College Accounting Study Set 7

Business

Quiz 4 :

The General Journal and the General Ledger

Quiz 4 :

The General Journal and the General Ledger

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Recording correcting entries. The following journal entries were prepared by an employee of Jupiter Company who does not have an adequate knowledge of accounting. INSTRUCTIONS Examine the journal entries carefully to locate the errors. Provide a brief written description of each error. Assume that Office Equipment and Office Supplies were recorded at the correct values. img Analyze: After the correcting journal entries have been posted, what effect do the corrections have on the company's reported assets?
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I have carefully examined books of Jupiter Company and found that transactions which are recorded in journal are not correct. Let me explain you error in each transaction entry.
1. First entry is recorded when company has performed services on credit. Means we will receive payment so this entry will be passed with Account Receivable not with Account Payable. New entry will be as follows.
img 2. In second transaction company has make payment against telephone bill so transaction will be recorded as follows.
img 3. In third transaction entry is correctly recorded but problem is in the amount of cash. As this is a compound entry so it will be as follows. Person who has passes entry earlier has entered 8400 in cash amount but it will be 8000 as sum of 7200 and 800 is 8000
img So these were the errors in the entries. When we will make posting of these transactions, it will affect the value of our assets which are reported earlier. Here I am giving description of assets in which change will be reflected.
A. Account Receivable: Company's account receivable will increase by 12400 as we have performed services on credit in journal no. 1.
B. Cash: In these transactions, two are related to cash. In journal no. 2 we have paid for telephone bill so that transaction will reduce balance by $1000 and Journal no. 3 will increase cash balance by $400 so in summation it will reduce by $600.

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What is the accounting cycle?
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Define the term Accounting Cycle:
Accounting Cycles means a process wherein the accounting events are recorded.
The accounting cycles have following steps:
Collecting and thereafter analyzing data
Putting those transactions in journal
Then there after posting in ledger
Then Preparing Trial Balance
And thereafter preparing financial statements
Following the accounting cycles ensures the accuracy of the Financial Statements and helps reducing the errors.

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How should corrections be made in the general journal?
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Define the term General Journal:
General Journal is the record of all types of business transactions posted in a chronological order that is in the order in which they occurs. It is the first step in the preparation of financial statement. The general ledger sometimes called the diary of business activities.
But sometimes errors are made in the journalizing i.e. in the process of recording transactions in the general journal.
For example:
1. Date is entered wrong.
2. Amount is wrongly entered
3. Party name is mismatched.
List the three are mainly two methods used in the correction of general journal which are:
1. When the journal entry is posted in the ledger:
A correction journal entry is made to rectify the error entry and then it is posted in the ledger. The old general journal entry should not be erased.
2. When the journal entry is not posted in the ledger:
In this case the journal entry should be neatly crossed over and the error is corrected by writing over the correct amount, name or number. The use of eraser is not permitted in the preparation of general journal. It also ensures proper evidence to be maintained with and to clear the audit trail.

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Review the following excerpt taken from the Walmart consolidated balance sheet as of January 31, 2010. Analyze: img What type of source document might be reflected in the journal entry to record the purchase of equipment?
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What is an audit trail? Why is it desirable to have an audit trail?
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The owner of a new business recently questioned the accountant about the value of having both a journal and a ledger. The owner believes that it is a waste of effort to enter data about transactions in two different records. How would you explain the value of having both records?
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Recording transactions in the general journal. The transactions that follow took place at the Lancastor Sports Arena during September 2013. This firm has indoor courts where customers can play tennis for a fee. It also rents equipment and offers tennis lessons. INSTRUCTIONS Record each transaction in the general journal, using the following chart of accounts. Be sure to number the journal page 1 and to write the year at the top of the Date column. Include a description for each entry. img img Analyze: If the company paid a bill for supplies on October 1, what check number would be included in the journal entry description?
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Financial Statements Sherrye Cravens is a new staff accountant for Oxford Beauty Supply. She has asked you to review the financial statements prepared for April to find and correct any errors. Review the income statement and balance sheet that follow and identify the errors Cravens made (she did not prepare a statement of owner's equity). Prepare a corrected income statement and balance sheet, as well as a statement of owner's equity, for Oxford Beauty Supply. img img
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Review the following excerpt taken from the Walmart consolidated balance sheet as of January 31, 2010. Analyze: img If the accounting manager reviewed the Transportation Equipment account in the general ledger, what types of information might be listed there? What ending balance would be reflected at January 31, 2010? Analyze Online: Locate the Web site for Walmart (www.walmartstores.com), which provides an online store for consumers as well as corporate information. Within the Web site, locate the consolidated balance sheet for the current year.
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Journalizing and posting transactions Four transactions for Farm Supply Repair that took place in November 2013 appear below, along with the general ledger accounts used by the company. INSTRUCTIONS Record the transactions in the general journal and post them to the appropriate ledger accounts. Be sure to number the journal page 1 and to write the year at the top of the Date column. img img Analyze: What liabilities does the business owe as of November 30?
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Review the following excerpt taken from the Walmart consolidated balance sheet as of January 31, 2010. Analyze: img What kinds of property, plant, and equipment are listed on the balance sheet?
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Journalizing and posting transactions. Several transactions that occurred during December 2013, the first month of operation for Boley's Accounting Services, follow. The company uses the general ledger accounts listed below. INSTRUCTIONS Record the transactions in the general journal (page 1) and post to the appropriate accounts. img img Analyze: Describe the activity for account 202 during the month.
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Why should management be concerned about the efficiency of a firm's procedures for journalizing and posting transactions?
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In what order are accounts arranged in the general ledger? Why?
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Review the following excerpt taken from the Walmart consolidated balance sheet as of January 31, 2010. Analyze: img What is the balance reported for transportation equipment?
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Recording correcting entries. All the journal entries shown below contain errors. The entries were prepared by an employee of Texas Corporation who does not have an adequate knowledge of accounting. INSTRUCTIONS Examine the journal entries carefully to locate the errors. Provide a brief written description of each error. Assume that Office Equipment and Office Supplies were recorded at the correct values. img Analyze: After the correcting journal entries have been posted, what effect do the corrections have on the reported assets of the company?
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Why should management insist that a firm's accounting system have a strong audit trail?
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What are posting references? Why are they used?
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Review the following excerpt taken from the Walmart consolidated balance sheet as of January 31, 2010. Analyze: img When the accountant for Walmart records a purchase of transportation equipment, what type of account is debited? If Walmart purchases transportation equipment on credit, what account might be credited?
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How might a poor set of recording procedures affect the flow of information to management?
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