Principles of financial accounting 12e by needles crosson chapter 06 sup

Summary of the Sales Journal Procedureslide 2 of 2 – Step 3: At the end of the month, sum the Amount column in the sales journal to determine the total credit sales, and post the total t

Powers

Crosson

Principles of

Accounting

12e

Supplement:

Special-Purpose Journals 6

C H A P T E R

Special-Purpose Journals

(slide 1 of 2)

 Special-purpose journals promote

efficiency, economy, and control.

– They greatly reduce the work involved in

entering and posting transactions in the general ledger, since only the total amounts of the

transactions are posted

– Each journal can be assigned to a different

employee, which helps establish good internal control

 Most business transactions fall into one of

four categories Each kind of transaction can

be recorded in a special-purpose journal.

Special-Purpose Journals

(slide 2 of 2)

 The general journal is used to record

transactions, like purchase returns,

sales returns, and adjusting and closing entries, that do not fall into any of

these special categories

– When transactions are posted from the

general journal to the ledger accounts, the

posting abbreviation is J

Sales Journal

 The sales journal is designed to handle all credit sales (Cash sales are recorded

in the cash receipts journal.)

 The sales journal saves time because:

– Only one line is needed to record each

transaction The credit to Sales is understood – No explanations are necessary because the

sales journal records only credit sales.

– Only one amount—the total credit sales—has

to be posted: once as a debit to Accounts Receivable and once as a credit to Sales.

Controlling Accounts and Subsidiary Ledgers

 A controlling account (or control account)

is an account in the general ledger that

maintains the total of the individual account balances in a subsidiary ledger.

 A subsidiary ledger is a ledger separate

from the general ledger that contains a

group of related accounts, such as a list of

customers (accounts receivable subsidiary

ledger).

– The total of the balances in the group of related accounts equals the balance in the corresponding controlling account, such as Accounts Receivable

Summary of the Sales Journal Procedure

(slide 1 of 2)

 Using a sales journal involves the following

steps:

– Step 1: Enter each sales invoice in the sales journal

on a single line Record the date, the customer’s name, the invoice number, and the amount

– Step 2: At the end of each day, post each

individual sale to the customer’s account in the accounts receivable subsidiary ledger Place a check mark (or customer account number) in the Post Ref column of the sales journal In the Post

Ref column of each customer’s account, place an S

and the sales journal page number to indicate the source of the entry

Summary of the Sales Journal Procedure

(slide 2 of 2)

– Step 3: At the end of the month, sum the Amount column in the sales journal to determine the total credit sales, and post the total to the general

ledger accounts (Accounts Receivable and Sales) Place the numbers of the accounts debited and credited beneath the total in the sales journal to indicate that this step has been completed In the general ledger, indicate the source of the entry in the Post Ref column of each account

– Step 4: Verify the accuracy of the posting by

adding the account balances of the accounts receivable subsidiary ledger and comparing the total with the balance of the Accounts Receivable controlling account in the general ledger

Sales Taxes

 Many cities and states require retailers

to collect a sales tax from their

customers and periodically remit the

total collected to the city or state.

– In this case, an additional column is needed

in the sales journal to record the credit to Sales Taxes Payable on credit sales.

Purchases Journal

 The Purchases Journal is used to record

purchases on credit.

– It can take the form of either a single-column

journal or a multicolumn journal In the single-column journal, only credit purchases of

merchandise for resale to customers are recorded

– This kind of transaction is recorded with a debit

to Purchases and a credit to Accounts Payable

– The Accounts Payable account is generally used

as a controlling account

– A separate account for each supplier is kept in an accounts payable subsidiary ledger

Summary of the Purchases Journal Procedure

(slide 1 of 2)

 The procedure for using the purchases journal

is much like that for using the sales journal:

– Step 1: Enter each purchase invoice in the

purchases journal on a single line Record the date, the supplier’s name, the invoice date, the terms (if given), and the amount

– Step 2: At the end of each day, post each

individual purchase to the supplier’s account in the accounts payable subsidiary ledger Place a check mark in the Post Ref column of the purchases

journal Place a P and the page number of the

purchases journal in the Post Ref column of each supplier’s account

Summary of the Purchases Journal Procedure

(slide 2 of 2)

– Step 3: At the end of the month, sum the Amount column in the purchases journal, and post the

total to the general ledger as a debit to Purchases and a credit to Accounts Payable Place the

numbers of the accounts debited and credited beneath the totals in the purchases journal to show that this step has been carried out In the general ledger, indicate the source of the entry in the Post Ref column of each account

– Step 4: Check the accuracy of the posting by

adding the account balances of the accounts payable subsidiary ledger and comparing the total with the balance of the Accounts Payable controlling account in the general ledger

Multicolumn Purchases Journal

 The single-column purchases journal can be

expanded to record credit purchases of items

other than merchandise by adding separate

debit columns for other accounts that are used often.

 The individual transactions in the Accounts

Payable column are posted daily to the accounts payable subsidiary ledger, and the totals of each column in the purchases journal are posted

monthly to the corresponding general ledger

accounts Entries in the Other Accounts column are posted individually to the named accounts.

Cash Receipts Journal

 All transactions involving receipts of cash

are recorded in the cash receipts journal – Although all cash receipts require a debit to

Cash, they differ in that they require a variety of credit entries Thus, the cash receipts journal

must have several columns.

– The Other Accounts column is used to record

credits to accounts not specifically represented

by a column The account numbers are entered

in the Post Ref column, and the amounts are posted daily to the appropriate account in the general ledger The Other Accounts column totals are not posted at the end of the month.

Cash Receipts Journal

 The cash receipts journal has the following debit and credit columns:

– Debit columns

 Cash

debits both to Cash and to some account other than Sales Discounts

– Credit columns

account from customers

Summary of the Cash Receipts

Journal Procedure (slide 1 of 2)

 The procedure for posting the cash receipts

journal follows:

– Step 1: Post the transactions in the Accounts

Receivable column daily to the accounts receivable subsidiary ledger Place a check mark in the Post

Ref column of the cash receipts journal and CR plus

the page number in the Post Ref column of each subsidiary ledger account

– Step 2: Post the debits/credits in the Other Accounts columns to the general ledger accounts Write the account number in the Post Ref column of the cash

receipts journal and CR plus the page number in the

Post Ref column of the general ledger account

Summary of the Cash Receipts

Journal Procedure (slide 2 of 2)

– Step 3: At the end of the month, total the columns in the cash receipts journal The sum of the Debits

column totals must equal the sum of the Credits column totals

– Step 4: Post the Debits column totals to the

corresponding accounts in the general ledger

– Step 5: Post the Credits column totals to the

corresponding accounts in the general ledger

– Steps 6-7: Write the account numbers below each

column in the cash receipts journal and CR plus the

page number in the Post Ref column of each account in the general ledger Place a check mark at the bottom of the Other Accounts column, which was

Cash Payments Journal

 All transactions involving payments of

cash are recorded in the cash payments journal (or cash disbursements journal).

 The cash payments journal includes the

following credit and debit columns:

– Credit columns: Cash, Purchases Discounts,

Other Accounts – Debit columns: Accounts Payable, specific

expense accounts (such as Salary Expense, Advertising Expense, and Rent Expense), Other Accounts

Summary of the Cash Payments

Journal Procedure (slide 1 of 2)

 The procedure for posting the cash

payments journal follows:

– Step 1: Post the transactions in the Accounts

Payable columns daily to the individual accounts in the accounts payable subsidiary ledger Place a check mark in the Post Ref

column of the cash payments journal.

– Step 2: Post the debits/credits in the Other

Accounts debit/credit columns to the general ledger Write the account number in the Post

Ref column of the cash payments journal and

CP plus the page number in the Post Ref

Summary of the Cash Payments

Journal Procedure (slide 2 of 2)

– Step 3: At the end of the month, the columns are

footed and crossfooted That is, the sum of the Credits column totals must equal the sum of the Debits column totals

– Step 4: At the end of the month, post the column

totals for Cash, Purchases Discounts, Accounts Payable, and the expense accounts to their

respective accounts in the general ledger Write the account number below each column in the cash

payments journal and CP plus the page number in

the Post Ref column of each general ledger account Place a check mark under the total of each Other

Accounts column in the cash payments journal to indicate that the postings in that column have been made

General Journal

 Adjusting and closing entries, as well as transactions that do not involve sales, purchases, cash receipts, or cash

payments, are recorded in the general journal.

 When a debit or credit is made to a

controlling account, the entry must be posted twice, once to the controlling

account and once to the individual

account in the subsidiary ledger.