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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615

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Accounting (Text Only)

26th Edition
Carl Warren + 2 others
ISBN: 9781285743615
Textbook Problem
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Purchases and cash payments journals

Happy Tails Inc. has a June 1, 2016 accounts payable balance of $600, which consists of $360 due Labradore Inc. and $240 due Meow Mart Inc. Transactions related to purchases and cash payments completed by Happy Tails Inc. during the month of June 2016 are as follows:

June 4. Purchased pet supplies from Best Friend Supplies Inc. on account, $255.

6. Issued Check No. 345 to Labradore Inc. in payment of account, $360.

13. Purchased pet supplies from Poodle Pals Inc., $710.

18. Issued Check No. 346 to Meow Mart Inc. in payment of account, $240.

19. Purchased office equipment from Office Helper Inc. on account, $2,670.

23. Issued Check No. 347 to Best Friend Supplies Inc. in payment of account from purchase made on June 4.

27. Purchased pet supplies from Meow Mart Inc. on account, $400.

30. Issued Check No. 348 to Jennings Inc. for cleaning expenses, $65.

a. Prepare a purchases journal and a cash payments journal to record these transactions. The forms of the journals are similar to those used in the text. Place a check mark (✓) in the Post. Ref. column to indicate when the accounts payable subsidiary ledger should be posted. Happy Tails Inc. uses the following accounts:

Cash 11
Pet Supplies 14
Office Equipment 18
Accounts Payable 21
Cleaning Expense 54

b. Prepare a listing of accounts payable creditor balances on June 30, 2016. Verify that the total of the accounts payable creditor balances equals the balance of the accounts payable controlling account on June 30, 2016.

c. Why does Happy Tails Inc. use a subsidiary ledger for accounts payable?

(a)

To determine

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 the all transaction which is involve the cash payments. For example, the business paid cash to employees (salary paid to employees).

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 for 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.

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.

To prepare: A single column revenue journal and a cash receipts journal of H Tails Incorporation.

Explanation

Purchase journal

Purchase journal of H Tails Incorporation in the month of September is as follows:

Purchase journal

Figure (1)

Cash payment journal

Cash payment journal of H Tails Incorporation in the month of September is as follows:

Cash payment journal

Date Check No. Account debited Post Ref. Other accounts Dr. Accounts payable Dr. Cash Dr...

(b)

To determine

To prepare: The accounts payable creditors balance, and verify that the total agrees with the ending balance of accounts payable control account.

(c)

To determine

To discuss: The uses of subsidiary ledger for accounts payable.

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