My friend, Wendy Gieger, owns a small retail store that sells candies and nuts.

Question

My friend, Wendy Gieger, owns a small retail store that sells candies and nuts. Geiger acquires her goods from a few select vendors. She generally makes purchase orders by phone an on credit. Sales are primarily for cash. Geiger keeps her own manual accounting system using a general journal and a general ledger. At the end of each buisness day, she records one summary entry for cash sales. Geiger recently began offering items in creative gift package. This has increased sales substantially, and she is now recieving orders from corporate and other clients who order large quantities and prefer to buy on credit. As a result of increased credit transactions in both purchases and sales, keeping the accounting records has become extreemly time consuming. Geiger wants to continue to maintain her own manual system and called me for advise. I need to write a memo to her advising how she might modify her current manual accounting system to accommodate the expanded business activities. Geiger is accustomed to checking her ledger by using a trial balance. My memo should explain the advantages of what I propose and of any other verification techniques I recomend.

Explanation / Answer

Wendy- I am very honored that you would ask my advice on such an important matter. In my opinion, I feel that it would be to your best interest to add subsidiary ledgers and special journals to your general journal and general ledger. Though you are adding more ledgers and journals it will be more specific making it easier to find and put in exactly what you need during the day. I would like to suggest you start by adding a sales journal and a purchase journal. These two journals will target the credit accounts that you are getting in and will help you sort your credit purchases and sales; then possibly a cash receipts journal and a cash disbursement journal for your cash sales (Wild, Shaw & Chiappetta, 2009, p. 272) if you are having trouble following your cash sales in a general journal. On the ledger side of things I would highly suggest an accounts receivable ledger for you’re your stores transaction data of individual customers and an accounts payable ledger for the stores transaction data of individual suppliers (Wild, Shaw & Chiappetta, 2009, p. 273). This will help you take care of those larger clients and stay a little more organized. If you have any questions about any of the special journals or subsidiary ledgers I have mentioned or with setting them up please let me know and I will be happy to help. Have a Great Day, --------- P.S. I forgot to ask before if you were using a paper journal and ledger or if you were using a spread sheet? If you are using a hard copy, I would strongly suggest using the technology around you so that you can speed up your process. If you need some suggestions on what to use just let me know. Have a great day!

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