I. During the first week of an accounting course Student A expressed the opinion that a great deal of time could be saved if a business would record directly in ledger accounts rather than entering transactions first in a journal and then posting the debit and credit amounts from the journal to the ledger. Student B disagreed with this view but added that such a system should not be called double-entry bookkeeping since each transaction would be entered only once. Student C disagreed with both A and B. He argued that the use of a journal and ledger was more efficient than entering transactions directly in ledger accounts. Furthermore, he argued that the meaning of double-entry bookkeeping did not refer to the practice of maintaining both a journal and a ledger. Evaluate the statements made by all three students.
II. Trevor Smith owns and runs a general store. The following transactions took place last week:
Trevor’s cash sales for the week amount to $1,634.
He pays wages for the week $899.
Trevor takes $180 cash from the business for his own private use.
He pays $328 cash for servicing his delivery van.
Trevor sells meat, rolls etc. $65 to the local squash club; the treasurer will pay Trevor next week.
Enter the transactions into either debit or credit side of Trevor’s Smith ledger accounts. Explain your choice.
III. In which ledger would you expect to find the following accounts? Explain your choice.
Account name Purchases Sales General
Ledger ledger ledger
Tamsin; a credit customer
Frank; a supplier to be paid next
month
Returns inwards account
Cash sales account
Rent account
Bank account
Capital account
Credit sales account
Drawings account
Motor expenses account
Purchases account.
CHAPTER III
FINANCIAL STATEMENTS