Accounting 20
Module 1
Lesson 5
Accounting 20
1
Lesson 5
Accounting 20
2
Lesson 5
Lesson 5 The Accounts Payable Application
Topics:
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•
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Introduction
Originating and Analyzing Accounts Payable Transactions
Journalizing and Posting the Transactions
Controlling and Accounting for Cash Payments
Reviewing Month-End Procedures
Remember These Important Points
Do You Understand?
Conclusion
Self Test
Answers For Self Test
Assignment 5
After studying lesson 5, the student should be able to
•
analyze purchase transactions.
•
journalize an entry to record discounts lost.
•
journalize purchase transactions in the General Journal.
•
post journal entries to individual supplier accounts in the General Ledger.
•
explain how the Accounts Payable Ledger account controls the Accounts Payable
subsidiary ledger.
•
list and explain the measures used to control cash payments.
•
journalize cash payment transactions in the Cash Payments Journal.
•
post cash payments to individual creditor accounts.
•
complete month-end procedures on the Cash Payments Journal.
•
prepare a Schedule of Accounts Payable.
Accounting 20
3
Lesson 5
Accounting 20
4
Lesson 5
Introduction
The accounts payable application deals with two related transactions:
•
the purchase of assets or services on account or credit
•
the cash payment to creditors to eliminate the accounts payable
Many firms purchase all of their assets and expenses on a credit basis. This means that
for every debit to an asset account or an expense account there will be a credit to accounts
payable. These transactions are part of the accounts payable application.
Accounting 20
5
Lesson 5
Originating and Analyzing Accounts Payable Transactions
Study and learn pages 346 to 351.
Dr. Johnson acquires goods and services from various suppliers. These suppliers provide
Dr. Johnson with an invoice which is a bill of sale made out by the vendor (seller). This
invoice represents the sales invoice for the preparer/supplier and a purchase invoice for
the receiver/purchaser.
Be aware of the general journal entry and the GAAPs which were applied to these three
transactions.
Journalizing and Posting the Transactions
Journalizing Accounts Payable Transactions
The method of recording debit and credit transactions for accounts payable differs from
one type of business to another.
Dr. Johnson's dental practice uses a
•
General Journal for recording all credit purchases of assets and services.
•
subsidiary ledger to keep track of individual creditor accounts.
•
special Cash Payments Journal to record all issued cheques.
Posting Accounts Payable Transactions
Study and learn pages 355 to 360.
Dr. Johnson uses an Accounts Payable Ledger. This is a subsidiary ledger storing
individual creditor (vendor) accounts. Thus, all creditor accounts are removed from the
General Ledger. A controlling account in the General Ledger which replaces all creditor
accounts is called Accounts Payable.
Accounting 20
6
Lesson 5
On page 356 of the text notice how the two creditor accounts are transferred to the
subsidiary ledger for accounts payable.
The balance in the Accounts Payable controlling account ($10 000) in the general ledger
must agree with the total of all individual creditor account balances in the subsidiary
ledger ($8 000 and $2 000).
The accounts in the subsidiary ledger are listed in alphabetical order so there is no need to
use account numbers.
Posting Daily--information affecting individual creditor accounts. Posting references to
these accounts are shown by a check mark because these accounts are filed in alphabetical
order.
Posting at the End of a Month--all general ledger accounts. Remember that the general
ledger account number is shown in the Post. Ref. column to indicate that posting has been
completed to that account. Note that the credit lines are posted twice; once to Accounts
Payable No. 202 in the general ledger; and once to the individual creditor account in the
Accounts Payable Ledger.
Pages 359 and 360 show how the General Journal and the two ledgers would appear after
all postings have been completed.
Controlling and Accounting for Cash Payments
Study the nine measures that may be used for controlling cash payments on pages 366 to
369.
Journalizing Cash Payments Transactions
Dr. Johnson uses a Cash Payments Journal to record all cash payments transactions.
Only one line is used to record a transaction and only the total needs to be posted to the
credit side of the Cash account at the end of the month. These measures save time in
journalizing and posting.
Study pages 370 to 373.
Accounting 20
7
Lesson 5
Posting From the Cash Payments Journal
During the Month - all accounts that appear in a subsidiary ledger should be posted on a
daily basis. In posting to these individual accounts, the amounts would be taken from the
Accounts Payable Dr. column of the Cash Payments Journal.
A check mark is placed in the Post. Ref. column next to the Accounts Payable column.
This is shown on page 375 of the text. Remember that the source of posting must also
appear in the Post. Ref. column of each individual creditor's account. This is shown on
page 374 of the text.
At Month-End - information is posted to all general ledger accounts. First, the Cash
Payments Journal must be totalled and prove the theory that the total debit or debits in a
special journal must be equal to the total credit or credits.
The total of Cash Cr. is posted to the credit side of the Cash account in the General
Ledger. After this total is posted, the account number for Cash (101) is shown
immediately below the column total. Post referencing must also be done in the Cash
account in the General Ledger--see page 376.
The total of Accounts Payable Dr. is posted to the debit side of the Accounts Payable
controlling account in the general ledger. Since the total has been posted, the account
code (202) for Accounts Payable is shown immediately below the column total. Post
referencing must also be done in the Accounts Payable account in the General Ledger--see
page 376 of the text.
The Other General Ledger Accounts are posted individually to the appropriate accounts.
For example, the debit to Rent Expense is posted separately because no special money
column has been provided for this account. That is the same case as the other accounts
under "Account Title."
Since the individual accounts in the Other General Ledger Accounts section were posted
individually, the total of this column would not be posted. Therefore, no account number
would appear immediately below this total. Instead, a check mark is placed to show that
the total has been proved against all other column totals. Post referencing must also be
done in the creditor's account in the Accounts Payable Ledger--see page 374 of the text.
Advantages of a Cash Payments Journal
Study the four advantages as summarized on page 376 of the text.
Accounting 20
8
Lesson 5
Summarizing the Cash Payments System
Study the flowchart on page 377 of the text.
Reviewing Month-End Procedures
Study pages 383 and 384 of the text.
Just as you learned in the last lesson, preparation of a monthly trial balance in the form of
a Schedule of Accounts Receivable was prepared.
In this lesson, we will prepare a Schedule of Accounts Payable which is a list of individual
creditors with their month-end balances. This total must agree with the balance of
Accounts Payable in the General Ledger.
On page 384 note that the total of Accounts Payable in the Schedule of Accounts Payable
is equal to Account 202 in the General Ledger. As well, the total of Accounts Receivable in
the Schedule of Accounts Receivable is equal to Account 103 in the General Ledger.
Remember These Important Points
•
The objectivity principle states that all transactions must be supported by proof.
The purchase invoice provides the "proof" of the purchase of a fixed asset and
establishes the date for the transaction.
•
The cost principle states that the transaction must be recorded at the cost incurred
by the business to put the asset into service.
•
The cost principle states that the asset must remain on the books at the originally
recorded cost known as the "historical cost."
Accounting 20
9
Lesson 5
•
To control cash payments, no employee should have responsibility for more than a
part of the cash payments function. In particular, the responsibility for handling
the cheques and recording the payments should be divided so that the work of one
employee can be checked against that of another.
•
The Accounts Payable Ledger is a subsidiary ledger storing individual creditor
accounts.
•
Accounts Payable is a controlling account in the General Ledger. The balance in
this controlling account must agree with the total of all individual creditor account
balances in the subsidiary ledger.
•
The Other General Ledger Accounts part of the Cash Payments Journal is used to
record the debit side of an entry to any General Ledger account that is not used too
often during the month.
•
Posting from the Cash Payments Journal is done in two stages: all individual
creditor accounts in the Accounts Payable Ledger are posted on a daily basis; all
accounts in the General Ledger are posted at the end of the month.
•
Postings to individual creditor accounts in the Accounts Payable Ledger are taken
from the Accounts Payable Dr. money column. A check mark is placed in the Post.
Ref. column opposite the creditor's name posted to indicate that the amount has
been transferred to the subsidiary ledger account.
•
Postings to General Ledger accounts should never be made until the column totals
are proved in the Cash Payments Journal.
•
The total of the Cash Cr. column is posted to the credit column of the Cash account
in the General Ledger. The account number for Cash is shown in brackets
immediately below the total amount to indicate that this amount has been
transferred to the General Ledger.
•
The total of the Accounts Payable Dr. column is posted to the debit column of the
Accounts Payable controlling account in the General Ledger. Again, the account
number would be shown in brackets immediately below the total amount.
•
The accounts shown in the Other General Ledger Accounts Dr section are posted to
the General Ledger. The account number for each account posted is shown in the
Post. Ref. column immediately opposite the amount transferred to the General
Ledger.
•
One set of trial balances is prepared after all postings to subsidiary and general
ledgers have been completed.
Accounting 20
10
Lesson 5
•
The trial balance of the Accounts Payable Ledger is prepared by completing a
Schedule of Accounts Payable. The total of this Schedule must agree with the
balance reported by the general ledger Accounts Payable account.
•
The trial balance of the Accounts Receivable Ledger is prepared by completing a
Schedule of Accounts Receivable. The total of this schedule must agree with the
balance reported by the general ledger Accounts Receivable account.
•
The trial balance of the General Ledger is the preparation of the listing of all
accounts in the general ledger with their respective month-end balances.
Do You Understand?
Invoice - a bill of sale made out by the vendor (seller).
Expired cost - expenditure for an item used to earn revenue.
Discounts lost expense - additional amount paid for an expense because payment was
made too late to take advantage of a lower cost.
Accounts payable ledger - a subsidiary ledger storing individual creditor accounts.
Accounts payable - a controlling account in the General Ledger.
Tickler file - a reminder file arranged by date.
Cash payments journal - a special journal in which all cheques are recorded.
Voucher cheque - a two-part cheque with a detachable statement form.
Schedule of accounts payable - a list of individual creditors with their month-end
balances.
Accounting 20
11
Lesson 5
Conclusion
You have learned about a very efficient journal--Cash Payments Journal.
You also learned how to handle large numbers of Accounts Payable.
Each business uses a system best fitted to its own needs.
Self Test
1.
Problem 9-3, page 352 of the text
2.
Problem 9-5, page 360 of the text
Correction: On pg. 361 of the textbook, the amount of the
Public Utilities bill dated December 12 is $150, not $50.
3.
MC 9-5, page 365 of the text
4.
Problem 9-8, page 377 of the text
Correction: On pg. 378 of the textbook, the balance forward of Denco Equipment &
Supply on December 29 is $11 080, not $11 070.
Corrections: On pg. 379 of the text, the balance forward of Cash (101) on December
31 is $11 159, not $10 874. The balance forward of Accounts Payable (202) on
December 29 is $15 978.72, not $15 852.51.
5.
Problem 9-11, page 384 of the text
Correction: On pg. 384 of the textbook in 9-11a, the balance of Accounts Receivable
(103) is $2 573, not $1 614. The balance of Professional Fees Earned (401) is $3
732, not $2 488.
Accounting 20
12
Lesson 5
P 9-3a
P 9-3b
P 9-3c
Ge n e ra l J o u rn a l
Date
20__
Accounting 20
P a ge
P o st
Re f.
Ac c o u n t Tit le a n d Expla n a t io n
13
D e bit
Cre dit
Lesson 5
P 9-3d
P 9-3e
Accounting 20
14
Lesson 5
P 9-5a, b, e
Ac c o u n t N o . 101
Cash
Date
20__
Expla n a t io n
P o st
Re f.
D e bit
Cre dit
Ac c o u n t N o . 102
Govern m en t of Can ada Bon ds
Date
20__
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P o st
Re f.
Expla n a t io n
P o st
Re f.
Expla n a t io n
P o st
Re f.
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P o st
Re f.
D e bit
Cre dit
D e bit
Cre dit
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Cre dit
Accounting 20
B a la n c e
Ac c o u n t N o . 114
Fu rn itu re
Date
20__
B a la n c e
Ac c o u n t N o . 112
Office Equ ipm en t
Date
20__
B a la n c e
Ac c o u n t N o . 110
Den tal Equ ipm en t
Date
20__
B a la n c e
D e bit
15
Cre dit
B a la n c e
Lesson 5
P 9-5a, b, e (continued)
Ac c o u n t N o . 201
Ban k L oan Payable
Date
20__
Expla n a t io n
P o st
Re f.
D e bit
Cre dit
Ac c o u n t N o . 202
Accou n ts Payable
Date
20__
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P o st
Re f.
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P o st
Re f.
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Cre dit
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P o st
Re f.
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P o st
Re f.
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Cre dit
Accounting 20
B a la n c e
Ac c o u n t N o . 510
Office S u pplies Expen se
Date
20__
B a la n c e
Ac c o u n t N o . 301
L . Ch an g, Capital
Date
20__
B a la n c e
Ac c o u n t N o . 220
Five-Y ear N ote Payable
Date
20__
B a la n c e
D e bit
16
Cre dit
B a la n c e
Lesson 5
P 9-5a, b, e (continued)
Ac c o u n t N o . 511
Utilities Expen se
Date
20__
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P o st
Re f.
D e bit
Cre dit
Ac c o u n t N o . 512
Den tal S u pplies Expen se
Date
20__
Accounting 20
B a la n c e
Expla n a t io n
P o st
Re f.
D e bit
17
Cre dit
B a la n c e
Lesson 5
Extra Forms
Ac c o u n t N o .
Date
20__
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P o st
Re f.
Expla n a t io n
P o st
Re f.
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P o st
Re f.
D e bit
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B a la n c e
Ac c o u n t N o .
Date
20__
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Cre dit
B a la n c e
Ac c o u n t N o .
Date
20__
Accounting 20
D e bit
18
Cre dit
B a la n c e
Lesson 5
P 9-5b, d
Accounts Payable Ledger
Den co Equ ipm en t & S u pply
Name
Addre s s Don Mills, On tario M3C 3G1
Date
20__
Expla n a t io n
P o st
Re f.
D e bit
Cre dit
B a la n c e
P o st
Re f.
D e bit
Cre dit
B a la n c e
P o st
Re f.
D e bit
Cre dit
B a la n c e
P o st
Re f.
D e bit
Cre dit
B a la n c e
Express Den tal In c.
Name
Addre s s Dow n sview , On tario
Date
20__
Expla n a t io n
Mardan Bu sin ess S ystem s L td.
Name
Addre s s 48 Preston S treet, Kitch en er, On tario N 2G 3W4
Date
20__
Expla n a t io n
Pu blic Utilities Com m ission
Name
Addre s s Box 3060, An yT ow n , Can ada
Date
20__
Expla n a t io n
Key Figure to Check: final balance in Denco’s account is $11 080.
Accounting 20
19
Lesson 5
P 9-5c, d, e
Ge n e ra l J o u rn a l
Date
20__
Accounting 20
P a ge
P o st
Re f.
Ac c o u n t Tit le a n d Expla n a t io n
20
D e bit
Cre dit
Lesson 5
P 9-8a Insert two cheque forms with stubs
Accounting 20
21
Lesson 5
P 9-8b, d, e, f, g
D a te
20__
Accounting 20
Ch e qu e
N u m be r
Ch e qu e P a id To
22
Ca s h P a y m e n ts J o u rn a l
Ac c o u n ts P a y a ble
P ost
Re f. Am o u n t D R.
Other General Ledg
Lesson 5
Other General Ledger Accounts
P ost
Ac c o u n t Title
Re f. Am o u n t D R.
Accounting 20
23
Ca s h CR.
Lesson 5
P 9-8b, d
Accounts Payable Ledger
Den co Equ ipm en t & S u pply
Name
Addre s s Don Mills, On tario M3C 3G1
Date
20__
Expla n a t io n
P o st
Re f.
D e bit
Cre dit
B a la n c e
P o st
Re f.
D e bit
Cre dit
B a la n c e
P o st
Re f.
D e bit
Cre dit
B a la n c e
P o st
Re f.
D e bit
Cre dit
B a la n c e
Express Den tal In c.
Name
Addre s s Dow n view , On tario
Date
20__
Expla n a t io n
Mardan Bu sin ess S ystem s L td.
Name
Addre s s 48 Preston S treet, Kitch en er, On tario N 2G 3W4
Date
20__
Expla n a t io n
Pu blic Utilities Com m ission
Name
Addre s s Box 3060, An yT ow n , Can ada
Date
20__
Accounting 20
Expla n a t io n
24
Lesson 5
P 9-8e
Total of Accounts Payable DR. Column
$____________________
Total of Other General Ledger Accounts DR. Column
____________________
Total of All Debits
Total of Cash CR. Column
P 9-8f
$
General Ledger
Ac c o u n t N o . 101
Cash
Date
20__
Expla n a t io n
P o st
Re f.
Expla n a t io n
P o st
Re f.
Expla n a t io n
P o st
Re f.
D e bit
Cre dit
Ac c o u n t N o . 112
Office Equ ipm en t
Date
20__
D e bit
Cre dit
Accounting 20
B a la n c e
Ac c o u n t N o . 201
Ban k L oan Payable
Date
20__
B a la n c e
D e bit
25
Cre dit
B a la n c e
Lesson 5
Ac c o u n t N o . 202
Accou n ts Payable
Date
20__
Expla n a t io n
P o st
Re f.
D e bit
Cre dit
Ac c o u n t N o . 220
Five-Y ear N ote Payable
Date
20__
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P o st
Re f.
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P o st
Re f.
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P o st
Re f.
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Cre dit
Accounting 20
B a la n c e
Ac c o u n t N o . 301
L . Ch an g, Draw in g
Date
20__
B a la n c e
Ac c o u n t N o . 301
L . Ch an g, Capital
Date
20__
B a la n c e
D e bit
26
Cre dit
B a la n c e
Lesson 5
Ac c o u n t N o . 501
R en t Expen se
Date
20__
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P o st
Re f.
Expla n a t io n
P o st
Re f.
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P o st
Re f.
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Cre dit
Ac c o u n t N o . 502
T eleph on e Expen se
Date
20__
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Cre dit
D e bit
Cre dit
Accounting 20
B a la n c e
Ac c o u n t N o . 504
Clean in g Expen se
Date
20__
B a la n c e
Ac c o u n t N o . 503
S alaries Expen se
Date
20__
B a la n c e
Expla n a t io n
P o st
Re f.
D e bit
27
Cre dit
B a la n c e
Lesson 5
P 9-11a
Ac c t .
No.
Ac c o u n t Tit le
Accounting 20
28
D e bit
Cre dit
Lesson 5
P 9-11b
Answers For Self Test
P 9-3a
Objectivity principle. In this case, the telephone bill gives evidence of an expense
transaction.
P 9-3b
February 13 is the date when MacPherson Plumbing & Heating received and approved the
telephone bill; therefore, February 13 is the date the bill must be paid because the terms
are “Now Due” as stated on the bill.
P 9-3c
The double entry in General Form may be shown as follows:
Dr.
Telephone Expense
82.58
Cr. Cash
82.58
To record the payment of telephone bill 1689480, now due.
Accounting 20
29
Lesson 5
P 9-3d
The expense recognition principel is used to select the correct account title in this problem.
Since the telephone services have been provided, the cost (as determined by the cost
principle) must have been used up (expired). All expired costs in accounting must be
debited to an appropriate expense account.
P 9-3e
The cost principle is used to choose the correct dollar amount on this bill.
P 9-5a, b, e
General Ledger
Ac c o u n t N o . 101
Cash
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
3
1 B alan ce forward
1 0 0 0 0
Dec.
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
3
1 B alan ce forward
Dec.
00 (Dr )
Ac c o u n t N o . 110
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
3
1 B alan ce forward
B a la n c e
8 0 0 0 0
00 (Dr )
5
GJ
2
1 4 2 7
22
8 1 4 2 7
22
29
GJ
2
6 4 8
00
8 2 0 7 5
22
Ac c o u n t N o . 112
Office Equ ipm en t
Date
20__
Dec.
B a la n c e
5 0 0 0 0
Den tal Equ ipm en t
Date
20__
00 (Dr )
Ac c o u n t N o . 102
Govern m en t of Can ada Bon ds
Date
20__
B a la n c e
Expla n a t io n
1 B alan ce forward
Accounting 20
P o st
Re f.
D e bit
3
Cre dit
B a la n c e
4 0 0 0
30
00 (Dr )
Lesson 5
Ac c o u n t N o . 114
Fu rn itu re
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
B a la n c e
3
1 B alan ce forward
6 0 0 0
Ac c o u n t N o . 201
Ban k L oan Payable
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
B a la n c e
3
1 B alan ce forward
5 0 0 0
Dec.
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
1 3 0 0 0
00 (Cr )
5
GJ
2
1 4 2 7
22
1 4 4 2 7
22
7
GJ
2
3 2 4
00
1 4 7 5 1
22
12
GJ
2
1 4 7
50
1 4 8 9 8
72
29
GJ
2
1 0 8 0
00
1 5 9 7 8
72
Date
20__
Ac c o u n t N o . 220
Expla n a t io n
1 B alan ce forward
P o st
Re f.
D e bit
Cre dit
3
Date
20__
00 (Cr )
Ac c o u n t N o . 301
Expla n a t io n
1 B alan ce forward
Accounting 20
B a la n c e
3 8 0 0 0
L . Ch an g, Capital
Dec.
B a la n c e
3
1 B alan ce forward
Five-Y ear N ote Payable
Dec.
00 (Cr )
Ac c o u n t N o . 202
Accou n ts Payable
Date
20__
00 (Dr )
P o st
Re f.
D e bit
3
Cre dit
B a la n c e
9 4 0 0 0
31
00 (Cr )
Lesson 5
P 9-5a, b, e (continued)
Ac c o u n t N o . 510
Office S u pplies Expen se
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
7
GJ
D e bit
3 2 4
2
Cre dit
B a la n c e
00
3 2 4
Ac c o u n t N o . 511
Utilities Expen se
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
12
GJ
D e bit
1 4 7
2
Cre dit
B a la n c e
50
1 4 7
Dec.
50 (Dr )
Ac c o u n t N o . 512
Den tal S u pplies Expen se
Date
20__
00 (Dr )
P o st
Re f.
Expla n a t io n
29
GJ
P 9-5a, b, d
D e bit
4 3 2
2
Cre dit
B a la n c e
00
4 3 2
00 (Dr )
Accounts Payable Ledger
Dem co Equ ipm en t & S u pply
Name
Addre s s Don Mills, On tario M3C 3G1
Date
20__
Dec.
Expla n a t io n
1 B alan ce forward
In v. 84762; du e J an ., 20__ GJ
P o st
Re f.
D e bit
Cre dit
B a la n c e
3
1 0 8 0
2
00
1 0 0 0 0
00 (Cr )
1 1 0 8 0
00
Express Den tal In c.
Name
Addre s s Dow n sview , On tario
Date
20__
Dec.
Expla n a t io n
1 In v. 748960; du e J an . 1, 20__ GJ
Accounting 20
P o st
Re f.
D e bit
Cre dit
1 4 2 7
2
32
B a la n c e
22
1 4 2 7
22 (Cr )
Lesson 5
P 9-5a, b, d (continued)
Mardan Bu sin ess S ystem s L td.
Name
Addre s s 48 Preson S treet, Kitch en er, On tario N 2G 3W4
Date
20__
P o st
Re f.
Expla n a t io n
Dec.
In v. 67891; du e J an . 3, 20__
D e bit
Cre dit
B a la n c e
3
1 B alan ce forward
GJ
3 2 4
2
00
3 0 0 0
00 (Cr )
3 3 2 4
00
Pu blic Utilities Com m ission
Name
Addre s s Box 3060 An yT ow n , Can ada
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
12 B ill 16250; du e Dec. 27, 20__
GJ
D e bit
Cre dit
B a la n c e
1 4 7
2
50
1 4 7
50 (Cr )
P 9-5c, d, e
Ge n e ra l J o u rn a l
Date
20__
Dec.
P a ge
P o st
Re f.
Ac c o u n t Tit le a n d Expla n a t io n
5 Dental Equipment
110
D e bit
1
4
2
Cre dit
7
22
202/ 3
Accts. Pay./Express Dental Inc.
2
1
4
2
7
22
3
2
4
00
1
4
7
50
0
8
0
00
Purchase Invoice 748960; Invoice date, Dec. 2;
terms of net 30 days; due date, Jan. 1, 19__.
7 Office Supplies Expense
510
3
2
4
00
202/ 3
Accts. Pay./Mardan Business Systems Ltd.
Purchase Invoice 67891; Invoice date, Dec. 4;
terms of net 30 days; due date, Jan. 3, 19__.
12 Utilities Expense
511
1
4
7
50
202/ 3
Accts. Pay./PUC
Bill No. 16250; dated Dec. 10; due date, Dec. 27.
29 Dental Supplies Expense
Dental Equipment
512
4
3
2
00 *
110
6
4
8
00 *
202/ 3
Accts. Pay./Denco Equip. & Supply
1
Purchases Invoice 84762; date, Dec. 27; terms
of net 10 days; due Jan. 7, 19__; cost of
supplies, $400 plus 8% tax; cost of equipment,
$600 plus 8% tax.
Note: Since the total invoice amount must be split between two debit accounts, the cost principle requires
the costing of separate amounts. The debit to Dental Supplies expense is in accordance with management’s
accounting policy to expire the cost of all supplies received.
Accounting 20
33
Lesson 5
MC 9-5a
The entry should be recorded in the General Journal and then posted to the General
Ledger Accounts Payable account and the subsidiary ledger account.
MC 9-5b
The dollar amount would be $78.40 because, according to the cost principle, the amount
journalized should be the cash it would take to settle the account on the date the purchase
invoice is recorded. Since it is safe to assume it would not take more than 10 days to
receive the bill from the date it was prepared, the $1.60 would be deducted from the $80,
and $78.40 would have to be paid on the date the invoice is recorded.
MC 9-5c
The General Ledger control account will be $1.60 less than the total of the subsidiary
ledger accounts. The General Ledger will balance if the office supplies account was
recorded in the amount of $78.40.
The other problem that may arise is the $80 will be paid because that is the amount
recorded in the supplier’s ledger account. The ledger account is used by the bookkeeper to
calculate the payment due to the supplier.
Accounting 20
34
Lesson 5
P 9-8a Insert two cheque forms with stubs that include the answers.
Accounting 20
35
Lesson 5
D a te
19__
Dec.
1
3
4
8
9
9
12
13
15
16
17
18
22
27
30
31
31
Ch e qu e
N u m be r
001
002
003
004
005
006
007
008
009
010
011
012
013
014
015
016
017
Ch e qu e P a id To
City Realty Co.
Denco Equipment Supply
Mardan Business Systems Ltd.
Bell Canada
VOID
City Dry Cleaners
Wright Office Ltd.
A. J. Holt
Dr. Lien Chang
Denco Equipment Supply
Mardan Business Systems Ltd.
VOID
Dr. Lien Chang
Public Utilities Commission
Pat Davis
The Royal Bank of Canada
Central Finance Co.
Telephone Expense
502
6 5 00
1 5
5
6
6 7
( )
0
0
3
8
0
0
5
6
00
00
00
00
1 0 0 0 00
8 6 00
1 5 0 0 00
1 0 0 00
5 0 0 00
503
201
220
302
504
112
112
302
Salaries Expense
Bank Loan Payable
5-Year Note Payable
L. Chang, Drawing
Cleaning Expense
Office Equipment
Office Equipment
L. Chang, Drawing
Ca s h P a y m e n ts J o u rn a l
Ac c o u n ts P a y a ble
Other General Ledger Accounts
P ost
P ost
Re f. Am o u n t D R.
Ac c o u n t Title
Re f. Am o u n t D R.
Rent Expense
501
9 0 0 00
5 0 0 00
2 0 0 00
5 0 0 00
2 0 0 00
1 4 7 50
1 5 4 7 50
(202)
P age 1
1 5
1
5
5
2
0
4
0
0
3
3
8
0
0
0
0
0
0
7
0
0
5
3
6
0
0
0
0
0
00
50
00
00
00
50
00
00
00
00
00
00
Ca s h CR.
9 0 0 00
5 0 0 00
2 0 0 00
6 5 00
1 0
1
1 5
5
6
8 3
(101)
Lesson 5
36
Accounting 20
P 9-8e
Total of Accounts Payable Dr. Column
Total of Other General Ledger Accounts Dr. Column
Total of All Debits
Total of Cash Cr. Column
$1 547.50
$6 786.00
$8 333.50
$8 333.50
Accounts Payable Ledger
P 9-8c, d
Den co Equ ipm en t & S u pply
Name
Addre s s Don Mills, On tario M3C 3G1
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
3
29 B alan ce forward
B a la n c e
1 1 0 8 0
00 (Cr )
3 Ch equ e 002 on a/c
CPJ
1
5 0 0
00
1 0 5 8 0
00
16 Ch equ e 010 on a/c
CPJ
1
5 0 0
00
1 0 0 8 0
00
Express Den tal In c.
Name
Addre s s Dow n sview , On tario
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
3
5 B alan ce forward
B a la n c e
1 4 2 7
22 (Cr )
Mardan Bu sin ess S ystem s L td.
Name
Addre s s 48 Preston S treet, Kitch en er, On tario N 2G 3W4
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
3
7 B alan ce forward
B a la n c e
3 3 2 4
00 (Cr )
4 Ch equ e 003 on a/c
CPJ
1
2 0 0
00
3 1 2 4
00
17 Ch equ e 011 on a/c
CPJ
1
2 0 0
00
2 9 2 4
00
Accounting 20
37
Lesson 5
Pu blic Utilities Com m ission
Name
Addre s s Box 3060, An yT ow n , Can ada
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
Cre dit
B a la n c e
3
12 B alan ce forward
27 Ch equ e 014 on a/c
D e bit
CPJ
1 4 7
1 4 7
1
50
50 (Cr )
0
P 9-8f
Ac c o u n t N o . 101
Cash
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
Cre dit
CP
1 1 1 5 9
1
8 3 3 3
Dec.
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
3
1 B alan ce forward
00
B a la n c e
4 0 0 0
00 (Dr )
CP
1
1 5 0 0
00
5 5 0 0
00
13
CP
1
1 0 0
00
5 6 0 0
00
Date
20__
Ac c o u n t N o . 201
P o st
Re f.
Expla n a t io n
D e bit
Cre dit
3
1 B alan ce forward
31
CP
1
5 0 0
00
Date
20__
P o st
Re f.
Expla n a t io n
Accounting 20
D e bit
Cre dit
3
29 B alan ce forward
31
B a la n c e
5 0 0 0
00 (Cr )
4 5 0 0
00
Ac c o u n t N o . 202
Accou n ts Payable
Dec.
2 8 2 5
12
Ban k L oan Payable
Dec.
50
00 (Dr )
Ac c o u n t N o . 112
Office Equ ipm en t
Date
20__
B a la n c e
3
1 B alan ce forward
31 T otal Paym en ts
D e bit
CP
1
1 5 4 7
38
50
B a la n c e
1 5 9 7 8
72 (Cr )
1 4 4 3 1
22
Lesson 5
Ac c o u n t N o . 220
Five-Y ear N ote Payable
Date
20__
Dec.
P o st
Re f.
Expla n a t io n
Cre dit
3
1 B alan ce forward
31
D e bit
CP
1
6 3 5
00
L . Ch an g, Capital
Date
20__
Dec.
D e bit
Cre dit
3
1 B alan ce forward
Expla n a t io n
D e bit
Cre dit
B a la n c e
1
5 0 0
00
5 0 0
22
CP
1
1 0 0 0
00
1 5 0 0
1
CP
D e bit
9 0 0
1
8
Cre dit
00
CP
00 (Dr )
D e bit
6 5
1
Cre dit
00
B a la n c e
6 5
00 (Dr )
Ac c o u n t N o . 503
Expla n a t io n
Accounting 20
B a la n c e
9 0 0
S alaries Expen se
30
00
Ac c o u n t N o . 502
P o st
Re f.
Expla n a t io n
Date
20__
00 (Dr )
Ac c o u n t N o . 501
P o st
Re f.
Expla n a t io n
Date
20__
00 (Cr )
B a la n c e
CP
T eleph on e Expen se
Dec.
00
15
Date
20__
Dec.
3 7 3 6 5
Ac c o u n t N o . 302
P o st
Re f.
R en t Expen se
Dec.
00 (Cr )
9 4 0 0 0
L . Ch an g, Draw in g
Dec.
3 8 0 0 0
Ac c o u n t N o . 301
P o st
Re f.
Expla n a t io n
Date
20__
B a la n c e
CP
P o st
Re f.
D e bit
1
1 5 0 0
39
Cre dit
00
B a la n c e
1 5 0 0
00 (Dr )
Lesson 5
P 9-8f (continued)
Ac c o u n t N o . 504
Clean in g Expen se
Date
20__
P o st
Re f.
Expla n a t io n
Dec.
9
CP
D e bit
Cre dit
8 6
1
B a la n c e
00
8 6
00 (Dr )
P 9-11a
Lien Chang, D.D.S.
Trial Balance
December 31, 20__
Cash
101
Government of Canada Bonds
102
Accounts Receivable
103
Dental Equipment
110
Office Equipment
112
Furniture
114
Bank Loan Payable
201
4
5
0
0
00
Accounts Payable
202
1
4
4
3
1
22
Five Year Note Payable
220
3
7
3
6
5
00
L. Chang, Capital
301
9
4
0
0
0
00
L. Chang, Drawing
302
Professional Fees Earned
401
3
7
3
2
00
Rent Expense
501
Telephone Expense
502
Salaries Expense
503
Cleaning Expense
504
Office Supplies Expense
510
Utilities Expense
Dental Supplies Expense
4
0
2
8
22
5
8
8
2
5
00
0
0
0
0
00
2
5
7
3
00
2
0
7
5
00
5
6
0
0
00
6
0
0
0
00
1
5
9
0
0
00
0
0
00
6
5
00
0
0
00
8
6
00
3
2
4
00
511
1
4
7
00
512
4
3
2
00
0
2
8
22
1
15
Accounting 20
2
40
4
5
15
Lesson 5
P 9-11b
Lien Chang, D.D.S.
Schedule of Accounts Payable
December 31, 20__
Denco Equipment & Supply
Express Dental Inc.
Mardan Business Systems Ltd.
$10 080.00
1 427.22
2 924.00
Total of Accounts Payable, December 31, 20__
Accounting 20
41
$14 431.22
Lesson 5