COS OA 58 - Chapter 4: The General Journal and the General Ledger

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Chapter 4: The General Journal and the General LedgerChapter Opener: Thinking CriticallyStudents should recognize that in order to grow, a business must broaden and diversify its product offerings.Caterpillar recognized quickly that no two jobs are alike and by offering a custom solution to their customersfor each distinct job they were able to generate more sales and more revenue.Fast Facts• Approximately half of all Caterpillar sales were to customers outside of the United States, maintainingCaterpillar’s position as a global supplier and leading U.S. exporter.• Caterpillar products and components are manufactured in 50 U.S. facilities and in 65 other locations in23 countries around the globe.• Caterpillar invested nearly $670 million in research and technology in 2003. Worldwide, employeesearned more than 3700 patents since 1997.• In 1963 Caterpillar and Mitsubishi Heavy Industries Ltd. formed one of the first joint ventures in Japan toinclude partial U.S. ownership. Caterpillar Mitsubishi Ltd. started production in 1965 and is now theNo. 2 maker of construction and mining equipment in Japan.Accounting on the Job: Thinking CriticallyStudents’ responses will vary. Issues that would require attention might include:• changes to travel agent commission policies• public earnings conference calls• changes to the corporation’s board of directorsAccounting on the Job: Internet ApplicationStudents will find information on paralegal careers at The National Association of Legal Assistants Web site(www.nala.org). The U.S. Department of Labor, Bureau of Labor Statistics, Web site offers information aboutfire fighting careers at (stats.bls.gov/oco/cg/cg1007.htm) and on correctional officer careers at(stats.bls.gov/oco/ocos156.htm).Managerial Implications: Thinking CriticallyAnswers will vary but may include the following.• Research a payment to a vendor. (Vendor says no payment was received.)• Research outstanding customer account. (Customer says account was paid.)• Research customer billing. (Customer says no invoice was received.)Discussion QuestionsThese questions are designed to check students’ understanding of the new terms, concepts, and procedurespresented in the chapter.1. Groups of accounts.2. Entry that includes more than a single debit and credit—two or more debits and/or credits.3. Helps establish audit trail.4. Record month, day, debited account/amount, credited account/amount, description.5. To record business transactions in chronological order.6. Steps performed to classify, record, and summarize financial data for a business.7. Before entry posted: cross out incorrect item, write correct data above it. After posted: journalize andpost a correcting entry.8. Chain of references; prevents fraud and errors.9. Notations of the page number of the journal from which a figure comes; number of account to which thefigure was posted; to provide cross-references.10. Assets, liabilities, and owner’s equity first, followed by revenue accounts, then expenses. They are inorder of the financial statements.11. Transfer of data from a journal to a ledger.Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 4 䡲 35Price_SM_ch04.qxd 10/26/05 2:39 PM Page 35ExercisesExercise 4.136 䡲 Chapter 4 Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.Debit Credit1. 401 1012. 517 1013. 111 4014. 131 1015. 202 101Debit Credit6. 101 4017. 101 1118. 101 3019. 121 20210. 511 101Exercise 4.2GENERAL JOURNAL Page 1Post. Date Description Ref. Debit Credit2007Sept. 1 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 62,000Marilyn James, Capital . . . . . . . . . . . . . . . . . . . . . . . . 301 62,000Beginning Investment of owner4 Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 8,500Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 8,500Purchased equipment on credit from Den, Inc.Invoice 9823, payable in 30 days16 Automobile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 22,500Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 22,500Purchased an automobile, Check 100120 Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 420Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 420Purchased supplies, Check 100223 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 120Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 120Returned damaged supplies andreceived cash refund30 Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 5,600Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 5,600Paid Den, Inc., on account forInvoice 9823, Check 10032007Sept. 30 Marilyn James, Drawing . . . . . . . . . . . . . . . . . . . . . . . . . 302 2,000Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 2,000Owner withdrew cash for personal use30 Rent Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511 1,200Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 1,200Paid October rent, Check 100430 Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 1,700Fees Income . . . . . . . . . . . . . . . . . . . . . . . . . . . …


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