Journal, Ledger, and Trial Balance

Q3.1. Why is documentary evidence essential to the accounting process?
Q3.2. What is the purpose of a chart of accounts? What factors influence
the design of a hospital’s chart of accounts?

Q3.3. Distinguish between a chart of accounts and a ledger.
Q3.4. How does a chart of accounts differ from a trial balance?
Q3.5. Why are numerical codes assigned to the accounts in a chart of
accounts? Are these codes identical in all hospitals?
Q3.6. Define each of the following terms: (1) journal, (2) journalizing,
and (3) journal entry.
Q3.7. What are the five essential elements of a journal entry?
Q3.8. In recording cash receipt transactions in the journal, debits are
made to cash. What types of accounts generally would be credited?
Q3.9. In recording cash disbursement transactions in the journal, credits
are made to cash. What types of accounts generally would be debited?
Q3.10. What is the purpose of posting journal entries to ledger accounts?
Q3.11. What are the five essential elements of a posting to a ledger account?
Q3.12. Distinguish between general and subsidiary ledgers. Give two
examples of a subsidiary ledger.
Q3.13. What is the purpose of a trial balance?
Q3.14. “If a trial balance indicates an equality of debit and credit balances,
this indicates that the journal and ledger are free of errors.” Do you
agree or disagree? Explain your answer

Q3.15. “The ledger contains a separate account for each account in the
hospital’s chart of accounts. That is, if the chart of accounts
contains 150 accounts, there will be 150 accounts in the ledger.”
Do you agree or disagree? Explain your answer.
Q3.16. In what sequence are accounts listed in the ledger? In a trial balance?

Exercises
E3.1. Select the best answer for each of the following five multiple-choice
questions.
1. The process of recording transactions in a journal is called
a. Journalizing,
b. Posting,
c. Preparation of a trial balance, or
d. Closing the books.
2. The process of transferring recorded information in the journal
to the ledger is called
a. Journalizing,
b. Posting,
c. Accumulating, or
d. Reporting.
3. A chart of accounts is
a. A listing of the accounts of a hospital with the account
balances at the beginning of the fiscal year,
b. A listing of the accounts of a hospital with the account
balances at the end of the fiscal year,
c. A listing of the accounts that will be used in recording and
classifying the transactions of a hospital, or
d. A diagram indicating the organizational structure of the hospital.
4. A trial balance is
a. A listing of the accounts of a hospital with the account
balances at a specified date;
b. An accounting form that presents only the revenues and
expenses of the hospital for a given period;
c. An accounting form that presents only the assets, liabilities,
and net assets of a hospital at a given point in time; or
d. The balance of a particular ledger account the first time you
attempt to compute it.
5. An accounting record that presents the transactions of the
hospital in chronological order is
a. A journal,
b. A ledger,
c. A trial balance, or
d. A statement of operations and a balance sheet.

E3.2. Compass Hospital provides you with the following information:
Accounts receivable, December 31, 20X1 $ 150,000
Accounts receivable, December 31, 20X2 175,000
Collections on patients’ accounts during 20X2 825,000
Required: What was the amount of charges to patients for services
rendered to them in 20X2?

E3.3. Catspaw Hospital provides you with the following information:
Accounts payable, December 31, 20X2 $ 45,000
Purchases of supplies on account during 20X2 316,000
Payments on accounts payable during 20X2 301,000
Required: What was the balance of accounts payable at
December 31, 20X1?

E3.4. Contrail Hospital provides you with the following information:
Inventory, December 31, 20X1 $ 57,000
Inventory, December 31, 20X2 60,000
Cost of supplies purchased during 20X2 437,000
Required: What was the cost of supplies used during 20X2?

E3.5. Convex Hospital provides you with the following information:
Cost of supplies used during 20X2 $855,000
Accounts payable, December 31, 20X1 200,000
Accounts payable, December 31, 20X2 246,000
Inventory, December 31, 20X1 191,000
Inventory, December 31, 20X2 100,000
Required: What was the total amount paid on accounts payable
during 20X2?

P3.1.

Cupfull Hospital completed the following transactions during the
month of October 20X1:
1. New equipment was purchased for $16,000 cash.

2. Supplies were purchased on account for $36,400.
3. Supplies that had cost $31,200 were issued from inventory
for use in hospital activities.
4. Payments on accounts payable were $34,700.
5. Services rendered to patients during the month were billed
as follows:
Routine services $ 84,300
Ancillary services 47,900
Total $ 132,200
6. Collections on patients’ accounts totaled $105,750.
7. Other revenues collected in cash amounted to $13,600.
8. Operating expenses were paid as follows:
Salaries and wages $ 82,400
Utilities 8,700
Insurance 2,900
Repairs 1,600
Other expenses 7,300
Total $ 102,900
9. A short-term, 9 percent loan of $15,000 was obtained from a
local bank (disregard interest).
Required: Using the chart of accounts provided in Figure 3.1, prepare, in good form, general journal entries for each of the preceding
transactions.

P3.2. Capstone Hospital began its corporate existence on January 1, 20X1.
During the ensuing year, it completed the following transactions:
1. The hospital received initial capital of $250,000 from a fundraising committee established by the citizens of Capstone. This
money was deposited in a bank checking account opened in the
name of Capstone Hospital.
2. The hospital issued $150,000 of 6 percent, ten-year bonds at face
value. Interest on these bonds is payable annually on December 31.
3. Plant assets were purchased for cash, as follows:
Land $ 35,000
Buildings 200,000
Equipment 125,000
Total $360,000
4. Purchases of supplies on account totaled $37,500.
5. Supplies that had cost $32,000 were issued from inventory for use in hospital activities.
6.Services were billed to patients as follows:
Routine services $ 91,000
Ancillary services 56,700
Total $147,700
7.Cash collections on patients’ accounts amounted to $121,600.
8.Payments on accounts payable totaled $24,900.
9.Other revenues received in cash amounted to $9,350.
10.Payments of operating expenses were as follows:
Salaries and wages $ 79,250
Utilities 11,600
Insurance 4,200
Repairs 3,100
Other expenses 2,300
Total $100,450
11.A short-term, 12 percent loan of $20,000 was obtained from a
local bank.
12.On December 31, the following expense was paid:
Interest on bonds $ 9,000
Interest on bank loan 600
Total $ 9,600
Required: Using chart of accounts provided in Figure 3.1, (1) journalize the 20X1 transactions, (2) post the transaction entries to the
general ledger, (3) prepare a trial balance at December 31, 20X1,
(4) prepare a statement of operations for 20X1, and (5) prepare a
balance sheet at December 31, 20X1.

P3.3. Cocktail Hospital’s trial balance at January 1, 20X1, includes the
following accounts:
Cash $ 10,500
Accounts receivable 24,800
Inventory 5,700
Land 19,000
Buildings 73,000
Equipment 27,000
Accounts payable $ 6,600
Short-term notes and loans
payable—banks 15,000
Bonds payable 60,000
Hospital net assets 78,400
$160,000 $160,000

The hospital completed the following transactions during the
month ended January 31, 20X1:
1. Purchases of supplies on account were $4,900.
2. Supplies that had cost $5,200 were issued from inventory for
use in hospital activities.
3. Services billed to patients were as follows:
Routine services $ 40,800
Ancillary services 31,600
Total $ 72,400
4. Cash collections on patients’ accounts were $59,100.
5. Payments on accounts payable totaled $5,070.
6. Other revenues received in cash amounted to $7,300.
7. Operating expenses included these payments:
Salaries and wages $ 53,200
Utilities 1,900
Insurance 1,200
Repairs 1,100
Other expenses 600
Total $ 58,000
8. Payment of interest on bonds and bank loan totaled $870.
Required: Using the chart of accounts provided in Figure 3.1, (1)
enter the January 1, 20X1, balances in ledger accounts, (2) journalize the January 20X1 transactions, (3) post the transaction
entries to the ledger accounts, (4) prepare a trial balance at January
31, 20X1, (5) prepare a statement of operations for January 20X1,
and (6) prepare a balance sheet at January 31, 20X1.
P3.4. Copper Hospital’s trial balance at November 30, 20X2, which
includes data accumulated since December 31, 20X1, is as follows:
Cash $ 14,700
Accounts receivable 34,900
Inventory 7,400
Land 30,000
Buildings 200,000
Equipment 105,000
Accounts payable $ 11,200
Notes payable 25,000
Bonds payable 75,000
Hospital net assets 274,300

Routine services revenue 85,800
Ancillary services revenue 31,300
Other operating revenues 9,400
Salaries and wages expense 95,000
Supplies expense 13,000
Utilities expense 3,600
Insurance expense 1,200
Repairs expense 1,700
Interest expense 4,500
Other expenses 1,000
$512,000 $512,000
The hospital completed the following transactions during the
month of December 20X2:
1. Purchases of supplies on account amounted to $2,300.
2. Supplies that had cost $1,100 were issued from inventory for
use in hospital activities.
3. Payments on accounts payable totaled $3,060.
4. Services billed to patients were as follows:
Routine services $ 9,300
Ancillary services 6,070
Total $ 15,370
5. Cash collections on patients’ accounts totaled $16,140.
6. Other revenues received in cash totaled $980.
7. Payments of operating expenses included the following:
Salaries and wages $ 9,100
Utilities 300
Insurance 150
Repairs 240
Other expenses 80
Total $ 9,870
8. Payment of interest on bonds and bank loan amounted to $850.
Required: Using the chart of accounts provided in Figure 3.1, (1)
enter the November 30, 20X1, balances in ledger accounts, (2) journalize the December 20X1 transactions, (3) post the transaction
entries to the ledger accounts, (4) prepare a trial balance at December 31, 20X1, (5) prepare a statement of operations for the year
ended December 31, 20X1, and (6) prepare a balance sheet at
December 31, 20X1.