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AppendixE-1


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AppendixE-2

Appendix E

Subsidiary Ledgers andSpecial Journals

Financial Accounting,

Seventh Edition


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AppendixE-3

1. Describe the nature and purpose of a subsidiaryledger.

2. Explain how companies use special journals in

journalizing.

3. Indicate how companies post a multi-column journal.

Study Objectives


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AppendixE-4

Used to keep track of individual balances.

Two common subsidiary ledgers are:

1. Accounts receivable (customers)

2. Accounts payable (creditors)

Nature and Purpose of Subsidiary Ledgers

SO 1 Describe the nature and purpose of a subsidiary ledger.

Each general ledger control account balance mustequal the composite balance of the individual accountsin the related subsidiary ledger.


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AppendixE-5

Illustration E-2

Relationship between

general and subsidiary

ledgers

Subsidiary Ledgers


Subsidiary Ledger Example


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AppendixE-6

1. Show in a single account transactions affecting onecustomer or one creditor.

2. Free the general ledger of excessive details.

3. Help locate errors in individual accounts.

4. Make possible a division of labor.

Subsidiary Ledgers


Advantages of Subsidiary Ledgers


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AppendixE-7

Subsidiary Ledgers

SO 2 Explain how companies use special journals in journalizing.

Usedto record similar types of transactions.

If a transaction cannot be recorded in a special journal, thecompany records it in the general journal.

Illustration E-4


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AppendixE-8

Each of the following is a subsidiary ledgerexcept the:

a. accounts receivable ledger.b. accounts payable ledger.

c. customers ledger.

d. general ledger.

Review Question

Subsidiary Ledgers



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AppendixE-9

Sales Journal


Illustration E-5

Under a perpetual inventory system, one entry at selling price in SalesJournal results in a debit to Accounts Receivable and a credit to Sales.

Another entry at cost results in a debit to Cost of Goods Sold and a creditto Merchandise Inventory.


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AppendixE-10

Sales Journal


Companies make daily postingsfrom the sales journal to theindividual accounts receivable

in the subsidiary ledger.

POSTING

Illustration E-6


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AppendixE-11

Sales Journal


Illustration E-6

Posting

Posting to the general ledger isdone monthly.


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AppendixE-12

One-line entry for each sales transaction savestime.

Only totals, rather than individual entries, areposted to the general ledger.

A division of labor results.

Advantages of Sales Journal

Sales Journal



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AppendixE-13

Cash Receipts Journal


In the cash receipts journal, companies record allreceipts of cash.

The posting of the cash receipts journal is similar to

the posting of the sale journal.


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AppendixE-14



Illustration: May transactions of Karns Wholesale Supply. Collections

from customers relate to the entries recorded in the sales journal inIllustration E-5.The entries in the cash receipts journal are based on thefollowing cash receipts.

May 1 Stockholders invested $5,000 in the business.

7 Cash sales of merchandise total $1,900 (cost, $1,240).

10 Received a check for $10,388 from Abbot Sisters inpayment of invoice No. 101 for $10,600 less a 2% discount.

12 Cash sales of merchandise total $2,600 (cost, $1,690).

17 Received a check for $11,123 from Babson Co. in paymentof invoice No. 102 for $11,350 less a 2% discount.

22 Received cash by signing a note for $6,000.23 Received a check for $7,644 from Carson Bros. in full for invoice

No. 103 for $7,800 less a 2% discount.

28 Received a check for $9,114 from Deli Co. in full for invoice No.104 for $9,300 less a 2% discount.


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AppendixE-15



Illustration E-8


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AppendixE-16

Cash ReceiptsJournal

SO 2

Illustration E-8

Posting


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AppendixE-17



Illustration E-10Proving the Ledgers


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AppendixE-18

Cash sales of merchandise are recorded in the:

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. sales journal.

Review Question




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AppendixE-19

Which of the following is not one of the creditcolumns in the cash receipts journal:

a. Other accounts.b. Accounts payable.

c. Accounts receivable.

d. Sales.

Review Question




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AppendixE-20

Purchases Journal

SO 3 Indicate how companies post a multi-column journal.

Illustration E-11

In the purchases journal,companies record all purchases ofmerchandise on account.


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AppendixE-21

Purchases Journal


Illustration E-11

In the purchases journal,companies record all purchases ofmerchandise on account.


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AppendixE-22

All of the following are advantages of usingsubsidiary ledgers except they:

a. show transactions affecting one customer or onecreditor in a single account.

b. free the general ledger of excessive details.

c. eliminate errors in individual accounts.d. make possible a division of labor.

Review Question

Purchases Journal



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AppendixE-23

Cash Payments Journal


In a cash payments journal,companies record all

disbursements of cash.

Illustration E-15


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AppendixE-24


SO 3

Illustration E-15

In a cash payments journal,companies record all

disbursements of cash.


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AppendixE-25

Credit purchases of equipment or supplies other thanmerchandise are recorded in the:

a. cash payments journal.b. cash receipts journal.

c. general journal.

d. purchases journal.

Review Question




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AppendixE-26

Cash payments of merchandise are recorded in the:

a. cash payments journal.

b. cash receipts journal.

c. general journal.

d. purchases journal.

Review Question




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AppendixE-27

Special journals substantially reduce thenumber of entries that companies make in thegeneral journal.

Only transactions that cannot be entered in aspecial journal are recorded in the generaljournal.

Also, correcting, adjusting, and closing entriesare made in the general journal.

Effects of Special Journals on the GeneralJournal



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AppendixE-28

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