Accounting 20
Module 3
Lesson 11
Accounting 20
1
Lesson 11
Accounting 20
2
Lesson 11
Lesson 11 - Introducing Special Journals in
a Merchandising Business
Read pages 507 to 548 in the textbook.
Topics:
•
•
•
•
•
•
•
•
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Introduction
Journalizing and Posting Credit Sales Transactions
Journalizing and Posting Cost of Goods Sold Transactions
Remember These Important Points
Do You Understand?
Conclusion
Self Test
Answers for Self Test
Assignment 11
After studying Lesson 11, the student should be able to
•
journalize documents affecting sales revenue in three-column and multi-column
Sales Journals, then post to the appropriate ledger accounts.
•
prepare journal proofs from a multi-column Sales Journal in order to verify the
accuracy of that journal's debit and credit entries.
•
define, prepare, and show the journal entry resulting from the preparation of a
credit memo.
•
analyze and record transactions involving Sales Returns and Allowances and Sales
Discounts.
•
verify the Accounts Receivable control account of the General Ledger, and illustrate
the use of a Schedule of Accounts Receivable from the Accounts Receivable
subsidiary ledger.
Accounting 20
3
Lesson 11
•
journalize documents affecting Cost of Goods Sold transactions in three-column and
multi-column purchases journals, then post to the appropriate ledger accounts.
•
analyze and record transactions involving Purchases Returns and Allowances and
Purchases Discounts.
•
explain the need for, and the proper use of, an Accounts Payable subsidiary ledger.
•
illustrate the use of a Schedule of Accounts Payable from the accounts payable
subsidiary ledger.
•
show the proper use of a debit memo and illustrate the journal entry that is
associated with a source document.
Accounting 20
4
Lesson 11
Introduction
We will now look at the first four steps in the accounting cycle for a merchandising
business.
•
originating transaction data from source documents
•
making debit and credit entries to the journal
•
posting entries from the journal to the ledger
•
preparing a trial balance from a listing of all ledger accounts to prove that the
debits equal credits.
This lesson incorporates some aspects of the Goods and Services Tax (GST) which
replaces the Federal Sales Tax. In this course, we will tax at a rate of 7% the majority of
goods and services. This tax is payable at all business levels (manufacturing, wholesaling,
and retail).
Accounting 20
5
Lesson 11
Journalizing and Posting Credit Sales Transactions
Introducing the Credit Sales System
In this lesson, we will deal only with the journalizing and posting of selling merchandise
on account (credit).
The source document for selling merchandise on account is a sales invoice.
In a credit sales system, dividing responsibility reduces the possibility that a dishonest
employee might commit fraud or theft.
Read carefully pages 508 - 514 of the text on following a credit sales system and in
analyzing a sales invoice.
Introducing the Sales Journal
An efficient accounting system uses special journals to record groups of repetitive
transactions.
The Sales Journal is used to record only the sales of merchandise on account (credit). The
source document is sales invoices.
We will use a three-column Sales Journal called a columnar sales journal.
Read pages 515 and 516 in the textbook.
Remember that the total of the Accounts Receivable Dr. column (total amount owing)
must be equal to the total of GST Payable Cr. and Sales Cr. columns (sales price).
The Goods and Services Tax is calculated on the amount before taxes at the rate of 7% on
most goods and services. An example is given on page 515.
Accounting 20
6
Lesson 11
Analyzing the Need for the Accounts Receivable Ledger
Read pages 516 to 518 in the textbook.
Most merchandising businesses remove individual customer accounts from the General
Ledger and replace them with one Accounts Receivable control account. The total of the
individual customer accounts in the Accounts Receivable Ledger must always agree with
the debit balance of this control account.
Individual accounts are filed in the Accounts Receivable Ledger and these are placed in
alphabetical order.
The use of subsidiary ledgers allows specialization and division of labour.
Posting Credit Sales to the Accounts Receivable Ledger
Read pages 519 to 521 in the textbook.
•
Individual items in the Accounts Receivable debit column are posted daily to charge
customer's accounts in the accounts receivable ledger. This column is the total
amount owed to the business.
•
As each item is posted, a checkmark is placed in the Post. Ref. column.
•
The total of the Accounts Receivable column must agree with the total credits
columns from the Sales Journal.
•
At the end of the month, each column total is posted to the general ledger accounts-Accounts Receivable as a debit; GST Payable as a credit; and Sales as a credit. The
account numbers are placed at the foot of each column of the sales journal to
indicate that posting is completed. The post. ref. columns in the general ledger are
filled in with S1--page one of the sales journal.
Accounting 20
7
Lesson 11
Expanding the Sales Journal
Read pages 522 to 524 in the textbook.
Most merchandising businesses require detailed information. For this reason, the Sales
column in the Sales Journal is expanded into several columns. This is a breakdown of
sales by product line, by department, or by some other feature. Note the example on page
522.
•
Every sales invoice is recorded as a debit to Accounts Receivable and a credit to at
least one of the two categories of sales revenue, and a credit to GST Payable.
•
Daily postings are made from the Accounts Receivable Dr. column.
•
At the end of the month, the column totals would be posted to the specific general
ledger accounts. In the example, the total of the Accounts Receivable column would
be posted to the debit side of the Accounts Receivable control account. The total of
the two sales columns would be credited to the Hardware Sales and Electrical Sales
accounts. The total of the GST Payable Cr. column would be credited to the GST
Payable account in the general ledger.
•
Post references must be completed at the foot of each column of the Journal and it
must also be completed for individual postings from the Sales Journal. If general
ledger accounts are used, the post. ref. column must also be filled in.
Recording Sales Returns and Allowances
Read pages 524 to 526.
As studied previously, the contra revenue account called Sales Returns and Allowances is
used when a customer returns part or all of an order of merchandise. The customer may
also keep the goods and request an adjustment to the invoice price.
If the customer's claim and/or return is justified, the seller will issue a source document
called a credit memo. An example is shown on page 525. As well, the general journal
entry is given. Study both carefully.
Accounting 20
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Lesson 11
Preparing Monthly Trial Balances
Read pages 526 to 528 in the textbook.
Before financial statements are prepared, monthly trial balances must be completed.
The Schedule of Accounts Receivable is prepared from the monthly balances of all
customer accounts in the subsidiary ledger. The total must agree with the account
balance in the Accounts Receivable control account.
General Ledger accounts are checked by completing a trial balance. This ensures equality
of the debits and credits.
Journalizing and Posting Cost of Goods Sold Transactions
We will concentrate on the periodic inventory method using the Purchases account and
General Ledger accounts to record the purchase of merchandise on account.
Analyzing the Credit Purchases System
Read pages 532 to 539 in the textbook.
The Purchases Journal contains all transactions involving the purchase of merchandise
on account. These goods or merchandise are purchased specifically to resell to customers.
The source documents used for this journal are purchase invoices.
A separate person must be assigned to each of the different duties described in the
textbook.
Accounting 20
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Lesson 11
Illustrating the Purchases Journal
Read pages 539 to 542 in the textbook.
Only credit merchandise purchases are recorded in the three-column Purchases Journal.
The Purchases Dr. column is used to record the debit to the Purchases account. The GST
Payable Dr. column is used to record the GST calculated on the purchase invoice. The
Account Payable Cr. column represents the total amount owing to each creditor. This
column is the total of the two Dr. columns.
Every purchase invoice is a debit to the Purchases account, a debit to the GST Payable
account, and a credit to the Accounts Payable control account.
•
Items in the account credited column are posted daily to the creditors' accounts in
the accounts payable subsidiary ledger. As each item is posted, a checkmark is
placed in the Post. Ref. column. In the ledger, P1 (or whatever purchases page you
are using) is put in the post. ref. column.
•
The total of the amount columns are posted at the end of the month to general
ledger accounts. Purchases is debited, GST Payable is debited, and Accounts
Payable is credited in the general ledger. At the foot of each column, place the
account numbers in parenthesis to indicate that the posting has been completed. In
the ledger, P1 (or whatever purchases page you are using) is put in the post. ref.
column.
Extending the Purchases Journal
Read pages 543 to 544 in the textbook.
The columnar Purchases Journal permits identification of different merchandise
purchases, as well as expenses and other assets other than merchandise purchases on
account and recording of any purchase where there is a credit to Accounts Payable.
Pay careful attention to the analysis on pages 543 and 544.
•
Posting to individual creditor accounts must be done daily. The amount posted
must be the total amount owing: Purchases plus GST. Post. referencing is done as
described earlier.
Accounting 20
10
Lesson 11
•
Posting to the General Ledger is done at month end. The total of the GST Payable,
Purchases Hardware, and Purchases Electrical columns must be debited. The total
of the Accounts Payable column is credited. Just below the total insert in brackets
the account number to which it is posted. Post. Ref. in the general ledger accounts
would be P and the specific page number used.
•
Each entry in the Sundries column requires a separate posting to the General
Ledger. Note that the Sundries column has its own Post. Ref column where you
indicate that the specific account number has been posted. Each entry is posted
individually--the column total is not posted.
Recording Transportation-In
Read pages 545 and 546 in the textbook.
Recording Purchases Returns and Allowances
Read carefully pages 546 to 548. Pay particular attention to the analysis.
You will recall that a business may return purchased goods because they are unsuitable or
damaged. At other times, the buyer may request an allowance on the price paid.
A debit memo is a source document sent to the seller to indicate that the seller's Accounts
Payable account will be debited as a result of the return or requested allowance.
Purchases Returns and Allowances is a contra purchase account and is therefore credited.
Accounting 20
11
Lesson 11
Remember These Important Points
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When a business sells merchandise on account (credit), a source document called a
sales invoice is prepared.
•
The many procedures in a credit sales system must have a division of responsibility
for these tasks.
•
The credit sales system consists of receiving the customer's order; preparing the
shipping order; approving the customer's credit rating; handling the shipping order
in the stockroom; preparing the bill of sale; and accounting for the sales invoice.
•
Two accounting principles are involved in the analysis of a sales invoice; the
revenue principle and the objectivity principle.
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A Sales Journal is used to record sales of merchandise on credit or account.
•
Each sales invoice must be analyzed as a debit to Accounts Receivable for the entire
amount owing, a credit to Sales for the sales price, and a credit to GST Payable for
the 7% Goods and Services Tax.
•
Individual items in the Accounts Receivable Dr. column are posted daily to the
charge customer's accounts in the Accounts Receivable Ledger. As each item is
posted, a checkmark is placed in the Post Reference column of the Sales Journal.
The specific page number of the Sales Journal is put in the Post. Ref. column of the
customer's account.
•
At the end of the month, each amount column total is posted to the general ledger
accounts--Accounts Receivable as a debit; GST Payable as a credit; and Sales as a
credit. The account numbers are placed at the foot of each column to indicate that
posting is completed.
•
Most merchandising businesses file individual accounts alphabetically in the
Accounts Receivable Ledger. The individual accounts have been replaced by one
controlling account called Accounts Receivable in the General Ledger.
•
The amount shown as a debit in the General Ledger Accounts Receivable account is
the sum of all individual accounts receivable which are now found in the Accounts
Receivable Ledger.
Accounting 20
12
Lesson 11
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Subsidiary ledgers contain only individual accounts making up specifically one class
of account. Use the Accounts Receivable and Accounts Payable Ledgers.
•
Most merchandising businesses require a breakdown of their sales by product line,
by department, or some other feature. Therefore, the sales journal is expanded to
include other money columns.
•
At the end of the month, the column totals of the columnar (or multi-column) Sales
Journal would be proved to show that the total debits of Accounts Receivable agrees
with the total credits of the individual sales columns and the GST Payable Cr.
column.
•
Once the Sales Journal proof is obtained, individual customer accounts and the
column totals are posted to appropriate ledger accounts as described previously.
•
A credit memo is a source document to grant a return or allowance to the customer.
Sales Returns and Allowances is a contra revenue account and is therefore debited.
•
The General Journal entry reduces the amount in the customer's account by the
amount authorized on the credit memo. Since a portion of the GST will also be
refunded, GST Payable is also reduced by a debit entry.
•
The credit entry must be posted twice--to the Accounts Receivable control account in
the General Ledger and once to the customer's account in the subsidiary ledger.
The post ref. columns must be completed if the entry is posted to ledger accounts.
•
A General Ledger Trial Balance and a Schedule of Accounts Receivable (and/or
Payable) must be completed at the end of the period before financial statements are
prepared. Remember that the total of the schedules must agree with the
corresponding control account balances in the General Ledger.
•
A purchase invoice is the source document for recording purchases of merchandise
on account. These goods or merchandise are purchased specifically to resell to
customers.
•
The credit purchases system consists of preparing the purchase requisition;
preparing the purchase order; receiving the merchandise; receiving the purchase
invoice, and accounting for the purchase invoice.
Accounting 20
13
Lesson 11
•
Only credit merchandise purchases are recorded in the three-column Purchases
Journal. The Purchases Dr. column is used to record the debit to the Purchases
account. The GST Payable Dr. column is used to record the 7% GST calculated on
the purchase invoice. The total of the two amounts, representing the total amount
owing, is recorded in the individual accounts payable identified in the Account
Credited column.
•
Each of the individual creditor's accounts is part of the subsidiary Accounts Payable
Ledger, which must be posted daily. The amount to be posted is taken from the
Accounts Payable Cr. column, which represents the total amount owing. As each
item is posted, a checkmark is placed in the Post Reference column. In the
subsidiary ledger, the specific page of the purchases journal would be inserted in
the Post Reference column.
•
The total of the amount columns are posted at the end of the month to general
ledger accounts--Purchases is debited, GST Payable is debited, and Accounts
Payable is credited.
•
A Schedule of Accounts Payable (list of all creditor account balances) is prepared at
the end of the month. The total of this schedule must agree with the balance in the
Accounts Payable control account in the General Ledger.
•
A columnar Purchases Journal permits identification of different merchandise
purchases. The journal also records expenses and assets other than merchandise
purchases on account. Any purchase where there is a credit to Accounts Payable is
recorded as well.
•
The Accounts Payable Cr. column records all transactions that result in an increase
in accounts payable. The total amount owing is recorded in this column.
•
The offsetting debit will be placed in either the Purchases column or the Sundries
column and the GST Payable Dr. column. The total entries to Purchases added to
the GST Payable Dr. entry must equal the amount in the Accounts Payable Cr.
column.
•
The GST Payable Dr. column serves to record the tax inputs or the GST paid on
Purchases.
•
Before posting occurs, a Purchases Journal Proof must be done to ensure accuracy of
debits and credits.
•
Once the proof is prepared, individual amounts as well as column totals must be
posted to appropriate ledger accounts as explained previously.
Accounting 20
14
Lesson 11
•
A FOB shipping point quoted on a purchase order means that the buyer is prepared
to pay the shipping cost from the seller's place of business to the buyer's location.
•
If the carrier allows credit terms, the General Journal entry would be to debit GST
Payable, debit Transportation-in and credit Accounts Payable (customer name).
The credit entry must be posted twice; once to the Accounts Payable control account
and once to the individual creditor's account in the Accounts Payable Ledger.
•
Sometimes a business returns purchased goods because they are unsuitable or
damaged. In other cases, the goods may be still usable, although not perfect, so the
buyer may request an allowance on the price. This is called Purchases Returns and
Allowances; it is a contra purchases account, and is therefore credited.
•
A debit memo is a source document sent to the seller to indicate that the seller's
Accounts Payable account will be debited as a result of the return or requested
allowance.
•
The general journal entry to record a Purchases Return and Allowance account
follows: The debit entry is to Accounts Payable and the creditor's account. The
entry must be posted twice; once to the Accounts Payable control account in the
General Ledger, and once to the individual creditor's account in the Accounts
Payable Ledger. The credit entries are to Purchases Returns and Allowances and
GST Payable.
Do You Understand?
Goods and Services Tax (GST) - the federal governments' consumption tax of 7% on the
majority of goods and services consumed in Canada.
Sales Invoice - a source document capturing the dollar results of a credit sale of
merchandise.
Sales Journal - a chronological record of credit sales.
Columnar Sales Journal (Multi-Column Sales Journal) - a sales journal with several
money columns.
Accounting 20
15
Lesson 11
Accounts Receivable Ledger - a subsidiary ledger in which all customer accounts are filed.
Direct Posting - transferring information from the source document directly to the
subsidiary ledger account.
Posting Credit Sales - posting the monthly total to the General Ledger accounts.
Credit Memo - a statement issued by the seller, granting a reduction in the invoice price
for damaged or returned goods.
Schedule of Accounts Receivable - a list of all customers' account balances, the total of
which must agree with the control account balance.
Purchase Invoice - a bill received by the buyer for merchandise purchased on credit.
FOB Shipping Point - buyer agrees to pay the shipping charges from the shipping point to
their place of business.
FOB Destination - seller agrees to pay the carrier for all transport costs from the shipping
point to the buyer's place of business.
Input Tax Credit - relates to any GST paid on purchases for resale or for its use in the
business.
Net Amount Method - a method of accounting for invoices wherein all cash discounts are
removed to account for the net cash equivalent price of invoices.
Gross Amount Method - a method of accounting for invoices wherein the total amount
owing shown on the invoice is recorded, and all cash discounts are accounted for only when
the cash is transacted.
Purchases Journal - a chronological record of merchandise purchased on credit.
Accounts Payable Ledger - the file of all individual creditor accounts.
Schedule of Accounts Payable - a list of all creditor account balances, the total of which
must agree with the controlling account balance in the General Ledger.
Debit Memo - a source document created by the buyer to notify the seller that the account
payable has been decreased by the amount of the purchase return or allowance requested.
Accounting 20
16
Lesson 11
Conclusion
This lesson presented two special journals--the Sales Journal and the Purchases Journal.
These are suitable where the volume of transactions is too much for one person to handle.
Special journals allow the bookkeeping tasks to be divided between two or more persons.
All the rules you have learned in your Accounting studies so far also apply to the special
journals.
Self Test
Accounting 20
1.
Problem 13-1, page 528 of the text
2.
Problem 13-2, page 529 of the text
3.
MC 13-2, page 531 of the text
4.
Problem 13-4, page 548 of the text
17
Lesson 11
P 13-1a, c
Accounting 20
18
Lesson 11
P 13-2c, d
In order to complete this question use the information found in the example of the Sales
Journal and General Journal page 529 of the text.
Sales Journal Proof
June 30, 20__
Accounting 20
19
Lesson 11
P13-2a, d
General Ledger
D a te
19__
20__
Ex p la n a ti o n
Account No.
P ost
Re f.
D e bi t
Cre d i t
General Ledger
D a te
19__
20__
Ex p la n a ti o n
Account No.
P ost
Re f.
D e bi t
Cre d i t
General Ledger
D a te
19__
20__
Ex p la n a ti o n
Accounting 20
Ex p la n a ti o n
B a la n c e
Account No.
P ost
Re f.
D e bi t
Cre d i t
General Ledger
D a te
19__
20__
B a la n c e
B a la n c e
Account No.
P ost
Re f.
D e bi t
20
Cre d i t
B a la n c e
Lesson 11
General Ledger
D a te
19__
20__
Ex p la n a ti o n
Account No.
P ost
Re f.
D e bi t
Cre d i t
General Ledger
D a te
19__
20__
Ex p la n a ti o n
P 13-2b, d
Account No.
P ost
Re f.
D e bi t
Accounting 20
B a la n c e
Credit Limit
Telephone
Ex p la n a ti o n
P ost
Re f.
D e bi t
Name
Address
D a te
19__
20__
Cre d i t
Accounts Receivable Ledger
Name
Address
D a te
19__
20__
B a la n c e
Cre d i t
B a la n c e
Credit Limit
Telephone
Ex p la n a ti o n
P ost
Re f.
D e bi t
21
Cre d i t
B a la n c e
Lesson 11
P 13-2b, d (continued)
Name
Address
D a te
19__
20__
Credit Limit
Telephone
Ex p la n a ti o n
P ost
Re f.
D e bi t
Name
Address
D a te
19__
20__
Cre d i t
B a la n c e
Credit Limit
Telephone
Ex p la n a ti o n
P ost
Re f.
D e bi t
Cre d i t
B a la n c e
P 13-2e
Accounting 20
22
Lesson 11
In order to complete this question use the information found in the example of the
Purchase Journal page 548 of the text.
Complete journal proof below.
P 13-4a, c
General Ledger
D a te
19__
20__
Ex p la n a ti o n
Account No.
P ost
Re f.
D e bi t
Cre d i t
General Ledger
D a te
19__
20__
Ex p la n a ti o n
Account No.
P ost
Re f.
D e bi t
Cre d i t
General Ledger
D a te
19__
20__
Accounting 20
Ex p la n a ti o n
B a la n c e
B a la n c e
Account No.
P ost
Re f.
D e bi t
23
Cre d i t
B a la n c e
Lesson 11
P 13-b, c
Accounts Payable Ledger
Name
Address
D a te
19__
20__
Ex p la n a ti o n
P ost
Re f.
D e bi t
Cre d i t
B a la n c e
Ex p la n a ti o n
P ost
Re f.
D e bi t
Cre d i t
B a la n c e
Ex p la n a ti o n
P ost
Re f.
D e bi t
Cre d i t
B a la n c e
Ex p la n a ti o n
P ost
Re f.
D e bi t
Cre d i t
B a la n c e
Name
Address
D a te
19__
20__
Name
Address
D a te
19__
20__
Extra Form
Name
Address
D a te
19__
20__
Accounting 20
24
Lesson 11
Answers For Self Test
P 13-1a
20__
P 13b
Sales Journal Proof
October 31, 20__
Sales Cr.
GST Payable Cr.
$2 835.00
198.45
Accounts Receivable Dr.
$3 033.45
Accounting 20
25
Lesson 11
P 13-2a, d
General Ledger
Account Accounts Receivable Control
DATE
20__
Account No. 120
Post
Ref.
Explanation
Debit
Credit
Balance
June 21
return on invoice 9880
J10
30
S15
21.40
3 016.33
Account GST Payable
DATE
20__
21.40
2 994.93
Account No. 208
Post
Ref.
Explanation
Debit
Credit
Balance
June 21
return on invoice 9880
J10
30
1.40
S15
197.33
Account Sales Fliers
DATE
20__
1.40
195.93
Account No. 401
Post
Ref.
Explanation
Debit
Credit
Balance
June 30
S15
1 719.00
Account Invoice Sales
DATE
20__
1 719.00
Account No. 402
Post
Ref.
Explanation
Debit
Credit
Balance
June 30
S15
785.00
Account Other Sales
DATE
20__
785.00
Account No. 403
Post
Ref.
Explanation
Debit
Credit
Balance
June 30
Accounting 20
S15
26
315.00
315.00
Lesson 11
Account Sales Returns and Allowances Fliers
DATE
20__
Account No. 405
Post
Ref.
Explanation
Debit
Credit
Balance
June 21
J10
P 13-2b, d
Name
Address
DATE
20__
20.00
20.00
Accounts Receivable Ledger
Acme Ads Ltd.
860 Redcliff Dr., Medicine Hat, Alberta T1A 3E3
Post
Ref.
Explanation
Debit
Credit Limit $5 000
Phone 633-9120
Credit
Balance
June 4
inv. 9877; n/15
S15
481.50
481.50
25
inv. 9881; n/15
S15
352.03
833.53
28
inv. 9882; n/15
S15
781.10
1 614.63
Name
Address
DATE
20__
A. Deler
444 - 13th Ave., Medicine Hat, Alberta T1A 4F2
Post
Ref.
Explanation
Debit
Credit Limit $300
Phone 695-9665
Credit
Balance
June 4
Name
Address
DATE
20__
inv. 9877; n/15
S15
69.55
Michael's Ltd.
900 West 7th Street, Medicine Hat, Alberta T1A 3B4
Post
Ref.
Explanation
Debit
69.55
Credit Limit $3 000
Phone 796-2121
Credit
Balance
June 1
inv. 9876; n/15
S15
197.95
197.95
19
inv. 9880; n/15
S15
224.70
422.65
21
return on inv. 9880
J10
Accounting 20
27
21.40
401.25
Lesson 11
Name
Address
DATE
20__
Richmond Chevrolet Car Sales
3300-13th Aveneue, Medicine Hat, Alberta T1A 4F9
Post
Ref.
Explanation
Debit
Credit Limit $8 000
Phone 591-2611
Credit
Balance
June 12
inv. 9878; n/15
S15
909.50
909.50
P 13-2c, d
Sales Journal Proof
June 30, 20__
Sales Other Cr.
Sales Invoices Cr.
Sales Fliers Cr.
GST Payable Cr.
Accounts Rec. Dr.
$ 315.00
785.00
1 719.00
197.33
$3 016.33
Top Notch Printing
Schedule of Accounts Receivable
as at June 30, 20__
Acme Ads Ltd.
A. Deler
Michael's Ltd.
Richmond Chevrolet Car Sales
$1 614.63
69.55
401.25
909.50
Total Accounts Receivable
$2 994.93
Total Accounts Receivable Control
$2 994.93
MC 13-2a
Under the direct posting method, the invoices are posted directly to the ledger accounts,
without any journal entries. This eliminates the time required to prepare journal entries,
and results in the customer accounts being updated quickly.
Accounting 20
28
Lesson 11
MC 13-2b
The disadvantage of not having journal entries will be revealed when someone tries to
trace a transaction. Let's assume for a moment that the trial balance at the end of the
month does not balance. How do you go back and attempt to find the error? Without any
journal entries providing equalities of debit and credit, how will you know what entries
have been made? For example, Mrs. Jones has an entry on her ledger account dated June
3 for $200.00, made when she purchased her goods. She now insists that she sent a
cheque on June 10 to pay that account, but the account shows no record. What must you
do to find the error? You must look through all accounts for a $200 entry. Let's assume
you find a $200 debit to Cash on June 10. No evidence exists that a credit entry was ever
made, but if it were made it could be to any account. In a small business with few
accounts, this may not be a problem, but in a larger business this would be a formidable
task.
MC 13-2c
Yes, all journals could be elminated from accounting systems, but then it would not be a
system. The success of the double-entry accounting system, using journals and ledgers, is
directly attributable to the interrelationship between the journal and the ledger, which
provides checks and balances to ensure equality of debits and credits. Without the journal
as a source of information as to where entries were posted, the accounting books would be
disorganized and you would have difficulty ensuring accuracy.
P 13-4a, c
General Ledger
Account Accounts Payable
Account No. 207
DATE
20__
Post
Ref.
Explanation
Debit
Credit
Balance
Apr. 15
Accounting 20
Totals
P34
29
35 310.00
35 310.00
Lesson 11
Account GST Payable
DATE
20__
Account No. 208
Post
Ref.
Explanation
Debit
Credit
Balance
Apr. 15
Totals
P34
2 310.00
Account Purchases
DATE
20__
2 310.00
Account No. 501
Post
Ref.
Explanation
Debit
Credit
Balance
Apr. 15
Totals
P 13-4b, c
Name
Address
DATE
20__
P34
33 000.00
33 000.00
Accounts Payable Ledger
C. & O. Wholesaler
Anytown, Canada
Phone 361-1000
Post
Ref.
Explanation
Debit
Credit
Balance
Apr. 5
inv. 6334; 1/15 n/60
Name
Address
DATE
20__
P34
12 840.00
Kelly Supplier
Anytown, Canada
12 840.00
Phone 778-6262
Post
Ref.
Explanation
Debit
Credit
Balance
Apr.
2
13
Accounting 20
inv. 1214; 2/10 n/30
P34
8 560.00
8 560.00
inv. 1383; 2/10 n/30
P34
8 025.00
16 585.00
30
Lesson 11
Name
Address
DATE
20__
Mini-Works Ltd.
Anytown, Canada
Phone 916-2130
Post
Ref.
Explanation
Debit
Credit
Balance
Apr. 10
Accounting 20
inv. A-663; n/30
P34
31
5 885.00
5 885.00
Lesson 11