Question

Chloe has done the accounting through August 16, the first sixteen days of business for her company. She has given you her trial balance as of August 16, 2016 below.

Chloe’s Cleaning Services

UNADJUSTED TRIAL BALANCE

August 16, 2016

	ACCOUNT TITLE	DEBIT	CREDIT
1	Cash	7,810.00
2	Accounts Receivable	4,575.00
3	Supplies	3,200.00
4	Equipment	7,500.00
5	Accumulated Depreciation-Equipment
6	Accounts Payable		3,450.00
7	Wages Payable		360.00
8	Chloe Sanderson, Capital		20,000.00
9	Chloe Sanderson, Drawing
10	Income Summary
11	Fees Earned		5,500.00
12	Wages Expense	3,600.00
13	Insurance Expense	100.00
14	Supplies Expense	1,300.00
15	Repairs Expense	250.00
16	Advertising Expense	550.00
17	Utilities Expense	350.00
18	Depreciation Expense-Equipment
19	Miscellaneous Expense	75.00
20	Totals	29,310.00	29,310.00

Chloe Sanderson, a friend of yours from business school, decided to be her own boss and start a business cleaning homes and offices after graduation. Although she was a general business major in college, she always enjoyed accounting; but she’s a little uncertain about what type of accounting system might be best for her fledgling business. She has already hired two employees to work for her, so she would like your help as soon as possible to set things up correctly.

Chloe already has three clients and two vendors, so she’d like to use two subsidiary ledgers: one for accounts receivable and one for accounts payable.

In addition, since would like to streamline her accounting by using four special journals she recalls from business school: a revenue journal, cash receipts journal, purchases journal, and cash payments journal.

CHART OF ACCOUNTS
Chloe’s Cleaning Services
General Ledger
ASSETS 11 Cash 12 Accounts Receivable 13 Supplies 16 Equipment 17 Accumulated Depreciation-Equipment LIABILITIES 21 Accounts Payable 23 Wages Payable EQUITY 31 Chloe Sanderson, Capital 32 Chloe Sanderson, Drawing 33 Income Summary	REVENUE 41 Fees Earned EXPENSES 51 Wages Expense 52 Insurance Expense 53 Supplies Expense 54 Repairs Expense 55 Advertising Expense 56 Utilities Expense 57 Depreciation Expense-Equipment 59 Miscellaneous Expense

Using what she remembers from business school, Chloe has prepared a list of accounting tasks for her business, and would like you to review it.

Determine whether each item should be on a given list. If so, select “Correct.” If not, select “Error,” choosing the correct list for the item.

On a Daily Basis
Enter cash receipts in the Cash Receipts Journal	Correct: Should be entered on a daily basis
Enter invoices in the Revenue Journal
Post the total of the Cash Cr. column of the Cash Payments Journal to the cash general ledger account Cr. column
Post the total of the Accounts Receivable Cr. column of the Cash Receipts Journal to the accounts receivable general ledger account Cr. column
Post the total of the Accounts Receivable Dr. column of the Revenue Journal to the accounts receivable general ledger account Dr. column

On a Regular Basis
Post Revenue Journal to Accounts Receivable Subsidiary Ledger customer accounts
Post Purchases Journal to Accounts Payable Subsidiary Ledger creditor accounts

At the End of the Month
Enter cash payments in the Cash Payments Journal
Post the total of the Cash Dr. column of the Cash Receipts Journal to the cash general ledger account Dr. column
Enter purchases on account in the Purchases Journal
Post the total of the Accounts Payable Cr. column of the Purchases Journal to the accounts payable general ledger Cr. column

Chloe has prepared the table below, showing the balances as of August 16 for her Accounts Receivable Subsidiary Ledger and Accounts Payable Subsidiary Ledger.

Accounts Receivable Subsidiary Ledger Balances
Customer Name	Balance as of August 16
Central Medical Offices, Inc.	$2,500
Functional Fitness Company	$800
Omega Multiplex Theater	$1,275

Accounts Payable Subsidiary Ledger Balances
Vendor Name	Balance as of August 16
Cleaning Supplies Warehouse	$2,850
Sudsy’s Laundry	$600

You’ve received a list of the remaining August transactions from Chloe.

Review the transactions, and then complete the table to give Chloe instructions on how to enter the transactions in her accounting system, using the following abbreviations. The transactions should be entered without considering end-of-month posting of totals, adjusting entries, or closing entries..

Subsidiary Ledger/Special Journal Name	Abbreviation for Table
General Journal	GJ
Revenue Journal	R
Cash Receipts Journal	CR
Purchases Journal	P
Cash Payments Journal	CP
General Ledger	GL
Accounts Receivable Subsidiary Ledger	AR
Accounts Payable Subsidiary Ledger	AP

Month	Date	Amount	Transaction	Journalize	Post to Ledger
Aug.	17	$1,500	Issued Invoice No. 405 to Functional Fitness Company
Aug.	19	$550	Paid Invoice No. 22 from Sudsy’s Laundry	CP
Aug.	22	$1,700	Ordered supplies from Cleaning Supplies Warehouse and received invoice
Aug.	23	$2,000	Received payment on account from Central Medical Offices, Inc.
Aug.	31	$3,600	Paid wages to employees Now that the remaining August transactions have been entered, Chloe feels confident enough to complete the end-of-month totals and posting. Help Chloe finish her accounting for the month by calculating the amounts below. Account Balance as of August 31, 2016 Cash Accounts Receivable Accounts Payable Accounts Receivable Subsidiary Ledger for Central Medical Offices, Inc. Accounts Receivable Subsidiary Ledger for Functional Fitness Company Accounts Receivable Subsidiary Ledger for Omega Multiplex Theater Accounts Payable Subsidiary Ledger for Cleaning Supplies Warehouse Accounts Payable Subsidiary Ledger for Sudsy’s Laundry Wages Expense

Answer 1

			On a Daily Basis
			Enter cash receipts in the Cash Receipts Journal	Correct: Should be entered on a daily basis
			Enter invoices in the Revenue Journal	Correct: Should be entered on a daily basis
			Post the total of the Cash Cr. column of the Cash Payments Journal to the cash general ledger account Cr. column	Error : at the end of the month
			Post the total of the Accounts Receivable Cr. column of the Cash Receipts Journal to the accounts receivable general ledger account Cr. column	Error : at the end of the month
			Post the total of the Accounts Receivable Dr. column of the Revenue Journal to the accounts receivable general ledger account Dr. column	Error : at the end of the month
			On a Regular Basis
			Post Revenue Journal to Accounts Receivable Subsidiary Ledger customer accounts	Correct:
			Post Purchases Journal to Accounts Payable Subsidiary Ledger creditor accounts	Correct:
			At the End of the Month
			Enter cash payments in the Cash Payments Journal	ERROR:on a daily basis
			Post the total of the Cash Dr. column of the Cash Receipts Journal to the cash general ledger account Dr. column	Correct:
			Enter purchases on account in the Purchases Journal	error : on a daily basis
			Post the total of the Accounts Payable Cr. column of the Purchases Journal to the accounts payable general ledger Cr. c	Correct:
Month	Date	Amount	Transaction	Journalize	Post to Ledger
Aug.	17	$1,500	Issued Invoice No. 405 to Functional Fitness Company	R	AR
Aug.	19	$550	Paid Invoice No. 22 from Sudsy’s Laundry	CP	GL
Aug.	22	$1,700	Ordered supplies from Cleaning Supplies Warehouse and received invoice	P	AP
Aug.	23	$2,000	Received payment on account from Central Medical Offices, Inc.	CR	GL
Aug.	31	$3,600	Paid wages to employees	CP	GL
			Account	Balance as of August 31, 2016
			Cash	3660
			Accounts Receivable	6075
			Accounts Payable	4600
			Accounts Receivable Subsidiary Ledger for Central Medical Offices, Inc.	500
			Accounts Receivable Subsidiary Ledger for Functional Fitness Company	2300
			Accounts Receivable Subsidiary Ledger for Omega Multiplex Theater	1275
			Accounts Payable Subsidiary Ledger for Cleaning Supplies Warehouse	4550
			Accounts Payable Subsidiary Ledger for Sudsy’s Laundry	50
			Wages Expense	0