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Lasting Summer Inc. has $2,510 in the October 1 balance of the accounts receivable account consisting of $1,060 from Champion Co. and $1,450 from Wayfarer Co. Transactions related to revenue and cash receipts completed by Lasting Summer Inc. during the month of October 2016 are as follows: a. Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted. b. Prepare a listing of the accounts receivable customer balances and verify that the total of the accounts receivable customer balances equals the balance of the accounts receivable controlling account on October 31, 2016. c. Why does Lasting Summer Inc. use a subsidiary ledger for accounts receivable?
Financial Accounting
Solutions
Financial Accounting
Lasting Summer Inc. has $2,510 in the October 1 balance of the accounts receivable account consisting of $1,060 from Champion Co. and $1,450 from Wayfarer Co. Transactions related to revenue and cash receipts completed by Lasting Summer Inc. during the month of October 2016 are as follows:
- a. Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted.
- b. Prepare a listing of the accounts receivable customer balances and verify that the total of the accounts receivable customer balances equals the balance of the accounts receivable controlling account on October 31, 2016.
- c. Why does Lasting Summer Inc. use a subsidiary ledger for accounts receivable?
(a)
Prepare single column revenue journal and a cash receipts journal of L S Incorporation.
Explanation of Solution
Revenue journal: Revenue journal refers to the journal that is used to record the fees earned on account. In the revenue journal, all revenue transactions are recorded only when the business performed service to customer on account (credit).
Cash receipts journal: Cash receipts journal refers to the journal that is used to record the all transaction which is involve the cash receipts. For example, the business received cash from customer (service performed in cash).
Accounts receivable subsidiary ledger: Account receivable subsidiary ledger is the ledger which is used to post the customer transaction in one particular ledger account. It helps the business for locate the error in the customer ledger balance. After all transactions are posted, the balances in the accounts receivable subsidiary ledger should be totaled, and compare with the balance in the general ledger of accounts receivable. If both the balance does not agree, the error has been located and corrected.
Subsidiary ledger: Subsidiary ledger refers to the ledger that provides the detailed information of the account already recorded in the general ledger such as accounts receivable subsidiary ledger and accounts payable subsidiary ledger.
Revenue journal of L S Incorporation in the month of October is as follows:
Revenue journal
| Date | Invoice No. | Account debited | Post Ref. |
Account receivable Dr. Fees earned Cr... | |
(b)
Prepare accounts receivable customers balance, and verify that the total agrees with the ending balance of accounts receivable control account.
(c)
Discuss the uses of subsidiary ledger for accounts receivable.
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