Chapter 5, Problem 5.4BPR

1.

To determine

General Ledger

General ledger refers to the ledger that records all the transactions of the business related to the company’s assets, liabilities, owners’ equities, revenues, and expenses. Each subsidiary ledger is represented in the general ledger by summarizing the account.

Accounts payable control account and subsidiary ledger

Accounts payable account and subsidiary ledger is the ledger which is used to post the creditors transaction in one particular ledger account. It helps the business to locate the error in the creditor ledger balance. After all transactions of creditor accounts are posted, the balances in the accounts payable subsidiary ledger should be totaled, and compare with the balance in the general ledger of accounts payable. If both the balance does not agree, the error has been located and corrected.

Purchase journal

Purchase journal refers to the journal that is used to record all purchases on account. In the purchase journal, all purchase transactions are recorded only when the business purchased the goods on account. For example, the business purchased cleaning supplies on account.

Cash payments journal

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

To Prepare: A single column revenue journal and cash receipt journal, and post the accounts in the accounts payable subsidiary ledger.

Explanation of Solution

Purchase journal

Purchase journal of Company WTE in the month of October 2016 is as follows:

Figure (1)

Cash payment journal

Cash payment journal of Company WTE in the month of October 2016 is as follows:

Cash payment journal

Date		Check No.	Account debited	Post Ref.	Other accounts Dr.	Accounts payable Dr.	Cash Dr.
Oct.	16	1	Rent expense	71	7,000		7,000
	18	2	Field supplies	14	4,570		4,570
			Office supplies	15	650		650
	24		PS Incorporation	✓		32,600	32,600
	26		MS Company	✓		9,780	9,780
	28		Land		240,000		240,000
	30		A Office supply Company	✓		1,320	1,320
	31		Salary expense	61	32,000		32,000
	31				284,220	43,700	327,920
					✓	(21)	(11)

Table (1)

Accounts payable subsidiary ledger

Name: A Office supply Company
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance ($)
Oct.	20		P1		1,320	1,320
	28		P1		3,670	4,990
	30		CP1	1,320		3,670

Table (2)

Name: MS Company
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance ($)
Oct.	17		P1		9,780	9,780
	26		CP1	9,780		-
	30		P1		12,450	12,450

Table (3)

Name: PS Incorporation
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance ($)
Oct.	16		P1		32,600	32,600
	24		CP1	32,600		-
	30		P1		30,800	30,800

Table (4)

2. and 3.

To determine

To post: The individual entries to the appropriate general ledger accounts.

Explanation of Solution

Prepare the general ledger for given accounts as follows:

Account:         Cash                                                              Account no. 11
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
Oct.	31		CP1	327,920			327,920

Table (5)

Account:    Field supplies                                                             Account no. 14
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
Oct.	18		CP1	4,570		4,570
	31		P1	47,530		52,100

Table (6)

Account:    Office supplies                                                             Account no. 15
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
Oct.	18		CP1	650		650
	31		P1	4,990		5,460

Table (7)

Account:         Prepaid rent                                                             Account no. 16
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
Oct.	31		J1	15,000			15,000

Table (8)

Account:  Field equipment                                                         Account no. 17
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
Oct.	16		P1	32,600		32,600
	31		J1		15,000	17,600

Table (9)

Account:  Office equipment                                                         Account no. 18
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
	31		P1		5,500		5,500

Table (10)

Account:  Land                                                                             Account no. 19
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
Oct.	23		CP1	240,000		240,000

Table (11)

Account:  Accounts payable                                                         Account no. 21
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
Oct.	31		P1		90,620		90,620
	31		CP1	43,700			46,920

Table (12)

Account:  Salary expense                                                         Account no. 61
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
Oct.	31		CP1		32,000		32,000

Table (13)

Account:  Rent expense                                                         Account no. 71
Date		Item	Post. Ref	Debit  ($)	Credit ($)	Balance
						Debit ($)	Credit ($)
Oct.	16		CP1		7,000		7,000

Table (14)

Journal                                                      Page  01
Date		Description	Post. Ref	Debit ($)	Credit ($)
Oct.	31	Prepaid rent	16	15,000
		Field equipment	17		15,000
		(To record leasing of field equipment)

Table (15)

4.

To determine

To prepare: The accounts payable creditor balances.

Explanation of Solution

Accounts payable creditor balance

Accounts payable creditor balance is as follows:

Company WTE
Accounts payable creditor balances
October 31, 2016
	Amount ($)
A Office supply Company	3,670
MS Company	12,450
PS Incorporation	30,800
Total accounts receivable	46,920

Table (16)

Accounts payable controlling account

Ending balance of accounts payable controlling account is as follows:

Company WTE
Accounts payable (Controlling account)
October 31, 2016
	Amount ($)
Opening balance	0
Add:
Total credits (from purchase journal)	90,620
	90,620
Less:
Total debits (from cash payment journal)	(43,700)
Total accounts payable	46,920

Table (17)

In this case, accounts payable subsidiary ledger is used to identify, and locate the error by way of cross-checking the creditor balance and accounts payable controlling account. From the above calculation, we can understand that both balances of accounts payable is agree, hence there is no error in the recording and posing of transactions.

5.

To determine

To discuss: The reason for using subsidiary ledger for the field equipment.

Explanation of Solution

A subsidiary ledger for the field equipment helps the company to track the cost of each piece of equipment, location, useful life, and other necessary data. This information is used for safeguarding the equipment and determining depreciation of equipment.