The sales invoice number is entered so the bookkeeper couldlook up the sales invoice and assist the customer. One benefit ofusing special journals is that one person can work with thisjournal while someone else works with a different specialjournal. Such journals allow a company to record accounting information and generate financial statements.

Trial Balance

If the amount of all theindividual accounts receivable accounts did not add up to the totalin the Accounts Receivable general ledger/control account, it wouldindicate that we made a mistake. The importance of special journals has decreased for larger companies these days. Larger businesses often use computerized accounting systems that bifurcate transactions on their own and update all the sections of the accounting record with a single entry. However, accounting software programs are expensive, and most of the smaller and medium-sized organizations may not be able to buy and maintain them. Such small and medium-sized entities opt to use special journals to organize their business transactions.

Table of Contents

Small organizations with a limited number of transactions can use only a single journal known as the general journal or journal proper. In large organizations where hundreds or even thousands of transactions occur each month, the use of a single journal is not adequate. Such organizations usually maintain many other journals in addition to a general journal. Other names used for these journals are books of original entry and subdivisions of journal. The special journals to general ledger entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of special journals at the end of an accounting period. Such journals allow a company to record accounting informationand generate financial statements.

Importance of special journals:

And the accounts receivable subsidiary ledger for Baker Co.would also show the payment had been posted (Figure7.22). The presence of this journal can make it easier for accountants to record all transactions related to the cash receipt. Furthermore, cash receipt journals have a function to record transactions that occur on a cash basis.

• The use of a reference code in any of the special journals isvery important.
• Special journal accounting helps the company maintain the accuracy of the transactions in an organized form.
• Recording all such transaction directly in general journal would be extremely time consuming and error prone.
• While this is correct accounting methodology, it also can create a cumbersome general journal with which to work and may make finding specific pieces of information very challenging.
• Match each of the transactions in the right column with theappropriate journal from the left column.

To keep track of whom the company owes money to and when payment is due, the entries are posted daily to the accounts payable subsidiary ledger. Accounts Payable in the general ledger becomes a control account just like pay by debit or credit card when you e Accounts Receivable. If we ordered inventory from Jones Mfg. (account number 789) using purchase order #123 and received the bill for $250, this would be recorded in the purchases journal as shown in Figure 7.28.

They do not contain the general journal and instead group related transactions under one journal. Additionally, they provide structured monitoring of all transactions during a given period. It guarantees that the business makes the appropriate moves for such transactions.

Because every credit sales transaction is recorded in the same way, recording all of those transactions in one place simplifies the accounting process. Note there is a single column for both the debit to Accounts Receivable and the credit to Sales, although we need to post to both Accounts Receivable and Sales at the end of each month. There is also a single column for the debit to Cost of Goods Sold and the credit to Merchandise Inventory, though again, we need to post to both of those.

The DR (debit) Other column would be handled a little differently as you need to look to the account column to find out where these individual amounts should be posted. We enter all cash received intothe cash receipts journal, and we enter all cash payments into thecash disbursements journal, sometimes also known as the cashpayments journal. Good internal control dictates the best rule isthat all cash received by a business should be deposited, and allcash paid out for monies owed by the business should be made bycheck. We enter all cash received into the cash receipts journal, and we enter all cash payments into the cash disbursements journal, sometimes also known as the cash payments journal.

Accounts Payable in the general ledgerbecomes a control account just like Accounts Receivable. If weordered inventory from Jones Mfg. (account number 789) usingpurchase order #123 and received the bill for $250, this would berecorded in the purchases journal as shown in Figure 7.28. Most companies have four special journals, but there can be more depending on the business needs.

On the other hand, assets sold in cash are recorded in the cash book and the sales of assets on credit are recorded in the proper journal. Since the sales journal is used exclusively to record credit sales, the last column (i.e., the amount column) represents both a debit to accounts receivable and a credit to sales. Any entry relating to the sale of merchandise for cash is recorded in the cash receipts journal. The information in the sales journal was taken from a copy ofthe sales invoice, which is the source document representing thesale.