Fundamental Accounting Principles
Fundamental Accounting Principles
23rd Edition
ISBN: 9781259536359
Author: John J Wild, Ken Shaw Accounting Professor, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 7, Problem 1CP
To determine

Introduction:

Summary Journals

• Summary journals are accounting documents prepared to record the financial transactions occurring during a month and then posting the totals of the same to the respective ledger accounts. Examples of Summary Journals are Sales Journals, Purchase Journal, Cash receipts and Cash payment Journals

• Sales Journal records the value of credit sales and cost of goods sold of such sales made during a given period. The value of the credit sales is transferred to the Accounts receivable ledger and sales ledger at the end of the month.

• Purchase Journal records the value of credit purchases made during a given period. The value of the credit purchases is transferred to the Accounts payable ledger and purchases’ ledger at the end of the month.

• Cash receipts record the value of cash receipts and cash sales made during a period along with the cost of goods sold of such sales. Total of cash receipts is transferred to the Cash account at the end of the month.

• Cash payment Journals record the value of cash payments made for purchases and expenses during a given period. Total of cash payments is transferred to the Cash account at the end of the month.

Journal Entries

• Journal entries are the first step in recording financial transactions and preparation of financial statements.

• These represent the impact of the financial transaction and demonstrate the effect on the accounts impacted in the form of debits and credits.

• Assets and expenses have debit balances and Liabilities and Incomes have credit balances and according to the business transaction, the accounts are appropriately debited will be credited by credited to reflect the effect of business transactions and events.

To Prepare:

a) Sales Journal

b) Purchases Journal

c) Cash Receipts Journal

d) Cash Payments Journal

e) General Journal

Expert Solution & Answer
Check Mark

Answer to Problem 1CP

Solution:

Sales Journal
Date Particulars Amount Cost of Goods Sold
May-02 Credit Sales $ 6,100.00 $4,100.00
May-16 Credit Sales $ 3,990.00 $1,890.00
May-22 Credit Sales $ 6,850.00 $4,990.00
May-26 Credit Sales $14,210.00 $8,230.00
May-31 Total $31,150.00 $ 19,210.00
Purchases Journal
Date Particulars Amount Inventory Supplies Others
May-04 Credit Purchases $37,729.00 $ 37,072.00 $ 83.00 $ 574.00
May-10 Credit Purchases $ 4,074.00 $ - $- $ 4,074.00
May-11 Credit Purchases $ 8,800.00 $8,800.00 $- $-
May-17 Credit Purchases $13,650.00 $ 13,650.00 $- $-
May-24 Credit Purchases $ 9,030.00 $8,120.00 $ 280.00 $ 630.00
May-25 Credit Purchases $ 3,080.00 $3,080.00 $- $-
May-31 Total $76,363.00 $ 70,722.00 $ 363.00 $ 5,278.00
Cash Receipts Journal
Date Particulars Amount Sales Discount Cash Sales Store Supplies Cost of Goods Sold
May-05 Cash Sales $ 4,459.00 $ 91.00 $- $- $ -
May-09 Cash Sales $ 350.00 $ - $- $ 350.00 $ -
May-11 Cash Sales $ 5,978.00 $122.00 $- $- $ -
May-15 Cash Sales $59,220.00 $ - $59,220.00 $- $ 38,200.00
May-30 Cash Sales $ 6,713.00 $137.00 $- $- $ -
May-31 Cash Sales $66,052.00 $ - $66,052.00 $- $ 42,500.00
May-31 Total $ 142,772.00 $350.00 $ 125,272.00 $ 350.00 $ 80,700.00
             
Cash Disbursements Journal
Date Particulars Amount Purchase Discount Rent Salaries Others
May-01 Office Rent $ 742.00 $ - $ 742.00 $- $ -
May-01 Sales Rent $ 2,968.00 $ - $ 2,968.00 $- $ -
May-08 Accounts Payable $ 6,174.00 $126.00 $- $- $ -
May-15 Office Salaries $ 3,150.00 $ - $- $ 3,150.00 $ -
May-15 Sales Salaries $ 5,320.00 $ - $- $ 5,320.00 $ -
May-19 Accounts Payable $ 8,624.00 $176.00 $- $- $ -
May-23 Accounts Payable $13,377.00 $273.00 $- $- $ -
May-26 Utilities $ 1,283.00 $ - $- $- $1,283.00
May-29 Drawings $ 7,000.00 $ - $- $- $7,000.00
May-30 Office Salaries $ 3,150.00 $ - $- $ 3,150.00 $ -
May-30 Sales Salaries $ 5,320.00 $ - $- $ 5,320.00 $ -
May-31 Total $57,108.00 $575.00 $ 3,710.00 $16,940.00 $8,283.00
Date Account Titles Debit Credit
May      
1 Office Rent $ 742.00  
  Sales Rent $ 2,968.00  
  Cash   $ 3,710.00
  (Being office rent paid)    
       
2 Accounts receivable $ 6,100.00  
  Sales   $ 6,100.00
  (Being credit sales recorded)    
       
2 Cost of goods sold $ 4,100.00  
  Merchandise inventory   $ 4,100.00
  (Being cost of goods sold of credit sale recorded)    
       
2 Sales Returns $ 175.00  
  Accounts receivable   $ 175.00
  (Being credit memo issued)    
       
3 Accounts payable $ 798.00  
  Merchandise Inventory   $ 798.00
  (Being credit memo received)    
       
4 Merchandise inventory $ 37,072.00  
  Store supplies $ 574.00  
  Office supplies $83.00  
  Accounts payable   $ 37,729.00
  (Being credit purchases recorded)    
       
5 Cash $ 4,459.00  
  Sales discount $91.00  
  Accounts receivable   $ 4,550.00
  (Being cash received for accounts receivable recorded net of discount)    
       
8 Accounts payable $ 6,300.00  
  Merchandise inventory   $ 126.00
  Cash   $ 6,174.00
  (Being cash paid for accounts payable recorded net of discount)    
       
9 Cash $ 350.00  
  Store supplies   $ 350.00
  (Being cash received for sale of store supplies)    
       
10 Office equipment $ 4,074.00  
  Accounts Payable   $ 4,074.00
  (Being credit purchases recorded)    
       
11 Cash $ 5,978.00  
  Sales discount $ 122.00  
  Accounts receivable   $ 6,100.00
  (Being cash received for accounts receivable recorded net of discount)    
       
11 Merchandise inventory $ 8,800.00  
  Accounts payable   $ 8,800.00
  (Being credit purchases recorded)    
       
12 Accounts payable $ 854.00  
  Office equipment   $ 854.00
  (Being credit memo received)    
       
15 Office salaries $ 3,150.00  
  Sales Salaries $ 5,320.00  
  Cash   $ 8,470.00
  (Being salaries paid in cash)    
       
15 Cash $ 59,220.00  
  Sales   $ 59,220.00
  (Being cash sales recorded)    
       
15 Cost of goods sold $ 38,200.00  
  Merchandise inventory   $ 38,200.00
  (Being cost of goods sold of cash sales recorded)    
       
16 Accounts receivable $ 3,990.00  
  Sales   $ 3,990.00
  (Being credit sales recorded)    
       
16 Costs of goods sold $ 1,890.00  
  Merchandise inventory   $ 1,890.00
  (Being cost of goods sold of credit sale recorded)    
       
17 Merchandise inventory $ 13,650.00  
  Accounts payable   $ 13,650.00
  (Being credit purchases recorded)    
       
19 Accounts payable $ 8,800.00  
  Merchandise inventory   $ 176.00
  Cash   $ 8,624.00
  (Being cash paid for accounts payable recorded net of discount)    
       
22 Accounts receivable $ 6,850.00  
  Sales   $ 6,850.00
  (Being credit sales recorded)    
       
22 Cost of goods sold $ 4,990.00  
  Merchandise inventory   $ 4,990.00
  (Being cost of goods sold of credit sale recorded)    
       
23 Accounts payable $ 13,650.00  
  Merchandise inventory   $ 273.00
  Cash   $ 13,377.00
  (Being cash paid for accounts payable recorded net of discount)    
       
24 Merchandise inventory $ 8,120.00  
  Office supplies $ 280.00  
  Store Supplies $ 630.00  
  Accounts payable   $ 9,030.00
  (Being credit purchases recorded)    
       
25 Merchandise inventory $ 3,080.00  
  Accounts payable   $ 3,080.00
  (Being credit purchases recorded)    
       
26 Accounts receivable $ 14,210.00  
  Sales   $ 14,210.00
  (Being credit sales recorded)    
       
26 Cost of goods sold $ 8,230.00  
  Merchandise inventory   $ 8,230.00
  (Being cost of goods sold of credit sale recorded)    
       
26 Utilities expense $ 1,283.00  
  Cash   $ 1,283.00
  (Being Cash paid for utilities recorded)    
       
29 Drawings $ 7,000.00  
  Cash   $ 7,000.00
  (Being drawings recorded)    
       
30 Cash $ 6,713.00  
  Sales discount $ 137.00  
  Accounts receivable   $ 6,850.00
  (Being cash received for accounts receivable recorded net of discount)    
       
30 Office salaries $ 3,150.00  
  Sales Salaries $ 5,320.00  
  Cash   $ 8,470.00
  (Being salaries paid in cash)    
       
31 Cash $ 66,052.00  
  Sales   $ 66,052.00
  (Being cash sales recorded)    
       
31 Cost of goods sold $ 42,500.00  
  Merchandise inventory   $ 42,500.00
  (Being cost of goods sold of cash sales recorded)    

Explanation of Solution

• Assets and Expenses have debit balances and must be debited in order to increase their balance and credited in order to decrease their balance.

• Liabilities and Incomes have credit balances and must be debited in order to decrease their balance and credited in order to increase their balance.

• On May 1 Office Rent will be debited by $ 742.00, Sales Rent will be debited by $ 2,968.00 and Cash will be credited by $ 3,710.00 since office rent was paid with 80% and 20% divided between Office and selling space.

• On May 2 Accounts receivable will be debited by $ 6,100.00 and Sales will be credited by $ 6,100.00 since credit sales to Hansel were recorded.

• On May 2 Cost of goods sold will be debited by $ 4,100.00 and Merchandise inventory will be credited by $ 4,100.00 since cost of goods sold of credit sale were recorded.

• On May 2 Sales Returns will be debited by $ 175.00 and Accounts receivable will be credited by $ 175.00 since credit memo was issued.

• On May 3 Accounts payable will be debited by $ 798.00 and Merchandise Inventory will be credited by $ 798.00 since credit memo was received.

• On May 4 Merchandise inventory will be debited by $ 37,072.00, Store supplies will be debited by $ 574.00, Office supplies will be debited by $83.00 and Accounts payable will be credited by $ 37,729.00 since credit purchases of inventory and supplies were recorded.

• On May 5 Cash will be debited by $ 4,459.00, Sales discount will be debited by $91.00 and Accounts receivable will be credited by $ 4,550.00 since cash received for accounts receivable was were recorded net of discount of 2% as per terms of sale.

• On May8 Accounts payable will be debited by $ 6,300.00, Merchandise inventory will be credited by $ 126.00 and Cash will be credited by $ 6,174.00 since cash was paid for accounts payable were recorded net of discount and credit memo of $798 issued.

• On May 9 Cash will be debited by $ 350.00 and Store supplies will be credited by $ 350.00 since cash was received for sale of store supplies.

• On May 10 Office equipment will be debited by $ 4,074.00 and Accounts Payable will be credited by $ 4,074.00 since credit purchases of office equipment were recorded.

• On May11 Cash will be debited by $ 5,978.00, Sales discount will be debited by $ 122.00 and Accounts receivable will be credited by $ 6,100.00 since cash received for accounts receivable was were recorded net of discount of 2%.

• On May11 Merchandise inventory will be debited by $ 8,800.00 and Accounts payable will be credited by $ 8,800.00 since credit purchases were recorded.

• On May12 Accounts payable will be debited by $ 854.00 and Office equipment will be credited by $ 854.00 since credit memo was received.

• On May15 Office salaries will be debited by $ 3,150.00, Sales Salaries will be debited by $ 5,320.00 and Cash will be credited by $ 8,470.00 since salaries was paid in cash.

• On May15 Cash will be debited by $ 59,220.00 and Sales will be credited by $ 59,220.00 since cash sales for first 15 days were recorded.

• On May15 Cost of goods sold will be debited by $ 38,200.00 and Merchandise inventory will be credited by $ 38,200.00 since cost of goods sold of cash sales were recorded.

• On May16 Accounts receivable will be debited by $ 3,990.00 and Sales will be credited by $ 3,990.00 since credit sales were recorded.

• On May16 Costs of goods sold will be debited by $ 1,890.00 and Merchandise inventory will be credited by $ 1,890.00

• Since cost of goods sold of credit sale were recorded.

• On May17 Merchandise inventory will be debited by $ 13,650.00 and Accounts payable will be credited by $ 13,650.00 since credit purchases were recorded.

• On May19 Accounts payable will be debited by $ 8,800.00, Merchandise inventory will be credited by $ 176.00 and Cash will be credited by $ 8,624.00 since cash was paid for accounts payable were recorded net of discount.

• On May22 Accounts receivable will be debited by $ 6,850.00 and Sales will be credited by $ 6,850.00 since credit sales were recorded.

• On May22 Cost of goods sold will be debited by $ 4,990.00 and Merchandise inventory will be credited by $ 4,990.00 since cost of goods sold of credit sale were recorded.

• On May23 Accounts payable will be debited by $ 13,650.00 Merchandise inventory will be credited by $ 273.00 and Cash will be credited by $ 13,377.00 since cash was paid for accounts payable were recorded net of discount.

• On May24 Merchandise inventory will be debited by $ 8,120.00, Office supplies will be debited by $ 280.00, Store Supplies will be debited by $ 630.00 and Accounts payable will be credited by $ 9,030.00 since credit purchases of inventory and supplies were recorded.

• On May25 Merchandise inventory will be debited by $ 3,080.00 and Accounts payable $ 3,080.00 since credit purchases were recorded.

• On May26 Accounts receivable will be debited by $ 14,210.00 and Sales will be credited by $ 14,210.00 since credit sales were recorded.

• On May26 Cost of goods sold will be debited by $ 8,230.00 and Merchandise inventory will be credited by $ 8,230.00 since cost of goods sold of credit sale were recorded.

• On May26 Utilities expense will be debited by $ 1,283.00 and Cash will be credited by $ 1,283.00 since Cash was paid for utilities were recorded.

• On May29 Drawings will be debited by $ 7,000.00 and Cash will be credited by $ 7,000.00 since drawings made by the owner were recorded.

• On May30 Cash will be debited by $ 6,713.00, Sales discount will be debited by $ 137.00 and Accounts receivable will be credited by $ 6,850.00 since cash received for accounts receivable were recorded net of discount of 2%.

• On May30 Office salaries will be debited by $ 3,150.00, Sales Salaries will be debited by $ 5,320.00 and Cash will be credited by $ 8,470.00 since salaries was paid in cash.

• On May31 Cash will be debited by $ 66,052.00 and Sales will be credited by $ 66,052.00 since cash sales were recorded.

• On May31 Cost of goods sold will be debited by $ 42,500.00 and Merchandise inventory will be credited by $ 42,500.00 since cost of goods sold of cash sales were recorded.

Conclusion

Hence the summary journals have been prepared.

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