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Departmentalized Accounting

PART

2

1 RecordingDepartmentalPurchases andCash Payments

2 RecordingDepartmentalSales and CashReceipts

4 FinancialReporting for aDepartmentalizedBusiness

3 Calculating andRecordingDepartmentalPayroll Data

(1000) Assets1100 CURRENT ASSETS1105 Cash1110 Petty Cash1115 Accounts Receivable1120 Allowance for Uncollectible Accounts1125-1 Merchandise Inventory—Golf1125-2 Merchandise Inventory—Tennis1130 Supplies—Office1135 Supplies—Store1140 Prepaid Insurance

1200 PLANT ASSETS1205 Office Equipment1210 Accumulated Depreciation—Office Equipment1215 Store Equipment1220 Accumulated Depreciation—Store Equipment

(2000) Liabilities2105 Accounts Payable2110 Employee Income Tax Payable—Federal2115 Employee Income Tax Payable—State2120 Federal Income Tax Payable2125 Social Security Tax Payable2128 Medicare Tax Payable2130 Sales Tax Payable2135 Unemployment Tax Payable—Federal2140 Unemployment Tax Payable—State2145 Health Insurance Premiums Payable2150 Life Insurance Premiums Payable2155 Dividends Payable

(3000) Stockholders’ Equity3105 Capital Stock3110 Retained Earnings3115 Dividends3120-1 Income Summary—Golf3120-2 Income Summary—Tennis3125 Income Summary—General

(4000) Operating Revenue4105-1 Sales—Golf4105-2 Sales—Tennis4110-1 Sales Discount—Golf4110-2 Sales Discount—Tennis4115-1 Sales Returns and Allowances—Golf4115-2 Sales Returns and Allowances—Tennis

(5000) Cost of Merchandise5105-1 Purchases—Golf5105-2 Purchases—Tennis5110-1 Purchases Discount—Golf5110-2 Purchases Discount—Tennis5115-1 Purchases Returns and Allowances—Golf5115-2 Purchases Returns and Allowances—Tennis

(6000) Operating Expense6100 SELLING EXPENSES6105 Advertising Expense6110 Credit Card Fee Expense6115 Depreciation Expense—Store Equipment6120-1 Salary Expense—Golf6120-2 Salary Expense—Tennis6125 Supplies Expense—Store

6200 ADMINISTRATIVE EXPENSES6205 Depreciation Expense—Office Equipment6210 Insurance Expense6215 Miscellaneous Expense6220 Payroll Taxes Expense6225 Rent Expense6230 Salary Expense—Administrative6235 Supplies Expense—Office6240 Uncollectible Accounts Expense

(7000) Income Tax7105 Federal Income Tax Expense

The chart of accounts for MasterSport is illustrated above forready reference as you study Part 1 of this textbook.

Balance Sheet Accounts Income Statement Accounts

MASTERSPORT CHART OF ACCOUNTS

11Recording DepartmentalPurchases and CashPayments

AFTER STUDYING CHAPTER 1, YOU WILL BE ABLE TO:

1. Define accounting terms related to departmental purchases and cashpayments.

2. Identify accounting concepts and practices related to departmentalpurchases and cash payments.

3. Perform file maintenance.

4. Journalize and post departmental purchases and purchases returns.

5. Journalize and post cash payments.

6. Reconcile a bank statement.

Financial information for a business can be recorded, summarized,and reported in a variety of ways. Accountants design accounting sys-tems to meet the specific needs of the business. The way in which infor-mation is kept and reported in the accounting system is determined bythe size, type, and complexity of the business. When designing financialrecords, the business should also consider the types of decisions that willbe made based on the financial statements.

If managers want to use financial statements to assist in making deci-sions for individual departments, information for each department mustbe recorded separately. The types of information to be gathered bydepartment include purchases, sales, cash payments and cash receipts.Payroll data may also be identified by department. Gathering informa-tion by department requires a somewhat different set of accounting pro-cedures. Regardless of the accounting procedures used, the sameaccounting concepts and practices are followed.

If a business decides to record information by department, it mustestablish procedures to ensure that transactions are assigned to the cor-rect department. Some businesses employ an accounting clerk for eachdepartment. The clerk’s primary responsibility is to record day-to-daytransactions for the department.

4

TERMS PREVIEW

asset liability equities owner’s equity accounting equationsource documentjournal special journal double-entry

accountingaccountledgergeneral ledgersubsidiary ledgercontrolling accountfile maintenancedepartmental

accounting systemmerchandising businessposting debit memorandumcontra accountcontra balancecash discountpurchases discountpetty cashbank statement

CHAPTER 1 Recording Departmental Purchases and Cash Payments 5

A NEW DEPARTMENT

Alonzo Guerra, CPA, has been consulted

by The Book Place, a book retailer, con-

cerning a planned expansion—the com-

pany wants to begin merchandising CDs

and videos in addition to books. The

company’s senior accountant, Bill Dillon,

has done some preliminary planning, but

wants an expert to help plan the require-

ments of the accounting system for this

expansion.Bill has already determined that the

chart of accounts and purchases and cash

payments journals will need to be redesigned. In meeting with Alonzo, Bill explains that

purchases are made from both large distributors and small independent publishers.

Returns are frequent because the industry permits the return of merchandise that is not

selling well after a certain period of time. Most vendors also offer cash discounts to

encourage timely payment on account.

Bill further states that the store space will be doubled to make room for these new mer-

chandise lines. However, he wants to keep the accounting system as simple as possible

and suggests that the CDs and videos be combined into one department for accounting

purposes. Office employees will process purchase orders for all three departments, but

new sales associates will be hired to assist customers in the new areas. New store display

fixtures will be needed to properly shelve the new merchandise. Alonzo promises to

deliver a report on his recommendations by the end of the week.

Critical Thinking

1. Is Bill’s goal to combine the two new lines into one department a good accounting practice? Why or

why not?

2. From the information given, which accounts in the chart of accounts that are related to purchases

and cash payments should be split into departmental accounts?

3. Should Alonzo recommend using a purchases returns and allowances journal or should returns be

recorded in a general journal?

ACCOUNTINGIN YOUR CAREER

6 CHAPTER 1 Recording Departmental Purchases and Cash Payments

ACCOUNTING EQUATION

ACCOUNTING RECORDS

1-1 Using Accounting Principles and Records

Accounting EquationAssets = Liabilities + Owner’s Equity

Accounting Equation(LEFT side of equation) (RIGHT side of equation)

Assets = Liabilities + Owner’s Equity

Anything of value that is owned is called anasset. An amount owed by a business is called aliability. Financial rights to the assets of a busi-ness are called equities. The amount remainingafter the value of all liabilities is subtracted fromthe value of all assets is called owner’s equity.In a corporation the value of the owner’s equityis referred to as stockholders’ equity.

An equation showing the relationship amongassets, liabilities, and owner’s equity is called an

accounting equation. The accounting equationmay be stated as assets = equities. More com-monly the equation is stated as assets = liabili-ties + owner’s equity.

The equation is often viewed as forming a“T.” In Figure 1-1, assets are listed on the leftside of the T account and equities (liabilities andowner’s equity) on the right side of the Taccount. Total assets must always equal total lia-bilities plus owner’s equity.

Accounting records show changes and thecurrent account balance of each asset, liability,and owner’s equity (or stockholders’ equity)account. In the United States, the amounts arestated in dollars and cents. (CONCEPT: Unit ofMeasurement)

The unit of measurement concept states thatbusiness transactions are reported in numbersthat have common values—that is, using a com-mon unit of measurement. If part of the infor-mation in the accounting records is financialand part is nonfinancial, the financial state-ments will not be clear. For example, ifMasterSport states its sales in number of unitssold (nonfinancial) and its expenses in dollars(financial), net profit cannot be calculated.

The preceding concept reference indicates theapplication of a specific accounting concept.For a complete statement and explanation ofthe concepts, refer to Appendix A.

Information about business transactions isobtained from original business papers calledsource documents. Each journal entry must besupported by a source document proving that atransaction occurred.

Figure 1-1

F Y I

The government’s first regulation of accountinginformation occurred in 1917 with the FederalReserve Board’s publication of “Uniform Accounts.”


GENERAL JOURNAL

Total assets must always equal total liabilities plus total owner’s equity.

R E M E M B E R

Figure 1-2

The recording of debit and credit parts of atransaction is called double-entry accounting.The accounting equation is the basis for all dou-ble-entry accounting. Two accounting principlesare common to double-entry accounting. (1) Thetotal value of things owned by a business(assets) equals the total value of claims of out-siders (liabilities) and claims of owners (owner’sequity). (2) Debits equal credits for each businesstransaction recorded.

A form for recording transactions in chrono-logical order is called a journal. A general jour-nal may be used to record all business transac-tions. A general journal includes amountcolumns for recording the dollars and cents of atransaction. (CONCEPT: Unit of Measurement)The general journal has two amount columns.The left amount column is labeled Debit. Theright amount column is labeled Credit. An entryrecorded in the debit column is known as adebit. Likewise, an entry recorded in the creditcolumn is known as a credit. The “T” previouslydescribed in the accounting equation is also pre-

sent in a general journal’s debit and creditamount columns as shown in Figure 1-2.

A journal used to record only one kind oftransaction is called a special journal. A busi-ness with many daily transactions may use spe-cial journals. Special journals include amountcolumns used to record debits or credits to spe-cific accounts. For example, a cash paymentsjournal includes a Cash Credit amount column.MasterSport uses four special journals alongwith a general journal to record its transactions.

1. Purchases journal—for all purchases ofmerchandise on account

2. Cash payments journal—for all cashpayments

3. Sales journal—for all sales of merchandise onaccount

4. Cash receipts journal—for all cash receipts

MasterSport uses a general journal to recordall other transactions.

Assets = Liabilities + Owner’s EquityLeft side Right side

T AccountDEBIT CREDIT

(Left side) (Right side)

GENERAL JOURNAL PAGE

1

2

3

4

5

6

7

1

2

3

4

5

6

7

DATE ACCOUNT TITLE DEBIT CREDITDOC.NO.

POST.REF.

(Leftcolumn)

(Rightcolumn)


Increases in revenue accounts increase owner’s equity. Therefore, the normal credit balance of revenue accounts is thesame as the normal balance of owner’s equity. Increases in expense accounts decrease owner’s equity. Therefore thenormal debit balance of expense accounts is opposite the normal balance of owner’s equity.

R E M E M B E R

NORMAL BALANCES OF ACCOUNTS

Figure 1-3

Transactions are journalized in chronologicalorder. Periodically, information is sorted to sum-marize like kinds of information. A record sum-marizing all the information pertaining to a sin-gle item in the accounting equation is called anaccount.

The amount in an account is known as anaccount balance. Each business transactioncauses a change in two or more account bal-ances. Increases in an account balance arerecorded in the same column as its normal bal-

ance. Decreases in an account balance arerecorded in the column opposite its normal bal-ance. The normal balances of different classifica-tions of accounts are shown in Figure 1-3.

Asset account balances are increased by deb-its and decreased by credits. Liability and capitalaccount balances as well as revenue account bal-ances are increased by credits and decreased bydebits. Expense account balances are increasedby debits and decreased by credits.

Assets = Liabilities + Owner’s Equity

Any Asset DEBIT CREDIT

NORMAL BALANCEIncrease Decrease

Any Liability DEBIT CREDIT

NORMAL BALANCEDecrease Increase

Stockholders’ EquityDEBIT CREDIT


Any Revenue DEBIT CREDIT


Any Expense DEBIT CREDIT

NORMAL BALANCEIncrease Decrease


GENERAL AND SUBSIDIARY LEDGER FILE MAINTENANCE

LEDGERS

Figure 1-4

A group of accounts is called a ledger. Aledger that contains all accounts needed to pre-pare financial statements is called a generalledger. A ledger that is summarized in a singlegeneral ledger account is called a subsidiaryledger. An account in a general ledger that sum-marizes all accounts in a subsidiary ledger iscalled a controlling account. Two subsidiaryledgers and two general ledger controllingaccounts are commonly used.

Subsidiary LedgersAccounts Receivable LedgerAccounts Payable Ledger

Controlling AccountsAccounts ReceivableAccounts Payable

Accounts for customers who buy merchan-dise on account are kept in an accounts receiv-able ledger. The corresponding controllingaccount is Accounts Receivable. Separate accountsare kept in an accounts payable ledger for ven-dors to whom money is owed. The correspond-ing controlling account is Accounts Payable. Thetotal of the subsidiary ledger accounts balancesshould equal the balance of the controllingaccount as shown in Figure 1-4.

MasterSport uses a general ledger accountnumbering system that meets three needs. (1) Aseparate numeric listing is provided for eachledger division. (2) A predesigned arrangementof numbers is provided within each ledger divi-sion. (3) Enough account number digits are pro-vided to allow the addition of new accounts. Theprocedure for arranging accounts in a generalledger, assigning account numbers, and keepingrecords current is called file maintenance.

The general ledger chart of accounts hasseven divisions. The first digit of each four-digitaccount number shows the general ledger divi-sion in which the account is located. Theaccounts in some divisions, such as Assets, aredivided into categories. The second digit of theaccount number shows the category in whichthe account is located. The last two digits showthe location of a specific account with respect toother accounts in that division and category.


MasterSport uses a four-digit numberingsystem for general ledger accounts with eachaccount number initially assigned sequentiallyby 5s. Assigning account numbers by 5s allowsnew accounts to be added easily between exist-ing accounts.

Businesses add accounts as needed. A newaccount is assigned the unused middle numberbetween two existing accounts. When no exactmiddle number is available, the nearest wholenumber is used.

MasterSport decided to add a new accountEquipment Repair Expense between the two exist-ing accounts Depreciation Expense—OfficeEquipment, 6205, and Insurance Expense, 6210. Theunused middle number between 6205 and 6210 is6207.5. The numbering system does not use deci-mals. Therefore, account number 6208, the near-est whole number, is used.

The new account is placed in the generalledger as follows.

6205 Depreciation Expense—Office Equipment(existing account)

6208 EQUIPMENT REPAIR EXPENSE (NEWACCOUNT)

6210 Insurance Expense (existing account)

New accounts that are added after the lastaccount in a division are assigned the next num-ber in sequence. Dividends Payable, 2155, is thelast existing account in the liabilities division. IfMasterSport decides to add a new liabilityaccount after Dividends Payable, the numberassigned would be 2160.

2155 Dividends Payable (existing account)2160 NEW ACCOUNT

Subsidiary Ledger File MaintenanceThe numbering system used for subsidiary

ledger accounts meets the same three needs asthe system for generalledger accounts.MasterSport uses athree-digit number-ing system for sub-sidiary ledger accounts.MasterSport’s subsidiaryledgers generally requiremore file maintenance thanthe general ledger.Therefore, subsidiaryledger account numbersare assigned by 10s toprovide more numbersfor adding newaccounts betweenexisting accounts.MasterSport uses thesame file mainte-nance proceduresfor the subsidiaryledgers as for the general ledger.

Accounts in the accounts receivable sub-sidiary ledger use three-digit account numbersthat begin with a 1. Accounts in the accountspayable subsidiary ledger use three-digit num-bers that begin with a 2. This system corre-sponds to the system used for the general ledger,since asset accounts begin with a 1, and liabilityaccounts begin with a 2.

ADDING NEW GENERAL LEDGER ACCOUNTS

The rule for rounding states that decimalsless than 5 are rounded down, and decimals5 or greater are rounded up. Using this rule:

6207.5rounds to

6208

F Y I

Payment terms may vary among businesses. Agood accounting system will include an easy wayto identify the terms given by a specific vendor.


Performing file maintenance activities; adding general ledger accounts

A partial general ledger chart of accounts for M. Schmidt Distributors is shown below and providedin the Working Papers. Your instructor will guide you through the following examples.

Liabilities Accounts Added2120 Federal Income Tax Payable Medicare Tax Payable2125 Social Security Tax Payable2130 Unemployment Tax Payable–State Unemployment Tax Payable–Federal

04. Add the two new liability accounts to the general ledger chart of accounts using the unusedmiddle number method.

Performing file maintenance activities; adding general ledger accounts

A partial general ledger chart of accounts for M. Schmidt Distributors is shown below and providedin the Working Papers. Work this problem independently.

Administrative Expenses Accounts Added6205 Depreciation Expense—Office Equipment Payroll Taxes Expense6210 Rent Expense Salary Expense—Administrative6215 Supplies Expense—Office Utilities Expense

05. Add the three new administrative expense accounts to the general ledger chart of accountsusing the unused middle number method.

01. How is the accounting equation mostcommonly stated?

02. What is the normal balance of an assetaccount? A revenue account?

03. What are the three needs met byMasterSport’s account numberingsystem?

asset

liability

equities

owner’s equity

accounting equation

source document

journal

special journal

double-entryaccounting

account

ledger

general ledger

subsidiary ledger

controlling account

file maintenance

ERMSREVIEWERMSREVIEWTT UDIT YOUR

UNDERSTANDINGUDIT YOUR UNDERSTANDINGAA

ORK TOGETHERWORK TOGETHERW

N YOUR OWNON YOUR OWNO


DEPARTMENTAL ACCOUNTING SYSTEM

1-2 Journalizing and Posting Purchasesand Purchases Returns

Management decisions depend on account-ing information about each phase of a business.When a business has two or more departments,accounting information should indicate howwell each department is doing. Accountinginformation can determine the kinds of mer-chandise that produce the greatest or the leastprofit.

An accounting system showing accountinginformation for two or more departments iscalled a departmental accounting system. In adepartmental accounting system, gross profit iscalculated for each department. The generalledger, therefore, must include a number of sep-arate departmental accounts. Shoe stores, furni-ture stores, computer stores, department stores,and sporting goods stores are examples of firmsthat commonly organize on a departmentalbasis.

A business that purchases and sells goods iscalled a merchandising business. MasterSportsells golf equipment and tennis equipment. Thebusiness is a corporation organized on a depart-mental basis.

Merchandising businesses may have two typesof equipment: (1) equipment purchased for saleto customers and (2) equipment used in theoperation of the business. MasterSport pur-chases and sells golf and tennis equipment.MasterSport uses office equipment and storeequipment to operate the business.

MasterSport uses a departmental accountingsystem. Accounting information is recorded andreported for two departments: (1) Golf and (2) Tennis. The separate departmental accountsfor MasterSport are in the chart of accounts,page 3. The accounts for the golf department areindicated by a -1 after the account number.Accounts for the tennis department are indicatedby a -2 after the account number. For example,Merchandise Inventory—Golf is assigned number1125-1 and Merchandise Inventory—Tennis is

assigned number 1125-2. The basic four digitaccount number for Merchandise Inventory is1125. A fifth digit, -1 or -2, identifies departmen-tal accounts.

Purchase invoices are used as the source doc-ument for all purchases on account. (CONCEPT:Objective Evidence)

The objective evidence concept states that asource document is prepared for each transac-tion. The source document is the original busi-ness paper indicating that the transaction didoccur and that the amounts recorded in theaccounting records are accurate and true. Forexample, a check is the original business paperfor a cash payment. The original businesspaper for a purchase on account is the pur-chase invoice. When accounting informationreported on the financial statements needs to beverified, an accountant will first check theaccounting record. If the details of an entryneed further checking, an accountant will thencheck the business papers as objective evidencethat the transaction did occur.

All departmental purchases of merchandiseon account are recorded in a purchases journal.A business with more than one departmentrecords a purchase on account inthe same way as a business witha single department except fortwo differences. (1) Each pur-chase invoice has a notationplaced on it showing to whichdepartment the purchaseapplies. (2) Each departmenthas a separate Purchases Debitcolumn in the purchases jour-nal. MasterSport’s pur-chases journal shown inFigure 1-5 has specialPurchases Debit columnsfor each department—Golfand Tennis.

Tennis Warehouse976 Century Blvd.Dublin, CA 94565-1101

SOLD TO MasterSport DATE May 29, 20--4750 Appian Way OUR ORDER NO. 98-117San Jose, CA 95125-0210 CUSTOMER’S ORDER NO. 336

TERMS 2/10, n/30 SHIP VIA TRUCK

QUANTITY STOCK NO. DESCRIPTION UNIT PRICE TOTAL AMOUNT

10 ea. GRX1 Graphite racquet 60.00 600.0010 dz. RG TAPE Ready-Grip Tape 24.50 245.00

Total Invoice 845.00Approved

D.P.

6/1/20-- TENNIS

DEPT.


JOURNALIZING PURCHASES ON ACCOUNT

Figure 1-5

Journalize a purchase on account

1. Write the date, June 1, in the Date column of the purchases journal. Since this is the first entryon page 6, include the current year, 20--.

2. Enter the vendor name, Tennis Warehouse, in the Account Credited column. 3. Record the invoice number, 336, in the Purch. No. column. Since only purchase invoice

numbers are recorded in the column, no identifying letter is necessary.4. Write the credit amount, 845.00, in the Accounts Payable Credit column.5. Record the debit amount, 845.00, in the Purchases Debit Tennis column.

GENERAL LEDGERPurchases—Tennis

845.00

Accounts Payable845.00

ACCOUNTS PAYABLE LEDGERTennis Warehouse

845.00

June 1. Purchased tennis equipment on accountfrom Tennis Warehouse, $845.00. PurchaseInvoice No. 336.

In the general ledger, Purchases—Tennis isincreased by an $845.00 debit. Accounts Payableis increased by an $845.00 credit. In the accountspayable ledger, Tennis Warehouse is increased byan $845.00 credit.

PURCHASES JOURNAL PAGE 6

1

2

1

2

DATE ACCOUNT CREDITEDACCOUNTSPAYABLECREDIT

PURCHASES DEBIT

GOLF TENNIS

June20--

1 Tennis Warehouse

PURCH.NO.

POST.REF.

8 4 5 00

1 2 3

336 8 4 5 00

2. Writevendorname.

1. Writeapprovaldate.

3. Recordinvoicenumber.

4. Writeinvoiceamount.

1

2 3

4 5

5. Writeinvoiceamount.

VENDOR NO. 270

DATE ITEM DEBIT CREDIT

June20--

1

POST.REF.

8 4 5 00

CREDITBALANCE

8 4 5 00

VENDOR Tennis Warehouse

P6


Purchases of merchandise on account are recorded in the purchases journal.

Purchases of merchandise for cash are recorded in the cash payments journal.

R E M E M B E R

POSTING FROM A PURCHASES JOURNAL


1

2

3

1

2

3


PURCHASES DEBIT

GOLF TENNIS

June20--

1 Tennis Warehouse

PURCH.NO.

POST.REF.

8 4 5 00 8 4 5 00

1 2 3

336 270

Figure 1-6

Post from the purchases journal to the accountspayable ledger

1. Write the date of the transaction, June 1, in the Date column ofthe ledger account. Since this is the first ledger entry for TennisWarehouse, include the current year, 20--, in the Date column.

2. Enter the purchases journal page number, P6, in the Post. Ref.column of the ledger account.

3. Record the credit amount, 845.00, in the Credit column of theaccount for Tennis Warehouse. All postings from the purchasesjournal to the ledger accounts will be to the Credit amountcolumn of the ledger.

4. Add the amount in the Credit amount column to the previous balance in the Credit Balancecolumn. Write the new account balance in the Credit Balance column. Since Tennis Warehousehas no balance, simply enter the amount, 845.00, in the Credit amount column in the CreditBalance column.

5. Record the vendor number in the Post. Ref. column of the journal. The vendor number showsthat the posting for this entry is complete.

F Y I

CPAs help small businesses avoidmany pitfalls of doing business.Business owners rely on CPAs foradvice in such areas as taxation,payroll requirements, bankingpolicies, and business planning.

Transferring information from a journalentry to a ledger account is called posting.MasterSport keeps vendor accounts in anaccounts payable ledger. Individual amounts inthe Accounts Payable Credit column of the pur-chases journal are posted often to the appropri-

ate vendor accounts. The purchases journal isabbreviated as P in the Post. Ref. column of theledger accounts. Posting from the AccountsPayable Credit column of the purchases journalto a ledger account is shown in Figure 1-6.

11. Write

approvaldate.

2

2. Write journal page number.

3

3. Record the credit amount.

4. Calculate new accountbalance.

5. Writevendornumber.

5

4

ACCOUNT NO. 2105

DATE ITEMBALANCE

DEBIT CREDIT

June 130

Balance27 8 3 0 00

8 6 8 0 0036 5 1 0 00

POST.REF.

✓

P6

20--

ACCOUNT Accounts Payable

DEBIT CREDIT


The purchases journal is proved and ruled atthe end of each month. A purchases journal isproved by adding each column and then prov-ing that the sum of the debit column totalsequals the credit column total. Double lines are

then ruled across the amount columns to showthat the totals have been verified as correct. Eachamount column total is posted to the generalledger account named in the column heading asshown in Figure 1-7.

POSTING THE TOTALS OF A PURCHASES JOURNAL


24

25

26

24

25

26


PURCHASES DEBIT

GOLF TENNIS

3030

Golf-Tee, Inc.Totals

PURCH.NO.

POST.REF.

1 3 9 0 0027 8 3 0 00

1 3 9 0 009 3 6 0 00 18 4 7 0 00

1 2 3

359 230

(2105)

Figure 1-7

Post the total of the Accounts Payable column to the general ledger

1. Write the date, 30, in the Date column of the account.2. Write the purchases journal page number, P6, in the Post. Ref. column of the account.3. Write the column total, 27,830.00, in the Credit amount column of the account.4. Calculate and record the new account balance, 36,510.00, in the Balance Credit column.5. Write the general ledger account number in parentheses, (2105), below the column total in

the purchases journal.

Figure 1-8


1

23

24

25

26

27

1

23

24

25

26

27


PURCHASES DEBIT

GOLF TENNIS

June20--

1

303030

Tennis Warehouse

EZ GolfGolf-Tee, Inc.Totals

PURCH.NO.

POST.REF.

8 4 5 00

2 9 2 0 001 3 9 0 00

27 8 3 0 00

2 9 2 0 001 3 9 0 009 3 6 0 00

8 4 5 00

18 4 7 0 00

1 2 3

336

358359

270

220230

(2105) (5105-1) (5105-2)

1. Writethedate.

1

2

2. Write journal page number.

33. Write column total.

44. Calculate new

account balance.

5 5. Write account number(in parentheses).

PURCHASES JOURNAL WITH POSTING COMPLETED

MasterSport’s departmental purchases journal, Figure 1-8, is shown after all posting has been completed.

Merchandise may be returned to a vendorfor several reasons. The merchandise may beunsatisfactory. The merchandise may not bewhat was ordered. Also, merchandise may bereceived in damaged condition. When merchan-dise is returned, the vendor usually gives thebuyer credit. Most vendors set some limits onreturns and allowances. For example, many ven-dors specify that returns and requests forallowances must be made within 30 days of purchase.

A form prepared by the customer showingthe price deduction taken by the customer forreturns and allowances is called a debit memorandum. When returning merchandise orrequesting an adjustment, MasterSport issues adebit memorandum like the one shown inFigure 1-9. The customer sends the debit memo-randum to inform the vendor of the details ofthe purchases return or allowance. The debitmemorandum is used as the source document

for a purchases returns and allowances transac-tion. (CONCEPT: Objective Evidence)

An account that reduces a related account ona financial statement is called a contra account.Purchases—Tennis is a cost account. An accountshowing deductions from a purchases account isa contra cost account. Purchases Returns andAllowances—Tennis is one of MasterSport’s con-tra cost accounts. Purchases returns andallowances are kept in a separate account andnot deducted directly from the purchasesaccount. This procedure helps the business seewhat proportion of the merchandise wasreturned to vendors.


The normal balance of a contra account is opposite that of the related account.

R E M E M B E R

ISSUING A DEBIT MEMORANDUM FOR DEPARTMENTAL PURCHASESRETURNS AND ALLOWANCES

Figure 1-9

DEBIT MEMORANDUM

MasterSport4750 Appian WaySan Jose, CA 95125-0210

TO Key Tennis Company NO. 222470 Wawona Drive DATE June 3, 20--San Jose, CA 95125-5058

We have debited your account today as follows:

DESCRIPTION UNIT PRICE TOTAL

2 aluminum junior tennis racquetModel #ALjr

27 5425 50


JOURNALIZING A DEBIT MEMORANDUM

DEBIT MEMORANDUM

MasterSport4750 Appian WaySan Jose, CA 95125-0210

TO Key Tennis Company NO. 222470 Wawona Drive DATE June 3, 20--San Jose, CA 95125-5058

We have debited your account today as follows:

DESCRIPTION UNIT PRICE TOTAL

2 aluminum junior tennis racquetModel #ALjr

27 5425 50

Figure 1-10

Journalize a purchases return

1. Write the date, June 3, in the Date column of the purchases returns and allowances journal.Since this is the first entry on page 6 of the purchases returns and allowances journal, includethe current year, 20--.

2. Enter the vendor name, Key Tennis Company, in the Account Debited column.3. Record the debit memorandum number, 22, in the Debit Memo. No. column.4. Write the debit amount, 54.50, in the Accounts Payable Debit column.5. Record the credit amount, 54.50, in the Purchases Returns and Allowances Credit Tennis

column.

PURCHASES RETURNS AND ALLOWANCES JOURNAL PAGE 6

1

2

1

2

DATE ACCOUNT DEBITED

PURCHASES RETURNS ANDALLOWANCES CREDIT

GOLF TENNIS

June20--

3 Key Tennis Company

ACCOUNTSPAYABLE

DEBIT

DEBITMEMO.

NO.

POST.REF.

5 4 50 5 4 50

1 2 3

22 240

MasterSport records all purchases returnsand allowances in a purchases returns andallowances journal. MasterSport’s purchasesreturns and allowances journal is shown inFigure 1-10.

June 3. Returned tennis equipment to KeyTennis Company, $54.50, from Purchase InvoiceNo. 333. Debit Memorandum No. 22.

In the general ledger, Accounts Payable isdecreased by a $54.50 debit. Purchases Returnsand Allowances—Tennis is increased by a $54.50

credit. In the accounts payable ledger, the ven-dor account, Key Tennis Company, is decreasedby a $54.50 debit.

GENERAL LEDGERAccounts Payable

54.50

Purchases Returns and Allowances—Tennis54.50

ACCOUNTS PAYABLE LEDGERKey Tennis Company

54.50

1. Write the date.

2. Entervendorname.

3. Record debit memorandum number.

4. Write the amount.

5. Write the amount.

1

23 4

5


POSTING FROM A PURCHASES RETURNS AND ALLOWANCES JOURNAL

PURCHASES RETURNS AND ALLOWANCES JOURNAL PAGE 6

1

2

9

10

11

12

1

2

9

10

11

12

DATE ACCOUNT DEBITED

PURCHASES RETURNS ANDALLOWANCES CREDIT

GOLF TENNIS

June20--

3

2730

Key Tennis Company

Super Pro TennisTotals

ACCOUNTSPAYABLE

DEBIT

DEBITMEMO.

NO.

POST.REF.

5 4 50

2 4 0 001 3 6 7 30

3 0 2 30

5 4 50

2 4 0 001 0 6 5 00

1 2 3

22

29

240

260

(5115-2)(5115-1)(2105)

Figure 1-11

Purchases returns and allowances are postedin the same manner as purchases on account.Each amount written in the Accounts PayableDebit column is posted often to the vendoraccount written in the Account Debited column.The purchases returns and allowances journal isabbreviated as PR in the Post. Ref. column of theledger accounts. For example, a reference of PR6indicates that the posting came from page 6 ofthe purchases returns and allowances journal.

A purchases return or allowance may bemade after a vendor has been paid in full. Thissituation might occur if an invoice is paid verysoon after it is received. After the return hasbeen posted, the vendor account may have adebit balance instead of a normal credit balance.

This debit balance reduces the amount to bepaid for future purchases. An account balancethat is opposite the normal balance is called acontra balance. A contra balance is shown byenclosing the amount in parentheses in theaccount’s Balance column.

A purchases returns and allowances journalis proved, ruled, and posted at the end of eachmonth. Each amount column total is posted tothe general ledger account named in the columnheading. The account number is written belowthe journal’s column total to show that theamount has been posted. MasterSport’s depart-mental purchases returns and allowances journalafter posting is shown in Figure 1-11.

PROFESSIONALBUSINESSETHICS

iegler Industries assemblesa safety system for passen-ger automobiles. This sys-

tem substantially reduces severeinjuries to drivers involved in acci-dents. In an effort to increase profits,Ziegler recently took steps to cut costsand increase production.

Instructions

Use the three-step checklist to helpdetermine whether each of the follow-ing actions by Ziegler Industriesdemonstrates ethical behavior.

Situation 1. Ziegler has begun

using some less expensive compo-nents. These components increase thesystem’s estimated failure rate from 12to 15 failures per 10,000 accidents.Despite this increase, the companycontinues to meet the government’ssafety standard of 20 failures per10,000 accidents.

Situation 2. Ziegler saves $80per system by purchasing less expen-sive components. As a result of thissaving, they decide to reduce the unitsales price of the system by $25.Therefore, Ziegler increases the perunit profit by $55.

AT WHAT PRICE SAFETY?

Z


departmentalaccounting system

merchandisingbusiness

posting

debit memorandum

contra account

contra balance

01. When MasterSport’s tennis depart-ment purchases merchandise onaccount, what general ledger accountsare affected, and how?

02. What general ledger accounts areaffected, and how, by a purchasesreturn of tennis equipment?



Journalizing and posting purchases on account and purchases returns and allowances

Music Designs, Inc. has two departments: Compact Discs and Tapes. A purchases journal, purchasesreturns and allowances journal, partial general ledger, and accounts payable ledger are provided inthe Working Papers. The balances are recorded as of March 1 of the current year. Your instructor willguide you through the following examples.

Mar. 1. Purchased tapes on account from Raymond Wholesalers, $1,350.00. P283.2. Purchased compact discs on account from Artex Music, $965.00. P284.5. Returned compact discs to Dade, Inc., $165.00, from P280. DM36.6. Returned tapes to Raymond Wholesalers, $100.00, from P283. DM37.

03. Journalize each transaction. Source documents are abbreviated as follows: debit memoran-dum, DM; purchase invoice, P.

04. Post the items that are to be posted individually. Post from the journals in the following order:purchases journal and purchases returns and allowances journal. Save your work to completethe On Your Own below.

Journalizing and posting purchases on account and purchases returns and allowances

Use the working papers from the Work Together above. Work this problem independently.

Mar. 18. Purchased tapes on account from Quality Tapes, $268.00. P288.20. Returned compact discs to Artex Music, $120.00, from P284. DM38.23. Purchased tapes on account from Castle Records and Tapes, $993.00. P289.31. Returned tapes to Castle Records and Tapes, $150.00, from P289. DM39.

05. Journalize each transaction.

06. Post the items that are to be posted individually. Prove and rule the journals. Post the totals.




DEPARTMENTAL CASH PAYMENTS

The “n” in 2/10, n/30 represents the word net.

R E M E M B E R

Most of MasterSport’s cash payments aremade by check. Therefore, checks are the sourcedocuments for most cash payments. (CONCEPT:Objective Evidence) All cash payments arerecorded in a cash payments journal.

Cash Payment on AccountPurchases on account are expected to be paid

within the stated credit period. A seller mayencourage early payment by allowing a deduc-tion from the invoice amount. A deduction that avendor allows on the invoice amount to encour-age prompt payment is called a cash discount. Acash discount on purchases taken by a customeris called a purchases discount.

A purchases discount is usually stated as apercentage. For example, the terms of an invoicemay be written as 2/10, n/30. The expression2/10 means that 2% of the invoice amount maybe deducted from the amount due if payment is

made within 10 days of the invoice date. Theexpression n/30 means that payment of the totalinvoice amount must be made within 30 days ofthe invoice date. No discount can be deducted,however, if payment is made after 10 days fromthe invoice date. MasterSport takes advantage ofall discounts allowed by vendors.

A purchases discount reduces the netamount of cash paid for a purchase. The accountPurchases Discount—Tennis is in the cost of mer-chandise division of MasterSport’s generalledger. Purchases discounts are kept in separateaccounts and not deducted directly from thepurchases accounts. This procedure helps thebusiness see what proportion of purchases onaccount were allowed purchases discounts.

An account that reduces a related account ona financial statement is known as a contraaccount. The purchases discount accounts arecontra cost accounts.

CULTURALDIVERSITY

ow do you meet otherpeople in your profession?Join a professional organi-zation. Several profes-

sional accounting organizations existto serve the needs of various ethnicgroups. Among these organizationsare: The American Association ofHispanic Certified Public Accountants;The National Association of BlackAccountants, Inc. (NABA); and TheAssociation of Asian AmericanAttorneys and Certified PublicAccountants.

These associations maintain aninformal network among members.

Such networks allow people in theprofession to meet, to use services ofother association members, and toshare ideas and career opportunities.They also promote career opportuni-ties for their members, work toexpand representation of their ethnicgroups in the workforce, and offervarious forms of continuing education.

In addition to their national organi-zations, each has various chaptersaround the country. All three offer stu-dent memberships to college studentswho are studying accounting.

PROFESSIONAL ORGANIZATIONS

H

1-3 Journalizing and Posting Cash Paymentsand Reconciling the Bank Statement


JOURNALIZING A PURCHASES DISCOUNT

CASH PAYMENTS JOURNAL PAGE 111 2 3 4

1

2

3

1

2

3

DATE ACCOUNT TITLE

June20--

1 Champion Tennis Supply

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

1 0 50

5

ACCOUNTSPAYABLE

DEBIT

5 2 5 00

CASHCREDIT

5 1 4 50

6

PURCH. DISCOUNT CR.

GOLF TENNIS

315

Figure 1-12

Journalize a cash payment that includes a purchasesdiscount

1. Write the date, June 1, in the Date column of the cash paymentsjournal. Since this is the first entry on page 11 of the cash paymentsjournal, include the current year, 20--.

2. Enter the vendor name, Champion Tennis Supply, in the AccountTitle column.

3. Record the check number, 315, in the Ck. No. column.4. Write the debit amount, 525.00, in the Accounts Payable Debit

column.5. Record one credit amount, 10.50, in the Purchases Discount Credit

Tennis column.6. Enter the other credit amount, 514.50, in the Cash Credit column.

F Y I

Some businesses organized bydepartments will have more thantwo departments. Additionalcolumns will be added to the vari-ous journals to accommodate thenumber of departments in thebusiness. For example, the cashpayments journal for a businesswith four departments would havefour Purchases Discount columns,one for each department.

MasterSport’s cash payments journal, shownin Figure 1-12, has two debit columns—GeneralDebit and Accounts Payable Debit. The journalalso has four credit columns—General Credit, aPurchases Discount Credit column for each ofthe two departments, and Cash Credit.

June 1. Paid cash on account to ChampionTennis Supply, $514.50, covering PurchaseInvoice No. 331 for tennis equipment for$525.00, less 2% discount, $10.50. Check No.315.

The source document for this transaction is acheck. (CONCEPT: Objective Evidence)

In the general ledger, Accounts Payable isdecreased by a $525.00 debit. Cash is decreased

by a $514.50 credit. Purchases Discount—Tennis isincreased by a $10.50 credit. In the accountspayable ledger, Champion Tennis Supply isdecreased by a $525.00 debit.


525.00

Cash514.50

Purchases Discount—Tennis10.50

ACCOUNTS PAYABLE LEDGERChampion Tennis Supply

525.00

1. Write thedate.

2. Enter vendorname.

3. Record thecheck number.

4. Write the debitamount.

5. Record discountamount. 6. Enter the credit

amount.

12 3 4 5

6


TAKING A DISCOUNT AFTER A PURCHASE RETURN

An additional calculation is necessary whena discount is taken after a purchase return orallowance has been granted. The discount is cal-culated on the amount owed at the time theinvoice is paid. Therefore, the amount of thereturn or allowance must be deducted from theamount of the original purchase before the dis-count can be calculated.

June 1. Paid cash on account to Golf-Tee, Inc.,$220.50, covering Purchase Invoice No. 332for golf equipment for $275.00, less DebitMemorandum No. 20 for $50.00, and less 2%discount, $4.50. Check No. 316.

The source document for this transaction is acheck. (CONCEPT: Objective Evidence)

The total amount due for this purchase afterthe return and the discount is calculated asshown in Figure 1-13. This transaction is journal-ized the same way as a payment of cash whenthere is no purchases return or allowance. Theonly difference is the way in which the amountsare calculated.


225.00

Cash220.50

Purchases Discount—Golf4.50

ACCOUNTS PAYABLE LEDGERGolf-Tee, Inc.

225.00

Amount owed on invoice:Original Purchases Purchase Invoice

Purchase Invoice – Return = AmountAmount (P332) (DM20) After Return

$275.00 – 50.00 = $225.00

Purchases discount:Purchase Invoice

�Purchases Discount

=Purchases

Amount After Return Rate Discount$225.00 × 2% = $4.50

Amount due after purchases discount:Purchase Invoice

–Purchases

=Total Amount

Amount After Return Discount Due$225.00 – $4.50 = $220.50


1

2

1

2

DATE ACCOUNT TITLE

June20--

11

Champion Tennis SupplyGolf-Tee, Inc.

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

4 501 0 50

5

ACCOUNTSPAYABLE

DEBIT

5 2 5 002 2 5 00

CASHCREDIT

5 1 4 502 2 0 50

6

PURCH. DISCOUNT CR.

GOLF TENNIS

315316

1

2

3

4

Figure 1-13

Calculate a discount after a return orallowance is granted and journalize thecash payment

1. Calculate the amount owed on the invoiceafter the purchases return, $225.00.

2. Calculate the new purchases discount, $4.50.3. Find the amount due after the purchases

return and the purchases discount, $220.50.4. Record the entry in the cash payments journal.


RECORDING ENTRIES IN A CASH PAYMENTS JOURNAL

Journalize buying office supplies for cash

1. Write the date, 1, in the Date column.2. Enter the account title, Supplies—Office, in the Account Title column.3. Record the check number, 317, in the Ck. No. column.4. Write the debit amount, 136.00, in the General Debit column.5. Record the credit amount, 136.00, in the Cash Credit column.


2

5

6

2

5

6

DATE ACCOUNT TITLE

11

Supplies—OfficeRent Expense

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

1 3 6 001 5 0 0 00

5

ACCOUNTSPAYABLE

DEBIT

CASHCREDIT

1 3 6 001 5 0 0 00

6

PURCH. DISCOUNT CR.

GOLF TENNIS

317318

Figure 1-14

1. Write the date. 2. Enter theaccount title.

3. Record thecheck number.

4. Write the debitamount.

5. Enter the credit amount.

4 5

June 1. Paid cash for office supplies, $136.00.Check No. 317.

Supplies—Office is increased by a $136.00debit. Cash is decreased by a $136.00 credit.

The entry on line 5 of page 11 of the cashpayments journal, Figure 1-14, shows the cashpayment for supplies. Use the following steps tomake the journal entry.

Supplies—Office136.00

Cash136.00

Journalize the cash payment of an expense

1. Write the date, 1, in the Date column.2. Enter the account title, Rent Expense, in the Account Title column. 3. Record the check number, 318, in the Ck. No. column. 4. Write the debit amount, 1,500.00, in the General Debit column.5. Record the credit amount, 1,500.00, in the Cash Credit column.

June 1. Paid cash for rent, $1,500.00. CheckNo. 318.

Rent Expense is increased by a $1,500.00debit. Cash is decreased by a $1,500.00 credit.

The entry on line 6 of page 11 of the cashpayments journal, Figure 1-13, shows the cashpayment for an expense. Use the following stepsto make the journal entry.

Rent Expense1,500.00

Cash1,500.00

1 2 3


CASH PAYMENT TO REPLENISH PETTY CASH


5

6

7

8

5

6

7

8

DATE ACCOUNT TITLE

30 Supplies—OfficeSupplies—StoreAdvertising ExpenseMiscellaneous Expense

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

1 6 4 001 3 6 00

5 6 004 6 00

5

ACCOUNTSPAYABLE

DEBIT

CASHCREDIT

4 0 2 00

6

PURCH. DISCOUNT CR.

GOLF TENNIS

350

Figure 1-15

POSTING FROM A CASH PAYMENTS JOURNAL


11

12

13

14

15

7

8

9

10

11

DATE ACCOUNT TITLE

303030

Miscellaneous ExpenseCredit Card Fee ExpenseTotals

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

1 2 803 4 0 00

19 5 2 0 00 1 7 3 0 00 1 4 1 30 3 3 1 50

5

ACCOUNTSPAYABLE

DEBIT

43 9 3 0 00

CASHCREDIT

1 2 803 4 0 00

61 2 4 7 20

6

PURCH. DISCOUNT CR.

GOLF TENNIS

M18M19

62156110

(1105)(5110-2)(5110-1)(2105)(✓ )(✓ )

11

12

13

14

15

MasterSport posts often from the GeneralDebit and General Credit columns to the generalledger. MasterSport also posts frequently fromthe Accounts Payable Debit column to theaccounts payable ledger.

At the end of each month, the cash paymentsjournal is proved and ruled. Totals of the specialamount columns are posted to their respective

accounts in the general ledger. The generalledger account number is written in parenthesesimmediately below the total. A check mark isrecorded in parentheses below the totals of theGeneral Debit and Credit columns to show thatthese totals are not posted. MasterSport’s depart-mental cash payments journal, Figure 1-16, isshown after all posting has been completed.

Figure 1-16

An amount of cash kept on hand and used formaking small payments is called petty cash.MasterSport’s petty cash fund is $500.00. Itreplenishes petty cash whenever the fund dropsbelow $100.00. In addition, the petty cash fund isreplenished on the last business day of each fiscalperiod, to assure that all expenses are recordedduring the fiscal period in which they occurred.(CONCEPT: Matching Expenses with Revenue)

To replenish petty cash, a check is written forthe amount spent from the fund. The check iscashed and the money placed back in the fund.

June 30. Paid cash to replenish the petty cashfund, $402.00: office supplies, $164.00; storesupplies, $136.00; advertising, $56.00; miscel-laneous expense, $46.00. Check No. 350.

The entry in Figure 1-15 shows the cash pay-ment to replenish petty cash. The steps to recordthe entry are the same as the steps for other cashpayment entries.

1. Write thedate.

2. Enter account titles.

3. Record check number.

4. Write the debit amounts.5. Write the credit amount.

1 2 34

5


Bank statements should be reconciled each month. Errors should be reported immediately to the bank.

R E M E M B E R

RECONCILING A BANK STATEMENT

Figure 1-17

Banks keep detailed records of their deposi-tors’ checking accounts. Records are kept of alldeposits received, all checks paid, and bank feescharged for maintaining an account. Bank chargesinclude service charges and credit card fees.

A report of deposits, withdrawals, and bankbalance sent to a depositor by a bank is called abank statement. Bank statements are commonlysent to depositors monthly. Many banks includeall canceled checks listed on the statement. Somebanks do not return canceled checks with thestatement. If the bank does not return canceledchecks, the check numbers and amounts shownon the statement should be carefully comparedto the check stubs.

A depositor should check the bank statementfor accuracy as soon as it is received. Any errorsfound should be reported immediately to thebank. The bank balance is compared with thecheckbook balance. Bringing information on abank statement and a checkbook into agreementis known as reconciling a bank statement.

MasterSport uses the form shown in Figure1-17 when reconciling the bank statement eachmonth. The reconciliation indicates that theadjusted checkbook balance and the adjustedbank balance are the same, $32,878.75.

Reconciling a bank statement

1. Enter the checkbook balance as shown on check stub, $33,231.55.2. Enter and add bank charges to obtain total bank charges, $352.80.3. Deduct total bank charges from checkbook balance to obtain adjusted checkbook balance, $32,878.75.4. Enter bank balance as shown on bank statement, $20,525.23.5. Enter and add the amounts of any outstanding deposits recorded on the check stubs but not listed on the bank

statement to obtain total outstanding deposits, $12,828.52.6. Add total outstanding deposits to bank balance, $33,353.75.7. Deduct total outstanding checks, $475.00.8. Verify that the adjusted checkbook balance and the adjusted bank balance are the same, $32,878.75.

2

1

3

4

5

6

7

8


JOURNALIZING BANK CHARGES


11

12

13

14

11

12

13

14

DATE ACCOUNT TITLE

303030

Miscellaneous ExpenseCredit Card Fee ExpenseTotals

CK.NO.

POST.REF.

GENERAL

DEBIT CREDIT

1 2 803 4 0 00

19 5 2 0 00 1 7 3 0 00 1 4 1 30 3 3 1 50

5

ACCOUNTSPAYABLE

DEBIT

43 9 3 0 00

CASHCREDIT

1 2 803 4 0 00

61 2 4 7 20

6

PURCH. DISCOUNT CR.

GOLF TENNIS

M18M19

62156110

(1105)(5110-2)(5110-1)(2105)(✓ )(✓ )

Figure 1-18

Credit Card Fee Expense340.00

Cash340.00

Miscellaneous Expense12.80

Cash12.80

All bank charges listed on a bank statementare considered cash payments. Even though nochecks are issued, each bank charge is recordedin a cash payments journal.

MasterSport has two bank charges. Onecharge is a bank service charge for maintaining achecking account. The other charge is a creditcard fee based on a percentage of the total ofcredit card sales deposited with the bank. Sinceno checks are available to serve as source docu-ments, memorandums are prepared showing thedetails of each service charge. (CONCEPT:Objective Evidence)

June 30. Received bank statement showingJune bank service charge, $12.80.Memorandum No. 18.

The source document for this transaction is amemorandum. (CONCEPT: Objective Evidence)

Miscellaneous Expense is increased by a $12.80debit. Cash is decreased by a $12.80 credit.

June 30. Recorded credit card fee expense forJune, $340.00. Memorandum No. 19.

The source document for this transaction is amemorandum. (CONCEPT: Objective Evidence)

Credit Card Fee Expense is increased by a$340.00 debit. Cash is decreased by a $340.00credit.

The entry on lines 11 and 12 of page 12 of thecash payments journal, Figure 1-18, shows theentry for June’s bank service charge and creditcard fee expense. Use the following steps tomake these journal entries.

Journalize the cash payments for a bank service charge and credit card feeexpense

1. Write the date, 30, in the Date column.2. Enter the account title in the Account Title column. 3. Record the memorandum number in the Ck. No. column and identify by the letter M. 4. Write the debit amount in the General Debit column. 5. Record the credit amount in the Cash Credit column.


cash discount

purchases discount

petty cash

bank statement

01. What general ledger accounts are affected, and how, by acash payment on account for tennis equipment thatincludes a purchases discount?

02. Why is a petty cash fund always replenished on the lastday of a fiscal period?

03. What source document does MasterSport use for each ofthe two bank charges shown on the bank statement?

Journalizing and posting departmental cash payments

Harmony Music has two departments: Guitars and Keyboards. A cash payments journal, partialgeneral ledger, and accounts payable ledger are provided in the Working Papers. Source documentsare abbreviated as follows: check, C; debit memorandum, DM; memorandum, M; and purchasenumber, P. Your instructor will guide you through the following examples.

Sept. 5. Paid cash on account for guitars from Peninsula Guitar covering P358 for $1,150.00. C241.7. Paid cash for supplies, $120.00. C242.9. Paid cash on account for keyboards from Magic Keyboard covering P360 for $2,210.00, less

DM53 for $210.00, and less 2% discount. C243.

04. Journalize the transaction.

05. Post items that are to be posted individually. Save your work to complete the On Your Ownbelow.

Journalizing and posting departmental cash payments

Use the working papers from the Work Together above. Work independently to complete the fol-lowing problem.

Sept. 16. Paid cash on account for keyboards from Magic Keyboard covering P361 for $1,800.00, less2% discount. C244.

19. Paid cash on account for guitars to Peninsula Guitar covering P359 for $1,680.00. C245.30. Paid cash to replenish the petty cash fund, $64.00: supplies, $15.00; advertising expense,

$22.00; miscellaneous expense, $27.00. C246.30. Received bank statement showing September service charge, $10.00. M54.30. Recorded credit card fee expense for September, $278.00. M55.

06. Journalize the transactions.

07. Post items that are to be posted individually. Prove and rule the journals. Post the totals.






After completing this chapter, you can

1. Define accounting terms related to departmental purchases and cash payments.

2. Identify accounting concepts and practices related to departmental purchasesand cash payments.

3. Perform file maintenance.

4. Journalize and post departmental purchases and purchases returns.

5. Journalize and post cash payments.

6. Reconcile a bank statement.

ACCOUNTINGPROFESSIONALS

As a company grows, it canadopt two strategies to satisfy itsneed for accounting expertise.The company can add to its full-time accounting staff.Alternately, the company couldhire independent consultants.Regardless of which strategy isadopted, the search for account-ing professionals should includeexamining their professional cer-tification.

The Certified PublicAccountant (CPA) is the mostwidely recognized certification.To become a CPA, an individualmust pass a certifying examina-tion and meet the educationaland experience requirements ofthe board of accountancy in theindividual’s state. A CPA is quali-fied to perform a variety ofaccounting functions, includingprocessing accounting informa-tion, auditing financial state-

ments, preparing tax returns, andproviding tax planning.

A partial list of additional cer-tifications available in accountingand related areas follows.

Certified ManagementAccountant: Responsible for theaccounting information system,assists managers to use account-ing information in decision mak-ing, and works to provide thecompany with adequate financialresources to conduct business.

Certified Internal Auditor:Audits the accounting informa-tion system and other operationalreporting systems.

Certified InformationSystems Analyst: Designs com-puter information systems thatprovide timely accounting infor-mation while assuring that theinformation is accessible only toauthorized personnel.

Certified Fraud Examiner:Investigates alleged fraudulentactivities by examining account-

ing records and interviewing per-sonnel; prepares evidence foradmission into court.

Certified Financial Planner:Manages the company’s employeebenefits and assists employees todevelop investment strategies tomeet future needs.

Certified ContingencyPlanner: Develops plans thatenable the company and itsaccounting information system tocontinue operations in the eventof a natural disaster.

REQUIRED:Identify an individual that has

one of the certifications listedabove. Ask the individual todescribe how the certification hasplayed a role in his or her profes-sional career.

E X P L O R E A C C O U N T I N G


1-1

1-2

APPLICATION PROBLEMPerforming file maintenance activities; adding general ledger accounts

The following is CarMaster Detailing’s partial general ledger chart of accounts.

Assets Accounts Added1110 Cash Petty Cash1115 Accounts Receivable Allowance for Uncollectible Accounts1120 Merchandise Inventory Supplies-Office1125 Supplies-Store Prepaid Insurance

Add the four new asset accounts to the general ledger chart of accounts using the unused middle numbermethod. Assume Supplies-Store is currently the last account in the division.

APPLICATION PROBLEMJournalizing and posting departmental purchases on account and purchases returnsand allowances

LifeLine Communications has two departments: Cellular Phones and Pagers. A purchases journal, pur-chases returns and allowances journal, partial general ledger, and accounts payable ledger are providedin the Working Papers. The balances are recorded as of October 1 of the current year.

Transactions:Oct. 1. Phones were purchased on account from CarPhone Wholesalers, $1,270.00. P183.

2. Pagers were purchased on account from PageMax, Inc., $970.00. P184.5. Purchased phones on account from ExecuPhone, $2,100.00. P185.6. The order from Western Distributors contained 5 defective pagers. Returned pagers, $205.00,

from P180. DM40.9. Purchased pagers on account from Cell Advantage, Inc., $945.00. P186.

13. Pagers were purchased on account from ComSystems, $2,240.00. P187.17. Returned phones to CarPhone Wholesalers, $120.00, from P183. DM41.

Posting. Post the items that are to be posted individually. Post from the journals in this order:purchases journal and purchases returns and allowances journal.

19. Purchased phones on account from Telecom Corporation, $450.00. P188.20. Pagers were returned to PageMax, Inc., $90.00, from P184. DM42.23. Issued P189 to purchase phones on account from ExecuPhone, $1,003.00. 30. Returned $75.00 of phones to Phone Solution, from P181. DM43.

Posting. Post the items that are to be posted individually.

Instructions:1. Journalize the transactions completed during October of the current year. Use page 11 of a pur-

chases journal and page 3 of a purchases returns and allowances journal. Source documents areabbreviated as follows: debit memorandum, DM; purchase invoice, P.

2. Prove and rule the purchases journal. Post the totals.

3. Prove and rule the purchases returns and allowances journal. Post the totals.

1-1

1-2


APPLICATION PROBLEMJournalizing and posting departmental cash payments

Los Gatos Nursery and Craft has two departments: Crafts and Plants. A partial general ledger andaccounts payable ledger are given in the Working Papers. The balances are recorded as of November 1of the current year.

Transactions:Nov. 1. Paid cash for miscellaneous expense, $150.00. C303.

2. Paid cash for rent, $1,300.00. C304.4. Paid cash on account to Wholesale Crafts, Inc. covering P287 for crafts for $885.00, less 2%

discount. C305.5. Paid cash for advertising, $83.50. C306.8. Paid cash for supplies, $95.50. C307.

10. Paid cash on account to Northtown Plants covering P288 for plants for $1,250.00, less 2%discount. C308.

13. Paid cash on account to Century Crafts, Inc., covering P289 for crafts for $963.00, less 2%discount. C309.

15. Paid cash for miscellaneous, $33.50. C310.Posting. Post the items that are to be posted individually.

21. Paid cash for supplies, $52.00. C311.23. Paid cash on account to Evergreen Trees & Shrubs covering P290 for plants for $1,840.00,

less 2% discount. C312.27. Paid cash on account to Evergreen Trees & Shrubs covering P292 for plants for $1,460.00,

less 2% discount. C313.30. Paid cash to replenish the petty cash fund, $212.00: supplies, $89.00; advertising, $83.40;

miscellaneous, $39.60. C314.30. Received bank statement showing November bank service charge, $14.30. M26.30. Recorded credit card fee expense for November, $488.20. M27.

Posting. Post the items that are to be posted individually.

Instructions:1. Journalize the transactions completed during November of the current year. Use page 21 of a cash

payments journal. All of the vendors from which merchandise is purchased on account offer terms of2/10, n/30. Source documents are abbreviated as follows: check, C; memorandum, M.

2. Prove and rule the cash payments journal. Post the totals.

APPLICATION PROBLEMReconciling a bank statement

On October 31 of the current year, San Jose Transmission Specialists, received a bank statement datedOctober 29. The following information is obtained from the bank statement and from the records of thebusiness.

Bank statement balance $31,820.00Bank service charge 8.80

1-3

1-4

Bank credit card charge 325.20Outstanding deposit:

October 27 7,152.75Outstanding checks:

No. 361 89.50No. 362 1,460.25

Checkbook balance on Check Stub No. 363 37,757.00

Prepare a bank statement reconciliation on a form similar to the one in this chapter. Use October 31 ofthe current year as the date.

MASTERY PROBLEMPerforming file maintenance activities; journalizing departmental purchases and cashpayments; reconciling a bank statement

San Juan Camera has two departments: Cameras and Accessories. The following is San Juan Camera’spartial general ledger chart of accounts.

6205 Depreciation Expense—Office Equipment6210 Miscellaneous Expense6215 Rent Expense6220 Supplies Expense—Office6225 Supplies Expense—Store

Transactions:Nov. 1. Paid cash for advertising, $95.00. C273.

1. Paid cash for rent, $1,250.00. C274.2. Purchased accessories on account from Standish Photo Supplies, $800.00. P262.3. Paid cash on account to National Camera Outlet covering P259 for cameras for $500.00,

less 2% discount. C275.3. Purchased cameras on account from Jens Wholesale Cameras, $840.00. P263.5. Paid cash on account to Standish Photo Supplies covering P261 for accessories for $645.00,

less 2% discount. C276.7. Returned cameras to Jens Wholesale Cameras, $88.00, from P263. DM28.

10. Purchased cameras on account from Focal Camera Distributors, $388.00. P264.11. Paid cash for store supplies, $82.50. C277.14. Paid cash on account to Standish Photo Supplies covering P262 for accessories; no discount.

C278.16. Returned accessories to Quality Film Company, $132.50, from P260. DM29.17. Purchased accessories on account from Farmer Camera Supply, Inc., $550.00. P265.17. Paid cash on account to Focal Camera Distributors covering P264 for cameras for $388.00,

less 2% discount. C279.18. Paid cash on account to Jens Wholesale Cameras covering P263 for cameras for $840.00,

less DM28 for $88.00; no discount. C280.18. Returned accessories to Farmer Camera Supply, Inc., $75.00, from P265. DM30.19. Purchased cameras on account from Jens Wholesale Cameras, $1,120.00. P266.21. Paid cash for office supplies, $62.30. C281.23. Purchased accessories on account from Quality Film Company, $336.00. P267.


1-5

continued

Nov. 24. Paid cash on account to Farmer Camera Supply, Inc. covering P265 for accessories for$550.00, less DM30 for $75.00, and less 2% discount. C282.

24. Purchased cameras on account from National Camera Outlet, $626.40. P268.26. Paid cash on account to Jens Wholesale Cameras covering P266 for cameras for $1,120.00,

less 2% discount. C283.28. Paid cash for store supplies, $53.00. C28430. Paid cash to replenish the petty cash fund, $221.00: office supplies, $57.10; advertising,

$62.50; miscellaneous, $101.40. C285.

Instructions:1. Add Insurance Expense and Uncollectible Accounts Expense to the general ledger chart of accounts

using the unused middle number method described in this chapter. Assume the company listsexpenses alphabetically.

2. Journalize the following transactions completed during November of the current year. Use page 11of a purchases journal and a purchases returns and allowances journal and page 21 of a cashpayments journal. All of the vendors from which merchandise is purchased on account offer termsof 2/10, n/30. Source documents are abbreviated as follows: check, C; debit memorandum, DM;purchase invoice, P.

3. Prepare a bank statement reconciliation. Use November 30 of the current year as the date. Thebank statement is dated November 29. The following information is obtained from the bank state-ment and from the records of the business.

Bank statement balance $16,578.00Bank service charge 20.20Bank credit card charge 382.80Outstanding deposit:

November 29 3,070.60Outstanding checks:

No. 283 1,097.60No. 284 53.00No. 285 221.00

Checkbook balance on Check Stub No. 286 18,680.00

4. Continue journalizing the following transactions.

Nov. 30. Received bank statement showing November bank service charge, $20.20. M31.30. Recorded credit card fee expense for November, $382.80. M32.

5. Prove and rule the journals.

CHALLENGE PROBLEMJournalizing purchases at net amount and using the account Discounts Lost

Introductory remarks: Some businesses record purchases at the net amount to be paid when the cash dis-count is taken. For example, merchandise is purchased for $1,000.00 with a 2% discount allowed if theaccount is paid within 10 days. The discount will reduce the price from $1,000.00 to $980.00. To recordthis purchase on account transaction, Purchases is debited for $980.00 and Accounts Payable is creditedfor $980.00. When the account is paid, Accounts Payable is debited for $980.00 and Cash is creditedfor $980.00. Purchases returns and allowances are also recorded at the discounted amount.


1-6

If the discount period expires before payment is made, the entry in the cash payments journal for theexample above would be as follows: debit Accounts Payable for $980.00, debit Discounts Lost for $20.00,and credit Cash for $1,000.00. Because most cash discounts are taken, there are few entries involving thediscounts lost account. For this reason, no special amount column is provided for the account in the cashpayments journal. Instead, the amounts debited to this account are recorded in the General Debit column.

Instructions:1. Journalize the transactions for Mastery Problem 1-5 following the method described above. Use

page 11 of a purchases journal and a purchases returns and allowances journal and page 21 of acash payments journal. All of the vendors from which merchandise is purchased on account offerterms of 2/10, n/30.

2. Prove and rule the journals.


Applied CommunicationA resume states your education, work experience, and

qualifications. Your resume should be accurate, honest, and perfect in every respect. It is preferableto limit the resume to one typed page.

Required:1. Research how to prepare an appropriate resume.2. Prepare a personal resume that you could send to

a prospective employer.

INTERNET ACTIVITYPoint your browser to

http://accounting.swpco.com

Choose Advanced Course,choose Activities, and complete

the activity for Chapter 1.

Maria Hector manages a card and gift shop. The shop’s general ledger includes a single salesaccount and a single purchases account. Periodically, Ms. Hector has an accountant reviewher accounting records and procedures. The accountant recommends that Ms. Hector changeto a departmental accounting system. The accountant recommends that separate revenue and

cost accounts be kept for the two types of merchandise sold—cards and gifts. Ms. Hector objects to theaccountant’s recommendation. She sees no advantage to complicating the accounting system by havingseparate departmental revenue and cost accounts. With whom do you agree? Why?

Scott Pfeiffer manages a hardware store. He has found that his bank statement and checkbookreconcile without error month after month. In order to save the time spent reconciling hisbank statement each month, Mr. Pfeiffer decides to make the reconciliation once every sixmonths. His daughter, who helps with the business’ accounting, disagrees with this practice.

With whom do you agree? Why?


General LedgerDatabase

The general ledger databaseconsists of a collection of accountsand the related account numbersneeded for financial reporting.The ledger specifically listsaccounts for assets, liabilities, cap-ital, income and expenses.

Database

A pre-arranged file in whichdata can be entered and retrievedis known as a database. Anexample of a database inAutomated Accounting is the gen-eral ledger. It contains generalinformation about the business, achart of accounts, and financialactivity for each account. The data-base is designed so that, when youenter information, it updates theaccount balances and stores datain a designated area for creatingreports. The general ledger data-base to be used for a problem isstored as a template. Templatescan be used repeatedly.MasterSport stores its generalledger database as a template.

Ledger and General Ledger

A ledger is a group ofaccounts. A ledger that containsall accounts needed to preparefinancial statements is called ageneral ledger. The namegiven to an account is known asan account title.

File MaintenanceA chart of accounts numbering

system includes the account num-

bers that will be used to processtransactions for various accounts.In this text, the numbering systemsfor manual and automated prob-lems are the same. The processused to set up the chart ofaccounts, add new accounts, andchange data for existing accountsis known as file maintenance.File maintenance includes arrang-ing accounts in the general ledgerand assigning the numbers.

Three steps are required toadd an account or change anaccount number.

1. Create an account numberor modify an existing number.

2. Enter it in the chart ofaccounts.

3. Check for accuracy by cre-ating a revised chart ofaccounts list.

Adding an Account Within aLedger

Adding a new account withina ledger may be necessary whenan asset is purchased, a liability isincurred, or an additional expensecategory is added. A new accountnumber is assigned the unusedmiddle number between two exist-ing accounts.

MasterSport added a newaccount, Equipment RepairExpense, between the two existingaccounts Depreciation Expense—Office Equipment, 6205, andInsurance Expense, 6210. Theunused middle number between6205 and 6210 is 6207.5. The

number 6207.5 contains five dig-its and cannot be assigned in afour-digit number system.Therefore, the nearest whole num-ber, 6208, would be assigned.The new account, EquipmentRepair Expense, is placed in thegeneral ledger as follows:

6205 Depreciation Expense—Office Equipment (existingaccount)

6208 EQUIPMENT REPAIREXPENSE (new account)

6210 Insurance Expense (existingaccount)

When adding a new accountafter the last account number in adivision, assign the next numberin the sequence. Sales TaxPayable, 2120, is the last existingaccount in the liabilities division. IfMasterSport decides to add a newliability account after Sales TaxPayable, the new account numberwould be assigned number 2125.

MasterSport maintains a list ofall vendors it uses. Vendors arestored in the system by name.Vendors may be added anddeleted. MasterSport also main-tains a list of its customers. The cus-tomer list is also stored by name.

Processing File Maintenance Data

In automated accounting,activities may be selected from themenu or from toolbar icons. Inmost cases, you will use the tool-bar icons to process data. Figure AA1-1 shows the menu and tool-bar for Automated Accounting7.0. Automated Accounting 8.0

AUTOMATED ACCOUNTINGMAINTENANCE OF GENERAL LEDGER DATABASE AND AUTOMATED

ENTRIES FOR PURCHASES AND CASH PAYMENTS


has additional menu options andtoolbar buttons.

Figure AA1-1 also shows theAccount Maintenance Window.The window is opened by clickingon the Accts. toolbar icon. To addan account, key the account num-ber and account title in the appro-priate columns and click the AddAccount button. In the figure,Equipment Repair Expense hasbeen added to the chart.

After file maintenance datahave been keyed, a revised chartof accounts is displayed andchecked for accuracy. The revisedchart of accounts is printed andfiled for future reference.

Recording DepartmentalPurchases and CashPayments

MasterSport’s accounting sys-tem has two departments: (1) Golfand (2) Tennis. MasterSport’s

departmental purchases and cashpayments transactions are ana-lyzed in Chapter 1.

Purchases on Account

MasterSport records all pur-chases on account transactions inthe purchases journal.

June 1, 20--. Purchased tennis equipmenton account from TennisWarehouse, $845.00.Purchase Invoice No. 336.

The journal entry to record thistransaction includes entering thedebit amount in the PurchasesTennis debit column on the pur-chases journal screen as shown inFigure AA1-2. The automatedaccounting software automaticallyrecords the credit to AccountsPayable for a purchases on accounttransaction. The vendor is thenselected from the pull-down list.

Purchase Returns and Allowances

MasterSport records purchasesreturns and allowances in the gen-eral journal.

June 3, 20--. Returned tennis equipmentto Key Tennis Company,$54.50, from PurchaseInvoice No. 333. DebitMemorandum No. 22.

The journal entry to record thistransaction includes entering thedebit amount in Accounts Payablefor the specific vendor and thecredit to the Purchases Returnsand Allowances account on thegeneral journal screen. For allgeneral journal transactions, it isnecessary to enter both the debitand credit amounts and to selectthe vendor name.

Cash Payment on Account

MasterSport records cash pay-ments transactions in the cashpayments journal.

June 1, 20--. Paid cash on account toChampion Tennis Supply,$514.50, coveringPurchase Invoice No. 331for stair master equipmentfor $525, less 2% discount,$10.50. Check No. 315.

The journal entry to record thistransaction includes entering adebit to the account to be paid onin the cash payments journal. Theautomated accounting softwareautomatically records a credit toCash for cash payment transac-tions.

An additional calculation isnecessary when a discount is

AUTOMATED ACCOUNTING

Figure AA1-1

1. Tool bar. 2. Menu.1 2


taken after a purchase return orallowance has been granted. Theamount of the return or allowancemust be deducted from the amountof the original purchase before thediscount can be calculated.

Buying Supplies for Cash

June 1, 20--. Paid cash for office sup-plies, $136.00. Check No.317.

The journal entry to record thistransaction is entered on the cashpayments journal screen. Thetransaction includes debiting theSupplies account. The automatedaccounting system will automati-cally credit Cash.

Cash Payment for an Expense

June 1, 20--. Paid cash for rent,$1,500.00. Check No. 318.

The journal entry to record thistransaction is entered on the cashpayments journal screen. Thetransaction includes debiting theexpense account. The automated

accounting system will automati-cally credit Cash.

Cash Payment to Replenish PettyCash

June 30, 20--. Paid cash to replenish thepetty cash fund, $402.00:office supplies, $164.00;store supplies, $136.00;advertising, $56; miscella-neous expense, $46.00.Check No. 350.

The journal entry to record thistransaction is entered on the cashpayments journal screen. Thetransaction includes debitingOffice Supplies, Store Supplies,Advertising, and Miscellaneous.

The automated accounting sys-tem automatically credits the Cashaccount.

Processing JournalEntries

Click on the journals toolbaricon. Select the tab for the journalin which the transaction is to berecorded. Enter the transactiondata. Use the Tab key to move

among the columns. When youhave entered all the transactions,click the Post button to post thedata to the ledgers.

After all data for a problemhave been entered into the jour-nals and posted, journal reportsare displayed, verified for accu-racy, and printed. A report isprinted for each journal in whichdata has been entered.

Reconciling a Bank Statement

In automated accounting, adata entry window is displayed onthe monitor for entering bank rec-onciliation data. To reconcile abank statement, bank charges,outstanding deposits and out-standing checks must be recorded.After the bank statement reconcili-ation data are keyed, the bankstatement reconciliation report isprinted.

AUTOMATING APPLICATIONPROBLEM 1-1

Instructions:1. Load Automated Accounting

7.0 or higher software.

2. Select database A01-1(Advanced Course Problem 1-1) from the accountingtemplate disk.

3. Select File from the menubar and choose the Save Asmenu command. Key thepath to the drive and direc-tory that contains your datafiles. Save the database witha file name of XXX011


Figure AA1-2


(where XXX are your initials).(Automated Accounting 8.0allows long file names. Yourinstructor may direct you touse your full name whensaving your files.)

4. Access Problem Instructionsthrough the Help menu. Readthe Problem Instructionscreen. (In AutomatedAccounting 8.0, ProblemInstructions are accessed byclicking the Browser toolbarbutton.)

5. Refer to page 29 for dataused in this problem.

6. Exit the AutomatedAccounting software.

AUTOMATING APPLICATIONPROBLEM 1-2



2. Select database A01-2(Advanced Course Problem 1-2) from the accountingtemplate disk.

3. Select File from the menubar and choose the Save As

menu command. Key thepath to the drive and direc-tory that contains your datafiles. Save the database witha file name of XXX012(where XXX are your initials).(Automated Accounting 8.0allows long file names. Yourinstructor may direct you touse your full name whensaving your files.)

4. Access Problem Instructionsthrough the Help menu. Readthe Problem Instruction screen.(In Automated Accounting8.0, Problem Instructions areaccessed by clicking theBrowser toolbar button.)

5. Refer to page 29 for dataused in this problem.


AUTOMATING MASTERYPROBLEM 1-5



2. Select database A01-5(Advanced Course Problem

1-5) from the accountingtextbook template disk.

3. Select File from the menubar and choose the Save Asmenu command. Key thepath to the drive and direc-tory that contains your datafiles. Save the database witha file name of XXX015(where XXX are your initials).(Automated Accounting 8.0allows long file names. Yourinstructor may direct you touse your full name whensaving your files.)

4. Access Problem Instructionsthrough the Help menu.Read the Problem Instructionscreen. (In AutomatedAccounting 8.0, ProblemInstructions are accessed byclicking the Browser toolbarbutton.)

5. Key the transactions listed onpage 31.



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