Autumn Cove Inc. has $2,010 in the December 1 balance of the accounts receivable account consisting of $880 from Champion Co

Autumn Cove Inc. has $2,010 in the December 1 balance of the accounts receivable account consisting of $880 from Champion Co. and $1,130 from Veritas Co. Transactions related to revenue and cash receipts completed by Autumn Cove Inc. during the month of December 2014 are as follows:


Dec. 3. Issued Invoice No. 622 for services provided to Palace Corp., $2,340.
 5. Received cash from Champion Co., on account, for $880.
 8. Issued Invoice No. 623 for services provided to Sunny Style Inc., $1,690.
12. Received cash from Veritas Co., on account, for $1,130.
18. Issued Invoice No. 624 for services provided to Amex Services Inc., $2,750.
23. Received cash from Palace Corp. for Invoice No. 622.
28. Issued Invoice No. 625 to Veritas Co., on account, for $980.
30. Received cash from Rogers Co. for services provided, $80.

a. Prepare a single-column revenue journal and a cash receipts journal to record these transactions. Use the following column headings for the cash receipts journal: Fees Earned Cr., Accounts Receivable Cr., and Cash Dr. Place a check mark () in the Post. Ref. column to indicate when the accounts receivable subsidiary ledger should be posted.

b. Prepare a listing of the accounts receivable customer balances and verify that the total of the accounts receivable customer balances equals the balance of the accounts receivable controlling account on December 31, 2014.

c. Why does Autumn Cove Inc. use a subsidiary ledger for accounts receivable?


Answer:

a.
REVENUE JOURNAL Page 19
Date
Invoice
No. Account Debited
Post.
Ref.
Accounts Rec. Dr.
Fees Earned Cr.
2014
Dec. 3 622 Palace Corp. √ 2,340
8 623 Sunny Style Inc. √ 1,690
18 624 Amex Services Inc. √ 2,750
28 625 Veritas Co. √ 980
31 Total 7,760
CASH RECEIPTS JOURNAL Page 25
Date
Account
Credited
Post.
Ref.
Fees
Earned
Cr.
Accts.
Rec.
Cr.
Cash
Dr.
2014
Dec. 5 Champion Co. √ 880 880
12 Veritas Co. √ 1,130 1,130
23 Palace Corp. √ 2,340 2,340
30 Fees Earned 80 80
31 Total 80 4,350 4,430
b.
AUTUMN COVE INC.
Accounts Receivable Customer Balances
December 31, 2014
Amex Services Inc. $2,750
Sunny Style Inc. 1,690
Veritas Co. 980
Total accounts receivable $5,420
The total of the customer accounts on December 31, 2014, $5,420, equals the
balance of the accounts receivable controlling account, shown as follows:
Accounts Receivable
Dec. 1 Bal.
31
Dec. 31 Bal.
2,010
7,760
5,420
Dec. 31 4,350

c. The accounts receivable subsidiary ledger is needed to track customer services provided on account and customer collections. Without the subsidiary ledger, it would not be possible for Autumn Cove Inc. to know who owes how much for services rendered. Furthermore, without the subsidiary ledger, it would be impossible to manage collections from individual customers.