Chapter 12, Problem 1MP

During the month of October 20--, The Pink Petal flower shop engaged in the following transactions:

Selected account balances as of October 1 were as follows:

The Pink Petal also had the following subsidiary ledger balances as of October 1:

REQUIRED

1. 1. Record the transactions in a sales journal (page 7), cash receipts journal (page 10), purchases journal (page 6), cash payments journal (page 11), and general journal (page 5). Total, verify, and rule the columns where appropriate at the end of the month.
2. 2. Post from the journals to the general ledger, accounts receivable ledger, and accounts payable ledger accounts. Use account numbers as shown in the chapter.

To determine

Prepare the given transaction in the sales journal, cash receipts journal, purchase journal, cash payment journal, and general journal and verify the total column and rule the column.

Explanation of Solution

Sales Journal:

Sales journal is one form of special journal book, which records all the sales transactions that are sold to customers on credit. In a single column sales journal, debit aspect of accounts receivable and credit aspect of inventory are recorded, and then posted to individual subsidiary customer account.

Prepare the given transaction in a sales journal and verify the total column and rule the column:

Table (1)

Verification of total debit and credit column:

$\begin{array}{l}\text{Total Debit = Total Credit}\\ \$6,300.00=\left(\$6,000.00+\$300.00\right)\end{array}$

Cash Receipts Journal:  It is a special book where only cash receipts transactions that are received from customers, merchandise sales and service made in cash and collection of accounts receivable are recorded.

The following are the some examples of transactions that would be recorded in the Other Accounts credit column of the cash receipts journal:

• • Cash received as interest on notes payable
• • Interest revenue received from debtors
• • Cash receipts from bank loans
• • Cash receipts for capital investments

Prepare the given transactions in the cash receipts journal and verify the total column and rule the column:

Table (2)

Verification of total debit and credit column:

$\begin{array}{l}\text{Total Debit = Total Credit}\\ \$10,910.00=\left(\begin{array}{l}\$7,235.00+\$3,500.00\\ +\$175.00\end{array}\right)\end{array}$

Purchase Journal: Purchase journal records all the merchandise purchase on credit. In a single column purchase journal, debit aspect of inventory and credit aspect of accounts payable are recorded, and then posted to individual subsidiary supplier account.

Prepare the transactions in the purchase journal:

Table (3)

Cash payments journal: Cash payments journal refers to the journal that is used to record the all transaction which is involve the cash payments. For example, the business paid cash to employees (salary paid to employees).

Cash payments journal is used to record merchandise purchases made in cash and payments of accounts payable. It also records all other cash payments to various purposes. To include all these transactions, companies use multi-column cash payments journal.

Prepare the transactions in a cash payments journal and total the each column of cash payments journal:

Table (4)

Use the general journal to record the sales returns and allowances:

General Journal: It is a book where all the monetary transactions are recorded in the form of journal entries on the date of their occurrence in a chronological order.

Transaction on October 14:

General Journal
Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
20--
October	14	Sales Returns and Allowances		401.1	300.00
		Sales Tax Payable		231	15.00
			Accounts Receivable, MJ	122/✓		315.00
		(Record merchandise returned)

Table (5)

Description:

• ■ Sales Returns and Allowances is a contra-revenue account, and contra-revenue accounts decrease the equity value, and a decrease in equity is debited.
• ■ Sales Tax Payable is a liability account. Since the payable decreased due to returns, the liability decreased, and a decrease in liability is debited.
• ■ Accounts Receivable, MJ Company is an asset account. Since inventory is returned, amount to be received has decreased, asset account is decreased, and a decrease in asset is credited.

Transaction on October 17:

Page: 3
Date		Account Titles and Explanation		Post Ref.	Debit ($)	Credit ($)
20--
October	17	Accounts Payable, V Etc.		202/✓	900
			Purchases Returns and Allowances	501.1		900
		(Record merchandise returned)

Table (6)

Description:

• ■ Accounts Payable, V Etc, is a liability account. Since inventory is returned, amount to be paid has decreased, liability account is decreased, and a decrease in liability is debited.
• ■ Purchases Returns and Allowances is a contra-cost account, and contra-cost accounts increase the equity value, and an increase in equity is credited.

To determine

Post the prepared journals to the general ledger, accounts receivable ledger and accounts payable ledger accounts.

Explanation of Solution

Posting transactions: The process of transferring the journalized transactions into the accounts of the ledger is known as posting the transactions.

Post the prepared journals to the general ledger:

ACCOUNT    Cash                                                                       ACCOUNT NO. 101
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	1	Balance	✓			18,225
	31		CR10	10,910		29,135
	31		CP11		3,726	25,409

Table (7)

ACCOUNT    Accounts Receivable                                             ACCOUNT NO. 122
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	1	Balance	✓			9,619
	14		J5		315	9,304
	31		S7	6,300		15,604
	31		CR10		7,235	8,369

Table (8)

ACCOUNT    Accounts Payable                                              ACCOUNT NO. 202
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	1	Balance	✓				5,120
	17		J5	900			4,220
	31		P6		4,700		8,920
	31		CP11	2,700			6,220

Table (9)

ACCOUNT    Sales Tax Payable                                                 ACCOUNT NO. 231
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	14		J5	15		15
	31		S7		300		285
	31		CR10		175		460

Table (10)

ACCOUNT    Sales                                                                         ACCOUNT NO. 401
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	31		S7		6,000		6,000
	31		CR10		3,500		9,500

Table (11)

ACCOUNT    Sales Returns and Allowances                            ACCOUNT NO. 401.1
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	14		J5	300.00		300.00

Table (12)

ACCOUNT    Purchases                                                            ACCOUNT NO. 501
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	31		P6	4,700		4,700

Table (13)

ACCOUNT    Purchases Return and Allowances                      ACCOUNT NO. 501.1
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	17		J5		900		900

Table (14)

ACCOUNT    Purchases Discounts                                           ACCOUNT NO. 501.2
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	31		CP11		24		24

Table (15)

ACCOUNT    Wages Expense                                                   ACCOUNT NO. 511
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	29		CP11	900		900

Table (16)

ACCOUNT    Phone Expense                                                   ACCOUNT NO. 5125
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
20--
October	5		CP11	150		150

Table (17)

Post the prepared journals to the accounts receivable ledger:

NAME          D Decorating
ADDRESS 12 J Lane, H, CT  06117
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
October	1	Balance	✓			3,340
	24		CR10		2,135	1,205
	27		S7	3,150		4,355

Table (18)

NAME          MJ
ADDRESS   700 H DR., AVON, CT  06108
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
October	1	Balance	✓			4,000
	12		CR10		3,100	900
	14		J5		315	585

Table (19)

NAME          E Shoe Maker
ADDRESS  52 J Road, H, CT 06118
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
October	1	Balance	✓			279
	1		S7	1,050		1,329

Table (20)

NAME           L Summers
ADDRESS     5200 H Avenue., H CT 06111
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
October	1	Balance	✓			2,000
	9		CR10		2,000
	12		S7	2,100		2,100

Table (21)

Post the journals to the accounts payable ledger:

NAME           F Wholesalers
ADDRESS     43 L Lane., B CT 06007
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
October	1	Balance	✓			1,500
	2		P6		4,000	5,500
	11		CP11	1,500		4,000

Table (22)

NAME           J Hand
ADDRESS     1009 D Rd., F CT 06082
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
October	1	Balance	✓			500
	2		CP11	500		0

Table (23)

NAME           S Enterprises
ADDRESS     88 A Street, N, CT 06789
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
October	4		P6		700	700
	13		CP11	700		0

Table (24)

NAME           V Etc.
ADDRESS     34 h Avenue.,  East H, CT 05234
Date		Item	Post. Ref.	Debit ($)	Credit ($)	Balance ($)
20--
October	1	Balance	✓			3,120
	17		J5	900		2,220

Table (25)