Delwood Plaza 3/10 n/60 5,900 5, Houghton Supplies net eom Jasper Sales net 30 2,150 2, Delwood Plaza 3/10 n/ Furniture Houghton Supplies 2/10 n/ Totals 9,925 8, (211) (118) (116) (X) 9,925 9,925

9 (continued) P 8-5 Cash Payments Journal Page 9 DEBITS CREDITS DATE CK. NO. ACCOUNT DEBITED POST. REF. OTHER ACCOUNTS ACCOUNTS PAYABLE INVENTORY CASH AT BANK Mar Furniture 151 1,080 1, Inventory Delwood Plaza 5, , Prepaid Insurance 117 1,345 1, Electricity and Gas Expense Houghton Supplies Salary Expense 531 1,100 1, Totals 4,675 6, ,078 (X) (211) (118) (111) 11,255 11,255 Journal Page 4 DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Mar. 17 Sales Returns and Allowances Accounts Receivable J.R. Wakeland 112/ Inventory Cost of sales Accounts Payable Houghton Supplies 211/ 420 Inventory

10 Differences: (5 min.) S External auditors are entirely independent of the business. Internal auditors are employees of the business. 2. External audits are designed to determine whether the company s financial statements are prepared in accordance with generally accepted accounting principles. Internal audits are designed to ensure that employees follow company policies and that operations run efficiently. Similarity: 1. Both types of auditors suggest improvements that help the business run more efficiently. 2. Both types of auditors determine whether the company is following legal requirements. (5 min.) S 9-4 The financial institution could have: 1. Kept all accounting duties away from the cashier. This would have kept the cashier from covering his theft with entries in the accounting records. 2. Required employees to take vacations and rotated employees from job to job. These measures would have placed another person in the cashier s job and probably would have brought the theft to light earlier. 3. Used an internal auditor. Daryl Light would be less likely to steal and manipulate customer accounts if he knew his work would be audited. Only two measures are required. (5-10 min.) S 9-9 The controller compares the records of the day s cash receipts, as follows: 1. Bank deposit amount from the cashier 2. Debit to Cash at Bank from the accounting department This comparison ensures that the debit to Cash at Bank equals the amount deposited in the bank.

11 A dishonest purchasing agent could: Purchase goods and have them delivered to his/her home. Approve payment for an excessive amount and split the excess with the supplier. Businesses avoid this internal control weakness by separating the following duties: purchasing goods receiving goods approving payment for goods (5 min.) S 9-10 (5 min.) S 9-12 O Malley should report the errors to Stone because Stone is her supervisor, and Stone is responsible for the errors. If Stone fails to take action, then O Malley should report the errors to the owner of the business. In any event, outsiders who are relying on Ireland Limited s financial statements must be made aware of the need to correct the reported net income figure. (10-20 min.) E 9-5

12 D.J. Hunter Bank Reconciliation 30 September 20XX BANK: Balance, 30 September $ 431 Add: Deposit in transit 1,209 Less: Outstanding cheques: Cheque No. 626 $ (75) 627 (275) (350) Adjusted bank balance $1,290 BOOKS: Balance, 30 September $1,330 Less: Correction of book error Recorded $68 cheque as $58 $ (10) Cost of cheques (18) Service charge (12) (40) Adjusted book balance $1,290 Hunter has cash of $1,290 on September 30.

13 (10-15 min.) E 9-6 Fred Midas Bank Reconciliation 21 October 20XX BANK: Balance, 31 October $ 900 Add: Deposit in transit 1,788 2,688 Less: Outstanding cheques: (467) Adjusted bank balance $2,221 BOOKS: Balance, 31 October $2,177 Add: EFT collection rent 400 2,577 Less: Service charge $ (12) Dishonoured cheques (74) Charge for printed cheques (9) Correction of book error Recorded $290 cheque as $29 (261) (356) Adjusted book balance $2,221

14 (10 min.) E 9-7 Journal DATE ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT Oct. 31 Cash at Bank 400 Rent Revenue 400 EFT collection of rent. 31 Miscellaneous Expense ($12 + $9) 21 Cash at Bank 21 Bank service charge and charge for printed cheques. 31 Accounts Receivable 74 Cash at Bank 74 Dishonoured cheques returned by bank. 31 Salary Expense ($290 $29) 261 Cash at Bank 261 Correction of book error.

15 (10-15 min.) E 9-10 Journal A. ACCOUNTS AND EXPLANATIONS POST. REF. DEBIT CREDIT DATE (a) Petty Cash 200 Cash in Bank 200 To set up the petty cash fund. (b) Delivery Expense 22 Postage Expense 42 Supplies Expense ($34 + $8) 42 Miscellaneous Expense 16 Cash Short & Over 3 Cash in Bank ($200 $75) 125 To replenish the petty cash fund.

16 (20-25 min.) P 9-3 Dunlap Dollar Stores Bank Reconciliation 30 April 2008 BANK: Balance, 30 April $18,080 Add: Deposits in transit ($1,060 + $330) 1,390 19,470 Less: Outstanding cheques: Cheque No $ , ,410 (4,810) Adjusted bank balance, 30 April $14,660 BOOKS: Balance, 30 April $13,640 Add: EFT collection of rent $ 300 Bank collection of bill receivable 1,300 Book error $1,390 cheque recorded as $1, ,140 15,780 Less: EFT payment of insurance $ 200 Dishonoured cheque 900 Service charge 20 (1,120) Adjusted book balance, 30 April $14,660