BFAR CHAPTER 9 CISCUSSION QUESTIONS

When special journals are used, would there still be a need for a general journal?

When special journals are used, the general journal is maintained for adjusting, closing, and reversing entries; and for recording transactions that do not fit in other special journals. Examples of the latter include the recording of purchases returns and allowances, and sale returns and allowances.

Describe the relationship between a control account and the subsidiary account.

Control account in the general ledger is used to manage hundreds of customers' accounts, and individual customer accounts are recorded in a SUBSIDIARY ACCOUNT. Under this approach, the general ledger is kept to a manageable size, and a detailed record of transactions with individual customers exists in the subsidiary ledger. It is a controlling account in the sense that its balance should equal the total of the individual account balances in the subsidiary ledger.

Name the source documents which serve as the basis for recording transactions in the special journals.

For Sales journal is the sales invoice. Cash receipts are evidenced by source documents like prenumbered OFFICIAL RECEIPTS (OR), CASH REGISTER TAPES (CRT) or CASH SLIPS, and BANK CREDIT MEMORANDUM (CM). For Purchases Journal the primary source document used as the basis for the entries in the journal is the Receiving Report (RR). For Cash Disbursements is the CHECK.

What is a subsidiary ledger? What are the advantages of using subsidiary ledgers?

Individual customer accounts are the subsidiary accounts. The advantage of using a subsidiary ledger is, that it lessens the burden of the entities that maintains accounts with numerous customers and creditors.

Using the voucher system, what purposes do the voucher register and check register serve?

The Voucher Register takes the place of purchase journal and provides a record of ALL AUTHORIZED CHECK PAYMENTS and APPROVED VOUCHERS are entered in the VOUCHER REGISTER in NUMERICAL SEQUENCE, while the Check register is a record of ALL CHECK PAYMENTS and CHECKS are issued only IN PAYMENT of APPROVED and RECORDED VOUCHERS.

What are the verification procedures performed on the voucher before approval?

1. Comparison of PRRR POI for agreement of qualities, prices, types of goods, and terms. 2. REVIEW of EXTENSIONS and FOOTINGS. 3. APPROVAL of ACCOUNT DISTRIBUTION. (i.e. the general ledger accounts to be debited).

Cite the advantages in using the special journals.

>Their use permits division of labor >Recording step cycle can be divided among several persons >Reduces recording time >Need no routine explanations for each entry >Account titles need not be repeated unlike in the general journal >The time saved in posting from the journals to the ledgers.

Explain the concept of the voucher system.

Most entities control purchases and cash disbursements by formalizing the process of verification and approval of payments using a method known as the VOUCHER SYSTEM. Under this system, checks may be drawn only upon a written authorization in the form of a voucher approved by responsible officials. The system consists of VOUCHERS, VOUCHER REGISTER, UNPAID VOUCHER FILE, CHECK REGISTER, and PAID VOUCHER FILE. The VOUCHER REGISTER takes the place of the PURCHASES JOURNAL while the CHECK REGISTER substitutes the CASH DISBURSEMENTS JOURNAL.

When are postings normally made to the subsidiary accounts and the general ledger control accounts?

The sum of the individual balances in the accounts receivable subsidiary ledger must EQUAL the balance in the accounts receivable CONTROL ACCOUNT in the general ledger. For every amount posted to the accounts receivable control account, an EQUAL AMOUNT must be posted to one or more of the customers accounts in the accounts receivable subsidiary ledger. (1) Transactions to individual accounts are generally posted daily to the subsidiary ledger. (2) In contrast, postings to the control accounts are usually made in total at the end of the month

What are special journals? Enumerate the four special journals and the specific transactions recorded in each journal.

These are journals of original entry other than the general journal that are designed for recording specific types of transactions of a similar nature. Most entities use the SALES JOURNAL records the sales of merchandise on account, CASH RECEIPTS are receipts of cash, PURCHASES JOURNAL are credit purchases of merchandise and other items, CASH DISBURSEMENTS JOURNAL are payment of cash , AND GENERAL JOURNAL are entries that do not fit in the OTHER JOURNALS. (CRPS GJCD).