Chapter 7 Specialized Journals and Subsidiary Ledgers

question
As a business grows and its number of guests and suppliers increase, the business operates more efficiently if it sets up _______ accounts in its general ledger for accounts receivable and accounts payable.
answer
control
question
Definition: This type of account records all transactions affecting guest accounts to a single account in the general ledger.
answer
Control Account
question
Definition: This type of ledger can be a ______ ledger of accounts receivable or accounts payable control accounts, and it records transactions for each individual guest.
answer
Subsidiary Ledger
question
The balance of the Accounts Receivable control account in the general ledger must equal the sum of the balances of individual guest accounts in the accounts receivable subsidiary ledger. Likewise for Accounts Payable control account and accounts receivable subsidiary ledger. Explain why this is necessary.
answer
They must equal each other because technically the subsidiary ledger accounts provide the detail for the control account.
question
True or False: Any time a transaction affects a control account, it also affects an account in the subsidiary ledger.
answer
True
question
In the lodging segment of the hospitality industry, Accounts Receivable - Trade consists of accounts receivable for guests and non-guests, kept in two separate ledgers. What are the two subsidiary ledger related here?
answer
Guest ledger and city ledger
question
The ______ ledger consists of accounts for guests currently staying in the lodging facility.
answer
guest
question
The ______ ledger consists of accounts for non-current guests and local businesses.
answer
city
question
Advantages of using specialized journals include what two things?
answer
Increased efficiency and improvements in internal control
question
What are the two increased efficiencies that specialized journals result in?
answer
1) Time saved in recording transactions because no explanation is required 2) Time saved in posting to the ledger accounts because only balances are posted rather than individual transactions
question
What are the two safeguards that improve internal control as a result of using specialized journals?
answer
1) The division of duties prevents one employee from handling transactions beginning to end 2) There is less potential for errors since there are less transactions in the general ledger
question
What are the 5 most common specialized journals?
answer
1) Sales journal 2) Cash receipts journal 3) Purchases journal 4) Cash disbursements journal 5) Payroll journal
question
What does the sales journal record?
answer
The charge of sales aka sales on account
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What does the cash receipts journal record?
answer
All cash transactions from customers
question
What does the purchases journal record?
answer
Purchases on account (purchases your company made for resale is an example)
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What does the cash disbursement journal record?
answer
All transactions involving the payment of cash to other people (checks) except for payroll
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What does the payroll journal record?
answer
Employee paychecks
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Where are the transactions that do not fit in a specialized journal recorded? What is an example?
answer
In the general journal. An example is stock.
question
After amounts from the specialized ledger have been posted at the end of the month, a trial balance of _______ ledger accounts is prepared to prove the equality of debits and credits.
answer
general ledger
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question
As a business grows and its number of guests and suppliers increase, the business operates more efficiently if it sets up _______ accounts in its general ledger for accounts receivable and accounts payable.
answer
control
question
Definition: This type of account records all transactions affecting guest accounts to a single account in the general ledger.
answer
Control Account
question
Definition: This type of ledger can be a ______ ledger of accounts receivable or accounts payable control accounts, and it records transactions for each individual guest.
answer
Subsidiary Ledger
question
The balance of the Accounts Receivable control account in the general ledger must equal the sum of the balances of individual guest accounts in the accounts receivable subsidiary ledger. Likewise for Accounts Payable control account and accounts receivable subsidiary ledger. Explain why this is necessary.
answer
They must equal each other because technically the subsidiary ledger accounts provide the detail for the control account.
question
True or False: Any time a transaction affects a control account, it also affects an account in the subsidiary ledger.
answer
True
question
In the lodging segment of the hospitality industry, Accounts Receivable - Trade consists of accounts receivable for guests and non-guests, kept in two separate ledgers. What are the two subsidiary ledger related here?
answer
Guest ledger and city ledger
question
The ______ ledger consists of accounts for guests currently staying in the lodging facility.
answer
guest
question
The ______ ledger consists of accounts for non-current guests and local businesses.
answer
city
question
Advantages of using specialized journals include what two things?
answer
Increased efficiency and improvements in internal control
question
What are the two increased efficiencies that specialized journals result in?
answer
1) Time saved in recording transactions because no explanation is required 2) Time saved in posting to the ledger accounts because only balances are posted rather than individual transactions
question
What are the two safeguards that improve internal control as a result of using specialized journals?
answer
1) The division of duties prevents one employee from handling transactions beginning to end 2) There is less potential for errors since there are less transactions in the general ledger
question
What are the 5 most common specialized journals?
answer
1) Sales journal 2) Cash receipts journal 3) Purchases journal 4) Cash disbursements journal 5) Payroll journal
question
What does the sales journal record?
answer
The charge of sales aka sales on account
question
What does the cash receipts journal record?
answer
All cash transactions from customers
question
What does the purchases journal record?
answer
Purchases on account (purchases your company made for resale is an example)
question
What does the cash disbursement journal record?
answer
All transactions involving the payment of cash to other people (checks) except for payroll
question
What does the payroll journal record?
answer
Employee paychecks
question
Where are the transactions that do not fit in a specialized journal recorded? What is an example?
answer
In the general journal. An example is stock.
question
After amounts from the specialized ledger have been posted at the end of the month, a trial balance of _______ ledger accounts is prepared to prove the equality of debits and credits.
answer
general ledger