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Lesson 08 (printer-friendly version)

INSTRUCTIONS:

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Chapter 1

Introduction

You took a little break from your journal and General Ledger in the last lesson while you learned about various banking
services. In this lesson, you'll return to your journal and General Ledger. You're going to learn how to post the column
totals in the journal to the General Ledger and how to prepare a Schedule of Accounts Payable and Schedule of
Accounts Receivable.

These two schedules are extremely important to Children's Capers. The Schedule of Accounts Receivable shows the
total amount of money owed to Children's Capers at the end of the month. The Schedule of Accounts Payable shows
how much money Children's Capers owes its vendors.

If Children's Capers extends too much credit to its customers, it may not have enough
working cash to meet its obligations. On the other hand, Children's Capers has to
keep a close eye on how much is owed to its vendors. The business doesn't want to
be in debt so much it can't pay the bills when they are due.

Just as individuals keep track of their income and expenses, so must a business,
especially a new company that may not have the dedicated customers that a
longstanding, well-known business would have.

These reports are only two of the many various end of fiscal period reports that will
assist the owners of Children's Capers in making decisions relating to the business in
the coming year.

Chapter 2

Review Transactions

Once again, I will give you a few review transactions to keep your new skills sharp. Please enter these transactions in
your journal:

Transaction #1: December 17, Received cash from daily sales, $1,500.00, plus $75.00 tax, total,
$1,575.00, T17.

Transaction #2: December 17, Purchased merchandise on account from Toys For Less, Inc., $350.00,
P10.

Transaction #3: December 20, Received on account from Richard Johnson, $150.00, R10.

Transaction #4: December 22, Paid Costco Wholesalers on account, $400.00, C33.

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Transaction #5: December 26, Paid cash for office supplies, $250.00, C34.

Transaction #6: December 28, Joan Caldwell, owner, withdrew $250.00 for personal use, C35.

You should now post columns 3 and 4 to the Accounts Receivable Ledger and columns 7 and 8 to the Accounts
Payable Ledger. Remember to post column 8 first, then column 7.

Now, you'll need to post the individual entries in columns 1 and 2 that you just journalized. Be sure to insert the Post
Ref. numbers in both the General Ledger accounts and the journal as you post.

Next, add the column totals of all the columns on page 14 of the journal and make sure the debit totals equal the credit
totals. Double rule the totals if they are in agreement. In the Account Title section, simply put Totals on the line where
your totals appear. Use December 31 as the date, as you are done posting for the month of December.

If your debit and credit totals do not agree, then you need to go back and check each individual transaction. You need
to be certain that you have a debit and a credit for each transaction for the same amount. Your totals should be on the
last line of the journal page.

Once again, the solutions to this lesson are in the Supplementary Material section.

Chapter 3

Posting Totals to the General Ledger

In Chapter 3, you're going to learn how to post the column totals in your journal to the General Ledger. Everything in
columns 1 and 2, General Debit and Credit, has already been posted. You posted those entries in each lesson as you
journalized them. That leaves columns 3-11. These are all special amount columns, so only the total of each column will
be posted to the General Ledger.

So, let's do it. Use December 31 as the date when posting all of the column totals. Column 3 is the Accounts Receivable
Debit column.

Find the Accounts Receivable account in the General Ledger and enter that debit entry. Bring that amount over into the
Debit Balance column. Now, on the next line of that account, make a credit entry for the total of column 4, Accounts
Receivable Credit. This credit is smaller than the debit balance, so subtract it from the debit balance. The difference is
still a debit balance because the debit balance was larger than the credit entry.

Enter 14 as the Post Ref. number in the ledger account, as you're posting from page 14 of the journal. Under the
column total put 1130 which is the account number assigned to Accounts Receivable in the General Ledger. This
account number goes under the total for both columns 3 and 4, as you posted both of those totals to that account.

Next, post the total of column 5, Sales, as a credit in the sales account in the General Ledger. Put the sales account
number, 4100, under the total of column 5 in the journal.

Then, post the total of column 6, Sales Tax Payable as a credit in the Sales Tax Payable account in the ledger. The
Sales Tax Payable account number is 2145, which goes under the total of column 6.

Next are columns 7 and 8, Accounts Payable. You're going to post the total of column 8 first, so that the charges are put
in before the payments. Post the total of column 8 as a credit to Accounts Payable in the General Ledger and bring the
total over to the Credit Balance column. Then, post the debit total from column 7 and a debit on the next line in the
General Ledger account.

The credit balance is larger than the debit entry, so subtract the debit from the credit balance. This will give you the new
credit balance. Don't forget to put the account number for Accounts Payable, 2115, under the column total in the journal.

Now you'll post the total of column 9 to the Purchases account in the General Ledger, account number 5100. Enter the
column total from the journal into the General Ledger account. Bring over the debit entry into the Debit Balance column

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in the ledger. Put the Purchases account number under the total of column 9 in the journal.

Finally, you'll post the column totals from columns 10 and 11, Cash Debit and Credit. Enter the debit first in the Cash
account in the General Ledger. Add the debit entry to the debit balance already showing in the ledger. This will give the
account a higher debit balance.

On the next line in the ledger account, enter the credit total from column 11 in the journal. Subtract this credit entry from
the debit balance and you have a new, lower debit balance in Cash. Put the Cash account number, 1110, under both
the Debit and Credit column totals in the journal.

That's it! One more check and you'll have it. I want you to go through your General Ledger and add every debit balance
together. Then I want you to go through once more and add every credit balance together. These totals must be the
same. If they aren't, you must find the error.

If your journal equals out but your debits and credits in the General Ledger do not, you must check each General
Ledger account for accuracy in addition and subtraction. If everything appears to be in order there, you must check to
be sure you transferred the amounts correctly from the journal to the ledger accounts.

I'm not going to tell you this will only take a minute because in reality it could take more than a few. But the error(s) must
be found before you can move on. Remember, after you have given it your best shot, the solutions to this lesson are in
the Supplementary Material section.

Chapter 4

Schedule of Accounts Payable and Accounts Receivable

Once you have the journal and General Ledger all balanced out, I'm going to have you prepare a Schedule of Accounts
Payable and a Schedule of Accounts Receivable for Children's Capers. There is something quite amazing about how
the totals equal out, but I won't let you in on the surprise until you have finished preparing these schedules.

On one of the forms you printed out (they are both the same form) put Children's Capers on the first line in the heading.
On the second line, put Schedule of Accounts Receivable. On the last line in the heading, put the date, December 31,
200-.

Next, go to your four accounts in the Accounts Receivable Ledger. If a person has a balance, list his name in the wide
column to the left on the schedule form. Enter their balance in the column squared for money amounts. Do this for each
account receivable account that has a balance. On the line following the last entry, write Total Accounts Receivable and
put the total of all the people who owe Children Capers money.

Now for the fun part. Look at the total on the form you just filled out, the Schedule of Accounts Receivable. Go to the
Accounts Receivable account in the General Ledger. The debit balance in that account should be the same number as
the total on your Schedule of Accounts Receivable. Hopefully, it is! How about that?

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If it isn't, you must once again find your error. It might be in figuring the balances in the Accounts Receivable Ledger or
you might have made an error in transferring a number from the journal to the ledger account. You must, however, find
the error before you continue.

For the next step, I want you to do the same thing with your Accounts Payable Ledger. Use the second form you printed
out to make a Schedule of Accounts Payable in the same manner you made your Schedule of Accounts Receivable.
When you're done and have a total of accounts payable, go to the Accounts Payable Ledger account in the General
Ledger. That credit balance must be the same as the total on your Schedule of Accounts Payable. Again, if it is not, you
must find your error.

Chapter 5

Conclusion

Accounts receivable and accounts payable were always my favorite activities in accounting. The manner in which the
balances in the General Ledger equal the total of the two schedules is very satisfying when they equal on the first try.
However, I found it a little frustrating when they did not. I remember times when I've looked for an hour for a one-cent
error. Hardly seems worth the time involved, but that one-cent error must be found or it will carry through your entire
system. I gained great pleasure from finally finding and correcting the error!

In this lesson, once again, you've learned a great deal of information. You've learned how to post journal totals to
Children's Capers General Ledger and how to prepare and prove a Schedule of
Accounts Payable and a Schedule of Accounts Receivable.

I hope you feel excited with your new knowledge and anxious to put it to good use.
You are now ready to move on to learn how to prepare the year-end financial reports
for Children's Capers.

When you're comfortable with the concepts in this lesson, I'd like you to take a short,
multiple-choice quiz.

Supplementary Material

Lesson 8 Forms
/crs/pix/fun/L08-Schedules.pdf
Here are the Schedule of Accounts Payable and Schedule of
Accounts Receivable forms.

Lesson 8 Solutions
/crs/pix/fun/L08-Solutions.pdf
All finished? Click here to check your work against this lesson's
solution forms. You can either print them or check the amounts
online. Unfortunately, some of the wider forms can only appear
sideways, so printing may be your better option. If you don't mind
tilting your head, you'll be able to see what you need to see on the
screen while saving some printer ink and paper!

Note: Only those forms and accounts with new entries in them will
appear in each lesson's solutions. If you're curious about a
transaction in a previous lesson, you'll have to go back to that
lesson's Solutions link.

FAQs

Q: What are Accounts Receivable and Accounts Payable Schedules?

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A: A Schedule of Accounts Receivable shows how much money is owed to your business by
customers. A Schedule of Accounts Payable shows what your business owes by vendor.

Q: Why are account numbers put under the column totals in the Journal?

A: These numbers represent the account number in the General Ledger where the column
total was posted to.

Q: What must be true in the General Ledger to insure that your work is correct?

A: The debit account balances and the credit account balances must be equal.

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