The following transactions occur in July 2017 relating to the business of Joseph

Question

The following transactions occur in July 2017 relating to the business of Joseph Leung (Assume Perpetual System)

Required

a) Prepare a sales journal using the layout shown in the textbook or course materials and record the above transactions with it where appropriate. Post the relevant entries from it into the T-accounts in the subsidiary ledgers and the month-end entries to the relevant T-accounts in the general ledger. (The same account numbers from the textbook or course materials can be used.)
b) Prepare a cash receipts journal using the layout shown in the textbook or course materials replacing ‘Sale Discount’ with ‘Cash Discount or Discount Allowed’. (You can add in additional columns if they are considered necessary.) Record the above transactions with it where appropriate. Post the relevant entries from it into the appropriate T-accounts in the subsidiary ledgers and the month-end entries to the relevant T-accounts in the general ledger. (You can use the same T accounts prepared for part (a) of the question.)
c) Discuss the differences in the special journals between a company using a perpetual inventory systems and one using a periodic inventory system.

July 2 Purchased $100,000 of merchandise on credit from Eva Tsang 3 Sold merchandise costing $10,000 to Jack Liu for $20,000 cash; invoice number 17 9 Sold merchandise costing $20,000 to Robert Chau for $30,000; terms 5/20, n/30; invoice number 18 15 Sold $6,000 of used office equipment to Jay Company for cash 22 Received cash from Robert Chau in full settlement of the amount due from the sale of 9 July 24 Sold merchandise costing $5,000 to Johnny Mak for $4,000; terms n/20; invoice number 19 29 Sold merchandise costing $40,000 to S&T Company for $60,000; terms 6/10, n/30; invoice number 20 31 Received cash from Johnny Mak in full settlement of the amount due from the sale of 24 July

Explanation / Answer

PERPETUAL INVENTORY SYSTEM SALES JOURNAL July Account Inv no. Terms Amount Cost of goods 3 Jack Liu 17 Cash $20,000 $10,000 9 Robert Chau 18 5/20,n/30 $30,000 $20,000 24 Johnny Mark 19 n/20 $4,000 $5,000 29 S&T Company 20 6/10, n/30 $60,000 $40,000 PURCHASE JOURNAL July Account Bill no. Terms Amount 2 Eva T sang credit $100,000 General Journal July Account Title Debit Credit 2 Inventory $100,000 Accounts payable $100,000 3 Cash $20,000 Sales $20,000 Cost of goods sold $10,000 Inventory $10,000 9 Account receivable $30,000 Sales $30,000 Cost of goods sold $20,000 Inventory $20,000 15 Cash $6,000 Office equipment $6,000 22 Cash $28,500 Cash discount $1,500 Accounts receivable $30,000 24 Account receivable $4,000 Sales $4,000 Cost of goods sold $5,000 Inventory $5,000 29 Account receivable $60,000 Sales $60,000 Cost of goods sold $40,000 Inventory $40,000 31 Cash $4,000 Account receivable $4,000 CASH JOURNAL July Account Debit Credit 3 Sales $20,000 15 Office equipment $6,000 22 Account receivable $30,000 22 Cash Discount $1,500 31 Account receivable $4,000 T-ACCOUNTS SALES ACCOUNT Account receivable $94,000 Cash $20,000 Cash discount $1,500 INVENTORY ACCOUNT Debit Credit Account Payable $100,000 Cost of goods sold $75,000 ACCOUNT PAYABLE Debit Credit Inventory $100,000 COST OF GOODS SOLD Debit Credit Inventory $75,000 ACCOUNT RECEIVABLE Sales $94,000 Cash $32,500 Cash discount $1,500 OFFICE EQUIPMENT Debit Credit Cash $6,000 Difference between using Perpetual Inventory and Periodic inventory Perpetual Inventory For Every sales Transaction two sets of entiries are made; 1. Credit Sales and Debit Cash or Account Receivable depeding on whether ir is cash or credit sales 2.Debit Cost of goods sold and credit inventory by the cost of the merchandise For Purchase transaction Inventory is debited and cash or Accounts Payable is credited Periodic Inventory For Sales transaction there is only one entry Credit Sales and Debit Cash or Account Receivable depeding on whether ir is cash or credit sales No entry is made for cost of goods sold For Purchase transaction Ipurchase account is debited and cash or Accounts Payable is credited The cost of goods sold is determined at the end of period after taking physical entry Cost of goods sold=(Purchase+Beginning Inventory )-(Closing Inventory

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