E7-1 Donahue Company uses both special journals and a general journal as describ

Question

E7-1 Donahue Company uses both special journals and a general journal as described in this chapter. On June 30, after all monthly postings had been completed, the Accounts Receivable control account in the general ledger had a debit balance of $320,000; the Accounts Payable control account had a credit balance of $77,000. The July transactions recorded in the special journals are summarized below. No entries affecting accounts receivable and accounts payable were recorded in the general journal for July. Sales Journal Total sales- $161,400 Purchases Journal Total purchases- $56,400 Cash Receipts Journal Accounts receivable column total- $131,000 Cash Payments Journal Accounts payable column total- $47,500 Instructions What is the balance of the Accounts Receivable control account after the monthly postings on July 31? $ What is the balance of the Accounts Payable control account after the monthly postings on July 31? $ To what account(s) is the column total of $161,400 in the sales journal posted? Credit sales and debit accounts receivable in the general ledgerCredit accounts receivable and debit sales in the general ledgerCredit cash and debit sales in the general ledgerCredit sales and debit cash in the general ledger To what account(s) is the accounts receivable column total of $131,000 in the cash receipts journal posted? Credit accounts receivable in the general ledgerDebit accounts receivable in the general ledgerCredit cash in the general ledgerDebit cash in the general ledger Correct. Incorrect. $350,400. Beginning balance of $320,000 plus $161,400 debit from sales journal less $131,000 credit from cash receipts journal. $85,900. Beginning balance of $77,000 plus $56,400 credit from purchases journal less $47,500 debit from cash payments journal. The column total of $161,400 in the sales journal would be posted to the credit side of the Sales account and the debit side of the Accounts Receivable account in the general ledger. The accounts receivable column total of $131,000 in the cash receipts journal would be posted to the credit side of the Accounts Receivable account in the general ledger.

Explanation / Answer

1. What is the balance of the Accounts Receivable control account after the monthly postings on July 31?
$350,400.00 Debit

2. What is the balance of the Accounts Payable control account after the monthly postings on July 31?
$85,900.00 Credit

3. To what account(s) is the column total of $161,400 in the sales journal posted?

The entry for total sales is :
Dr Accounts receivable
Cr Sales

However in actual practice, we don't post the totals, we post the individual sales invoices that make up the total. This gives us the most accurate posting against individual debtor accounts rather than just one lump sum total.

In addition, in most accounting systems, when you post individual items into the subsidiary ledger, the total balances in the control account are automatically updated.

So my answer would be (c) because we don't post the total, we post the individual invoices that make up the total.


4. To what account(s) is the accounts receivable column total of $131,000 in the cash receipts journal posted?

Cash received from debtors is posted as:
Dr Cash
Cr Accounts receivable

Again, the individual receipts from debtors should be offset against their individual balances.

So my answer for this would be (b) because we post the individual amounts that make up the total.

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