Chapter 7, Problem 5PB

1 and 2

To determine

Prepare the general ledger for Company TUF.

Explanation of Solution

General ledger: General ledger is a record of all accounts of assets, liabilities, and stockholders’ equity, necessary to prepare financial statements. In the ledger all the entries are recorded in the account order, for which the transactions actually take place.

Post the journal entries in the General Ledger:

GENERAL LEDGER
ACCOUNT: Cash					Account No.: 101
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
May 1		✔			$ 25,800.00
May 4		J12	$ 1,176.00		$ 26,976.00
May 6		J13	$ 925.00		$ 27,901.00
May 7		J13		$ 25.00	$ 27,876.00
May 10		J13	$ 441.00		$ 28,317.00
May 17		J13	$ 1,274.00		$ 29,591.00
May 19		J13	$ 2,900.00		$ 32,491.00
May 29		J14	$ 568.40		$ 33,059.40

Table (1)

GENERAL LEDGER
ACCOUNT: Accounts receivable					Account No.: 111
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
May 1	Balance	J12			$ 4,100.00
May 1		J12	$ 450.00		$ 4,550.00
May 4		J12		$ 1,200.00	$ 3,350.00
May 8		J13	$ 1,500.00		$ 4,850.00
May 10		J13		$ 450.00	$ 4,400.00
May 14		J13		$ 200.00	$ 4,200.00
May 17		J13		$ 1,300.00	$ 2,900.00
May 19		J13		$ 2,900.00	$ 0.00
May 20		J14	$ 580.00		$ 580.00
May 24		J14	$ 480.00		$ 1,060.00
May 26		J14	$ 850.00		$ 1,910.00
May 27		J14		$ 48.00	$ 1,862.00
May 29		J14		$ 580.00	$ 1,282.00
May 30		J14	$ 1,200.00		$ 2,482.00
ACCOUNT: Sales					Account No.: 401
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
May 1		J12		$ 450.00		$ 450.00
May 6		J13		$ 925.00		$ 1,375.00
May 8		J13		$ 1,500.00		$ 2,875.00
May 20		J14		$ 580.00		$ 3,455.00
May 24		J14		$ 480.00		$ 3,935.00
May 26		J14		$ 850.00		$ 4,785.00
May 30		J14		$ 1,200.00		$ 5,985.00
ACCOUNT: Sales Returns and Allowances					Account No.: 451
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
May 7		J13	$ 25.00		$ 25.00
May 14		J13	$ 200.00		$ 225.00
May 27		J14	$ 48.00		$ 273.00

Table (2)

GENERAL LEDGER
ACCOUNT: Sales Discount					Account No.: 452
Date	Description	Post. Ref.	Debit	Credit	Balance
					Debit	Credit
2019
May 4		J12	$ 24.00		$ 24.00
May 10		J13	$ 9.00		$ 33.00
May 17		J13	$ 26.00		$ 59.00
May 29		J14	$ 11.60		$ 70.60

Table (3)

Reference Notes:

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Rules of Debit and Credit:

Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

• Debit, all the increase in the assets, the expenses and the dividends, all the decrease in liabilities, revenues and the stockholders’ equities.
• Credit, all the increase in the liabilities, the revenues, and the stockholders’ equities, and all decreases in the assets, and the expenses.

Pass the journal entries for the given transactions:

	General Journal			Page - 12
Date	Description	Post Ref	Debit	Credit
2019
May 1	Accounts receivable	111	$450
	Sales	401		$450
	(To record the sale on account to AF; Invoice 9312, 2/10, n/10)
May 4	Sales Discount (1)	452	$24
	Cash (2)	101	$1,176
	Accounts receivable	111		$1,200
	(To record the receipt of payment from OCF, Invoice 9299)

Table (4)

	General Journal			Page - 13
Date	Description	Post Ref	Debit	Credit
2019
May 6	Cash	101	$925
	Sales	401		$925
	(To record the sale for cash)
May 7	Sales Returns and Allowances	451	$25
	Cash	101		$25
	(To record the sales returns for goods sold on May 6)
May 8	Accounts receivable	111	$1,500
	Sales	401		$1,500
	(To record the sale on account to RF; Invoice 9313, 2/10, n/10)
May 10	Sales Discount (3)	452	$9
	Cash (4)	101	$441
	Accounts receivable	111		$450
	(To record the receipt of payment from AF, Invoice 9312)
May 14	Sales Returns and Allowances	451	$200
	Cash	101		$200
	(To record the sales returns from RF for the sales made on May 8 using invoice 9313, the credit memorandum is 109)
May 17	Sales Discount (6)	452	$26
	Cash (7)	101	$1,274
	Accounts receivable  (5)	111		$1,300
	(To record the receipt of payment from RF, Invoice 9313)
May 19	Cash	101	$2,900
	Accounts receivable	111		$2,900
	(To record the receipt of payment from WLF, Invoice 9279)

Table (5)

	General Journal			Page - 14
Date	Description	Post Ref	Debit	Credit
2019
May 20	Accounts receivable	111	$580
	Sales	401		$580
	(To record the sale on account to GPS; Invoice 9314, 2/10, n/10)
May 24	Accounts receivable	111	$480
	Sales	401		$480
	(To record the sale on account to MFD; Invoice 9315, 2/10, n/10)
May 26	Accounts receivable	111	$850
	Sales	401		$850
	(To record the sale on account to CFS; Invoice 9316, 2/10, n/10)
May 27	Sales Returns and Allowances	451	$48
	Cash	101		$48
	(To record the sales returns from MFD for the sales made on May 24 using invoice 9315, the credit memorandum is 110)
May 29	Sales Discount (8)	452	$11.60
	Cash (9)	101	$568.40
	Accounts receivable	111		$580.00
	(To record the receipt of payment from GPS, Invoice 9314)
May 30	Accounts receivable	111	$1,200
	Sales	401		$1,200
	(To record the sale on account to WLF; Invoice 9317, 2/10, n/10)

Table (6)

Working Notes (1):

Calculate the value of Sales Discount on May 4.

$\begin{array}{c}\text{Sales Discount = } \text{Accounts receivable} \times 2\%\\ =\frac{\$1,300\times 2}{100}\\ =\$26\end{array}$

Working Notes (2):

Calculate the value of Cash on May 4.

$\begin{array}{c}\text{Cash =Accounts receivable }-\text{ Sales Discount}\\ =\$1,300-\$26\\ =\$1,274\end{array}$

Working Notes (3):

Calculate the value of Sales Discount on May 10.

$\begin{array}{c}\text{Sales Discount = } \text{Accounts receivable} \times 2\%\\ =\frac{\$450\times 2}{100}\\ =\$9\end{array}$

Working Notes (4):

Calculate the value of Cash on May 10.

$\begin{array}{c}\text{Cash =Accounts receivable }-\text{ Sales Discount}\\ =\$450-\$9\\ =\$441\end{array}$

Working Notes (5):

Calculate the value of Accounts receivable on May 17.

$\begin{array}{c}\text{Accounts receivable = Sales}-\text{Sales Returns and allowances}\\ =\$1,500-\$200\\ =\$1,300\end{array}$

Working Notes (6):

Calculate the value of Sales Discount on May 17.

$\begin{array}{c}\text{Sales Discount = } \text{Accounts receivable} \times 2\%\\ =\frac{\$1,300\times 2}{100}\\ =\$26\end{array}$

Working Notes (7):

Calculate the value of Cash on May 17.

$\begin{array}{c}\text{Cash =Accounts receivable }-\text{ Sales Discount}\\ =\$1,300-\$26\\ =\$1,274\end{array}$

Working Notes (8):

Calculate the value of Sales Discount on May 29.

$\begin{array}{c}\text{Sales Discount = } \text{Accounts receivable} \times 2\%\\ =\frac{\$580\times 2}{100}\\ =\$11.60\end{array}$

Working Notes (9):

Calculate the value of Cash on May 29.

$\begin{array}{c}\text{Cash =Accounts receivable }-\text{ Sales Discount}\\ =\$580-\$11.60\\ =\$568.40\end{array}$

3

To determine

Using the Schedule of Accounts Receivable compare the Accounts receivable balances with the total and identify the total amount of sales before allowances, returns or discounts.

Explanation of Solution

Schedule of accounts receivable: This is the schedule which reports all the debtors of a company during the given period and the balances to be recovered from them.

Prepare the Accounts receivable Subsidiary Ledger:

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME: AF
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
May 1	Invoice 9312	J12	$ 450.00		$ 450.00
May 10		J13		$ 450.00	$ 0.00
NAME: CFS
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
May 26	Invoice 9316	J14	$ 850.00		$ 850.00
NAME: GPS
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
May 20	Invoice 9314	J14	$ 580.00		$ 580.00
May 29		J14		$ 580.00	$ 0.00
NAME: MFD
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
May 24	Invoice 9315	J14	$ 480.00		$ 480.00
May 27	Credit Memorandum 101	J14		$ 48.00	$ 432.00
NAME: OCF
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
May 1	Balance	✔			$ 1,200.00
May 4		J12		$ 1,200.00	$ 0.00

Table (7)

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER
NAME: RF
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
May 8	Invoice 9313	J13	$ 1,500.00		$ 1,500.00
May 14	Credit Memorandum 109	J13		$ 200.00	$ 1,300.00
May 17		J13		$ 1,300.00	$ 0.00
NAME: WLF
ADDRESS:
Date	Description	Post. Ref.	Debit	Credit	Balance
2019
May 1	Balance				$ 2,900.00
May 19		J13		$ 2,900.00	$ 0.00
May 30	Invoice 9317	J14	$ 1,200.00		$ 1,200.00

Table (8)

Prepare the Schedule of Accounts Receivable:

Company TUF
Schedule of Accounts Receivable
May 31, 2019
Particulars	Amount ($)
AF	$ 0.00
CFS	$ 850.00
GPS	$ 0.00
MFD	$ 432.00
OCF	$ 0.00
RF	$ 0.00
WLF	$ 1,200.00
Total accounts receivable	$ 2,482.00

Table (9)

The total amount of sales before allowances, returns or discounts is $5,060.

Working notes (10):

Calculate the total sales:

$\begin{array}{c}\text{Total sales = Sales}-\text{Returns, Allowances and discounts}\\ =\$5,985.00-\$925.00\\ \text{= \$5,060}\end{array}$