Chapter 5, Problem 1PA

Sage Learning Centers was established on July 20, 2016, to provide educational services. The services provided during the remainder of the month are as follows:

Instructions

1. Journalize the transactions for July, using a single-column revenue journal and a two-column general journal. Post to the following customer accounts in the accounts receivable ledger, and insert the balance immediately after recording each entry: D. Chase; J. Dunlop; F. Mintz; T. Quinn; K. Tisdale.

2. Post the revenue journal and the general journal to the following accounts in the general ledger, inserting the account balances only after the last postings:

3. a. What is the sum of the balances of the customer accounts in the subsidiary ledger at July 31?

b. What is the balance of the accounts receivable controlling account at July 31?

4. Assume Sage Learning Centers began using a computerized accounting system to record the sales transactions on August 1. What are some of the benefits of the computerized system over the manual system?

To determine

Record the transactions in General journal, Revenue journal, Accounts Receivable subsidiary ledger, and General ledger.

Explanation of Solution

General Journal: The journal where the debit and credit entries of the accounting transactions are recorded in a chronological order are referred to as general journal.

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: This is a ledger in which individual balance of every account is recorded. This is an expansion of the general ledger. The subsidiary ledger records the individual balances and hence there is no need to record the individual balances in the general 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.

The following table shows the revenue journal of SL Centers.

Revenue Journal
Date		Invoice No.	Accounts Debited	Post Ref.	Accounts Receivable Dr. Fees Earned Cr.
2016
July	21	1	J D	✓	115
	22	2	K T	✓	350
	24	3	T Q	✓	85
	27	4	F M	✓	225
	30	5	D C	✓	170
	30	6	K T	✓	120
	31	7	T Q	✓	105
	31				1170
					(12) (41)

Table (1)

The above transactions were transacted on account. Hence, they were posted in revenue journal.

The following table shows the general journal of SL Centers.

General Journal

Date		Description	Post Ref.	Debit	Credit
2016
July	25	Supplies		300
		Fees Earned			300

Table (2)

Supplies are assets for the business; it increases the assets of the business. So debit supplies. Fees earned are component of owners’ equity and it increases it. So credit fees earned.

Accounts Receivable Subsidiary Ledger

Name:  D C

Date		Items	Post Ref.		Debit	Credit	Balance
2016
July	30			R1	170		170

Table (3)

Name:  F M

Date		Items		Post Ref.		Debit	Credit	Balance
2016
July	27				R1	225		225

Table (4)

Name:  J D

Date		Items		Post Ref.		Debit	Credit	Balance
2016
July	21				R1	115		115

Table (5)

Name:  K T

Date		Items		Post Ref.	Debit	Credit	Balance
2016
July	22				350		350
	30				120		470

Table (6)

Name:  T Q

Date		Items	Post Ref.	Debit	Credit	Balance
2016
July	24			85		85
	31			105		190

Table (7)

The above transactions were transacted on account. Hence they are posted in the account receivable subsidiary of D C, J D, F M, T Q, and K T.

General Ledger

Account: Account Receivable                     

Date		Items	Post Ref.	Debit	Credit	Balance
						Debit	Credit
2016
July	31		R1	1,170		1,170

Table (8)

The general ledger records the summary of the subsidiary ledger accounts. So 1,170 from revenue journal are recorded in the general ledger.

Account: Supplies                             

Date		Items	Post Ref.	Debit	Credit	Balance
						Debit	Credit
2016
July	25		J1	300		300

Table (9)

The general ledger records the summary of the subsidiary ledger accounts. So services provided for 300 to K T, in exchange of supplies are posted in supplies account.

Account: Fees Earned                         

Date		Items	Post Ref.	Debit	Credit	Balance
						Debit	Credit
2016
July	25		J1		300		300
	31		R1		1170		1170

Table (10)

The general ledger records the summary of the subsidiary ledger accounts. So 300 from supplies account and 1,170 from revenue journal are recorded in the fees earned.

To determine

Determine the sum of the balances of the customer accounts in the subsidiary ledger at 31^st July.

Answer to Problem 1PA

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

Customers Account	Amount
D C	170
F M	225
J D	115
K T	470
T Q	190
Total	1170

Table (11)

Explanation of Solution

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

To determine

Determine the balance of the accounts receivable controlling account.

Answer to Problem 1PA

The balance of the accounts receivable controlling account is 1,170.

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 receivable ledger is 1,170, so the balance of the accounts receivable controlling account is 1,170.

To determine

Explain the benefits of the computerized system over the manual system.

Explanation of Solution

If SL Centers will start using computerized accounting system, then it can handle its accounting process more efficiently. Each sale transaction will record in electronic invoice form. The posting to accounts subsidiary ledgers as well as general ledgers will be automatic. There is no chance of double posting or clerical errors. Manual verification of controlling account with subsidiary ledger accounts is not required.