Subsidiary ledgers and control accounts, Cost Accounting


B & B Mechanical Repairs is a small, family owned partnership that specialises in the servicing and repair of motor vehicles. The business employs three qualified mechanics, while the partners (owners) spend around half of their time in the office in an administration role, and the other half working on vehicles.

The mechanics repair all makes and models of cars, and order parts from suppliers once a vehicle has been initially inspected. The business could receive as many as 10 deliveries per day of spare parts, each arriving on credit with 30 day terms being offered. Suppliers represent the major car manufacturers including Holden, Ford, Toyota, Mitsubishi, Kia, Subaru etc. At the end of each month, the business receives an invoice from each supplier with the total amount outstanding from the months' purchases. The invoices are always paid in full within the discount period (if offered).

Customers are required to pay by cash, eftpos, direct debit or cheque on collection of their vehicle, as no credit terms are offered. Other typical transactions include payment of rent each week, the cash purchase of kitchen and office supplies, and the quarterly utilities accounts. The employees are paid in cash weekly and the partners usually take cash drawings of between $900 and $1,200 per week, depending on the week's revenue.

At present, the business uses one general journal in conjunction with a general ledger to record all business transactions. The business is registered for GST.


(a) Design templates of special journals that you recommend to be used by B & B Mechanical Repairs based on the information above.

(b) Write a report explaining to the partners how the introduction and use of the special journals you designed in part (a), along with subsidiary ledgers and control accounts, could be used by the business to improve the recording process. Based on the templates you prepared in part (a), you should also explain in detail when and how posting to the ledgers is done. Use specific examples from the business described above. Maximum 500 words.

Posted Date: 2/18/2013 1:33:56 AM | Location : United States

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