Exercise 6.1: Kelly\'s Wholesale Toys had the following debtors as at 1 May 2005

Question

Exercise 6.1: Kelly's Wholesale Toys had the following debtors as at 1 May 2005: ipodi's Toys $400, L.Rendina&Sons; $380 and Toys Galore $1 200. The details of the firm's debtors are recorded as part of the normal general ledger. The followine information relates to the transactions affecting the firm's debtors during May: 2005 May 3 Charged Tripodi's Toys $2 500 for goods delivered: cost of sale $1 280 (Inv. 189) 5 Invoiced H. Franklin $300 for credit sale (Inv. 190): cost of sale $180 8 Received $300 on account from L. Rendina & Sons 10 Issued Invoice no. 191 to B. Dobson for $1 000 (cost price $600) 13 Charged Tripodi's Toys $1 200 for credit sale (Inv. 192): cost price $650 16 Invoiced Northern Trading Company $900: cost of sale $460 (Inv. 193) 20 Received $400 from Tripodi's Toys 22 Sent invoice 194 to Kids Games Pty Ltd $230 (cost price $120) 24 Received $80 from L. Rendina&Sons; 26 Invoiced G.Wayne &Co.; $620 for credit sale (cost price $320) 28 Sent a letter to Northern Trading regarding overdue account 30 Received $300 from H. Franklin a Prepare the credit sales journal for Kelly's Wholesale Toys for the month of May 2005 Prepare the credit sales account and the individual debtors accounts as they the general ledger of Kelly's Wholesale Toys (including the cash receipts data from the transactions). would appear c Would this business benefit by the introduction of a debtors subsidiary ledger? Explain y answer fully

Explanation / Answer

Exercise 6.1 Kelly's Wholesale Toys

a.

b.

c. Kelly's business would benefit from the introduction of a debtors subsidiary ledger. The various benefits would be as under:

1. The detailed information for each debtor can be maintained in the subsidiary ledger including each invoice number, date, amounts due and received, credit terms, etc.

2. It will have better control over its financial information by having a general ledger debtors control account and all details of transactions recorded in the debtors subsidiary ledger. The credit manager can have a better control over receivables from each debtor.

3. Access can be limited to the debtors subsidiary ledger for the credit team without providing access to entire general ledger.

Please post independent questions separately. Thank you.

Credit Sales Journal DATE INVOICE NO. TO WHOM SOLD POST REF. ACCOUNTS
RECEIVABLE
DEBIT SALES
CREDIT COST OF GOODS SOLD DR. INVENTORY CR. 2005 May. 3 189 Tripodi's Toys 2500 2500 1280 May. 5 190 H. Franklin 300 300 180 May. 10 191 B. Dobson 1000 1000 600 May. 13 192 Tripodi's Toys 1200 1200 650 May. 16 193 Northern Trading Company 900 900 460 May. 22 194 Kids Games Pty Ltd 230 230 120 May. 26 G. Wayne & Co. 620 620 320 6750 6750 3610

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