Chapter 5, Problem 3PB

Plumb Line Surveyors provides survey work for construction projects. The office staff use office supplies, while surveying crews use field supplies. Purchases on account completed by Plumb Line Surveyors during May are as follows:

Instructions

1. 1. Insert the following balances in the general ledger as of May 1:

1. 2. Insert the following balances in the accounts payable subsidiary ledger as of May 1:

1. 3. Journalize the transactions for May, using a purchases journal (p. 30) similar to the one illustrated in this chapter. Prepare the purchases journal with columns for Accounts Payable, Field Supplies, Office Supplies, and Other Accounts. Post to the creditor accounts in the accounts payable subsidiary ledger immediately after each entry.
2. 4. Post the purchases journal to the accounts in the general ledger.
3. 5. a. What is the sum of the creditor balances in the subsidiary ledger at May 31?

   b. What is the balance of the accounts payable controlling account at May 31?

4. 6. What type of e-commerce application would be used to plan and coordinate transactions with suppliers?

To determine

Record the transactions in general ledger.

Answer to Problem 3PB

The balances of different accounts are posted in the general ledger of PLS.

General Ledger

	Field Supplies				Account Number 14
Date		Items	Post Ref.	Debit	Credit	Balance
						Debit	Credit
May	1	Balance				6,200
	31		P30	16,900		23,100

Table (1)

Explanation of Solution

General Journal: It is a chronological record of the transactions, showing an explanation of each transaction, the accounts affected, whether those accounts are increased or decreased, and by what amount. It has two columns i.e. Debit column and Credit column.

Special Journal: Special journal records a single kind of transactions that occurs frequently. For example: Revenue Journal is a special journal which records all revenue earned on account.

General ledger: It is the primary ledger, which contains all balance sheet and income statement accounts. For example: Cash Account, Equipment Accounts, and Rent Accounts etc.

Subsidiary ledger: A large number of individual accounts with a common characteristic can be grouped together in a separate ledger called subsidiary ledger. For example: Accounts Receivable subsidiary ledger or customer ledger.

Controlling Account: Each subsidiary ledger is represented in the general ledger by a summarizing account, called a controlling account. For example: Accounts Receivable Subsidiary ledger is represented in Accounts Receivable ledger.

Field supplies are assets for the business, so the balance is posted in the debit column.

	Account:  Office Supplies				Account Number 15
Date		Items	Post Ref.	Debit	Credit	Balance
						Debit	Credit
May	1	Balance				1,490
	31		P30	1,105		2,595

Table (2)

Office supplies are assets for the business, so the balance is posted in the debit column.

	Account: Office Equipment				Account Number 18
Date		Items	Post Ref.	Debit	Credit	Balance
						Debit	Credit
May	1	Balance				19,400
	5		P30	8,150		27,550

Table (3)

Office equipment is an asset for the business, so the balance is posted in the debit column.

	Account: Accounts Payable				Account Number 21
Date		Items	Post Ref.	Debit	Credit	Balance
						Debit	Credit
May	1	Balance					5,145
	31		P30		26,155		31,300

Table (4)

Accounts payable is liability for the business, so the balance is posted in the credit column.

To determine

Record the balances in the accounts payable subsidiary ledger and the transactions for October in journal.

Answer to Problem 3PB

The balances in the accounts payable subsidiary ledger and the transactions for October in journal are recorded.

Accounts Payable Subsidiary Ledger

Name: AVS Co.
Date		Items	Post Ref.	Debit	Credit	Balance
May.	1	Balance				3,900
	19		P30		8,150	12,050

Table (5)

Name: JM Co.
Date		Items	Post Ref.	Debit	Credit	Balance
May.	1	Balance				730
	15		P30		500	1,230
	26		P30		265	1,495

Table (6)

Name: L Co.
Date		Items	Post Ref.	Debit	Credit	Balance
May.	1	Balance				515
	3		P30		340	855

Table (7)

Name: TS Co.
Date		Items	Post Ref.	Debit	Credit	Balance
May.	8		P30		4,500	4,500
	23		P30		2,450	6,950
	30		P30		3,040	9,990

Table (8)

Name: W Co.
Date		Items	Post Ref.	Debit	Credit	Balance
May.	1		P30		3,240	3,240
	12		P30		3,670	6,910

Table (9)

Explanation of Solution

The above transactions were transacted on account. Hence they are posted in the account payable subsidiary ledger of AVS, JM, L, TS, and W Company.

To determine

Prepare the purchase journal.

Answer to Problem 3PB

The purchase journal of PLS Company for the month of May is as follows:

Figure (1)

Explanation of Solution

All the purchase transactions which are on account for the month of May are recorded in the Purchase journal.

To determine

Determine the sum of the balances of the creditors accounts in the subsidiary ledger at 31^st May.

Answer to Problem 3PB

The sum of balances of creditors’ accounts in subsidiary ledger accounts is shown in the following table.

Creditors	Amount
AVS Co.	$12,050
JM Co.	$1,495
L Co.	$855
TS Co.	$9,990
W Co.	$6,910
Total	$31,300

Table (10)

Explanation of Solution

The sum of balances of creditors’ accounts in subsidiary ledger accounts is calculated by adding the balances of creditors’ accounts.

To determine

Determine the balance of the accounts receivable controlling account.

Answer to Problem 3PB

The balance of the accounts payable controlling account is 31,300.

Explanation of Solution

Each subsidiary ledger is represented in the general ledger by a summarizing account, called a controlling account. Since the balance of accounts payable ledger is 31,300, so the balance of the accounts payable controlling account is 31,300.

To determine

Indicate the type of e-commerce application would be used to plan and coordinate transactions with suppliers.

Explanation of Solution

The type of e-commerce application would be used to plan and coordinate transactions with suppliers is the Supply Chain Management (SCM). It is an internet application to plan supply needs and coordinate with suppliers.