Inventory... 151 Accounts Payable... 201 Jan Marks, Capital... 301 Jan Marks, Drawings... 311 Service Revenue... 411 Depreciation Expense... 531 (5 min.) S 8-4 (5 min.) S 8-7 1. $1,718 Inventory account in the General Ledger 2. $3,927 Posted to Sales Revenue on November 30 3. $ 907 Susan Lu account in the Accounts Receivable Subsidiary Ledger 4. $4,319 Accounts Receivable account in the General Ledger (5 min.) S 8-8 1. 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... 694 Susan Lu... 907 Clay Schmidt... 1,783 Total accounts receivable... $4,319 (10 min.) S 8-9
1. Cash receipts during November.. $6,134 2. Cash collections on account: Nov. 14... $ 900 22... 300 Total... 1,200 Total discounts... 35 Decrease in accounts receivable... $1,235 3. 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 13,863 31 CP.9 11,078 2,785 (90-120 min.) P 8-5 ACCOUNT ACCOUNTS RECEIVABLE ACCOUNT NO. 112 Mar. 17 J.4 740 740 31 S.8 12,965 12,225 31 CR.3 10,425 1,800 ACCOUNT SUPPLIES ACCOUNT NO. 116 Mar. 24 CR.3 80 80 31 P.6 680 600
ACCOUNT PREPAID INSURANCE ACCOUNT NO. 117 Mar. 22 CP.9 1,345 1,345 ACCOUNT INVENTORY ACCOUNT NO. 118 Mar. 10 CP.9 770 770 17 J.4 410 1,180 29 J.4 420 760 31 P.6 8,470 9,230 31 S.8 7,070 2,160 31 CR.3 1,820 340 31 CP.9 177 163 ACCOUNT FURNITURE ACCOUNT NO. 151 Mar. 5 CP.9 1,080 1,080 22 P.6 775 1,855 ACCOUNT ACCOUNTS PAYABLE ACCOUNT NO. 211 Mar. 29 J.4 420 420 31 P.6 9,925 9,505 31 CP.9 6,580 2,925
ACCOUNT SALES REVENUE ACCOUNT NO. 411 Mar. 31 CR.3 3,410 3,410 31 S.8 12,965 16,375 ACCOUNT SALES DISCOUNTS ACCOUNT NO. 412 Mar. 31 CR.3 172 172 ACCOUNT SALES RETURNS AND ACCOUNT NO. 413 ALLOWANCES Mar. 17 J.4 740 740 ACCOUNT INTEREST REVENUE ACCOUNT NO. 419 Mar. 8 CR.3 120 120 ACCOUNT COST OF SALES ACCOUNT NO. 511 Mar. 17 J.4 410 410 31 S.8 7,070 6,660 31 CR.3 1,820 8,480
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.9 380 380 Reqs. 2 and 4 Accounts Receivable Subsidiary Ledger ACCOUNT CANBERRA ASSOCIATES Mar. 9 S.8 6,250 6,250 19 CR.3 6,250-0- 29 S.8 1,800 1,800 ACCOUNT J.R. WAKELAND Mar. 15 S.8 740 740 17 J.4 740-0- ACCOUNT L.E. WOOTEN Mar. 2 S.8 2,350 2,350 12 CR.3 2,350-0- 18 S.8 1,825 1,825 31 CR.3 1,825-0-
Accounts Payable Subsidiary Ledger ACCOUNT DELWOOD PLAZA Mar. 3 P.6 5,900 5,900 13 CP.9 5,900-0- 22 P.6 775 775 ACCOUNT HOUGHTON SUPPLIES Mar. 13 P.6 680 680 28 P.6 420 1,100 29 J.4 420 680 30 CP.9 680-0- ACCOUNT JASPER SALES Mar. 20 P.6 2,150 2,150
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. 2 191 L.E. Wooten 2,350 1,390 9 192 Canberra Associates 6,250 3,300 15 193 J.R. Wakeland 740 410 18 194 L.E. Wooten 1,825 970 29 195 Canberra Associates 1,800 1,000 31 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
(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 1,820 8 120 Interest Revenue 419 120 12 2,303 47 2,350 L.E. Wooten 19 6,125 125 6,250 Canberra Associates 24 80 Supplies 116 80 31 1,825 1,825 L.E. Wooten 31 13,863 172 10,425 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 5,900 13 Houghton Supplies net eom 680 680 20 Jasper Sales net 30 2,150 2,150 22 Delwood Plaza 3/10 n/60 775 Furniture 151 775 28 Houghton Supplies 2/10 n/30 420 420 31 Totals 9,925 8,470 680 775 (211) (118) (116) (X) 9,925 9,925
(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. 5 473 Furniture 151 1,080 1,080 10 474 Inventory 118 770 770 13 475 Delwood Plaza 5,900 177 5,723 22 476 Prepaid Insurance 117 1,345 1,345 25 477 Electricity and Gas Expense 541 380 380 30 478 Houghton Supplies 680 680 31 479 Salary Expense 531 1,100 1,100 31 Totals 4,675 6,580 177 11,078 (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 413 740 Accounts Receivable J.R. Wakeland 112/ 740 17 Inventory 118 410 Cost of sales 511 410 29 Accounts Payable Houghton Supplies 211/ 420 Inventory 118 420
Differences: (5 min.) S 9-3 1. 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.
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
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.
(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
(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.
(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.
(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. 3119 $ 630 3120 1,670 3121 100 3122 2,410 (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 $1,930 540 2,140 15,780 Less: EFT payment of insurance $ 200 Dishonoured cheque 900 Service charge 20 (1,120) Adjusted book balance, 30 April $14,660