Slide title

Chapter 7

Special Journals and

Subsidiary Ledgers

1. Explain the purpose of special journals

2. Explain the purpose of control accounts and

subsidiary ledgers

3. Journalize transactions using special journals

– Sales journal

– Cash receipts journal

– Purchases journal

– Cash payments journal

Learning objectives

4. Post transactions from the special journals to

general and subsidiary ledger accounts

5. Prepare schedules of accounts receivable and

payable

6. Explain how special journals affect the general

journal

Learning objectives

Explain the purpose of

special journals

Learning objective 1

Special journal:

▪ A record in which similar transactions are

journalized

▪ Exact types and format used varies from business

to business

Advantages:

▪ More efficient way to journalize transactions

– Each transaction entered on one line

– Time saved by posting column totals

The purpose of special journals

Explain the purpose of

control accounts and

subsidiary ledgers

Learning objective 2

Control account:

▪ An account in the general ledger that summarizes

the information contained in its related subsidiary

ledger

Subsidiary ledger:

▪ An accounting record that stores the details

summarized in the related control account

▪ Not part of the general ledger

Control accounts and subsidiary ledgers

Examples:

Control accounts and subsidiary ledgers

Control account Subsidiary ledger

Accounts Receivable Accounts Receivable Subsidiary Ledger

Accounts Payable Accounts Payable Subsidiary Ledger

Inventory Inventory Cards

▪ At the end of the accounting period:

Control accounts and subsidiary ledgers

Control Account:

Ending Balance $600 =

Subsidiary Ledger:

Account 1 100

Account 2 200

Account 3 300

Total $600

Advantages:

▪ Minimizes detail in the general ledger accounts

▪ Provides up-to-date details on the balances of each

subsidiary account

▪ Internal control

– Assist in detecting and preventing errors in the accounts

– Allows separation of duties

Control accounts and subsidiary ledgers

Journalize transactions using

special journals

Sales journal

Cash receipts journal

Purchases journal

Cash payments journal

Learning objective 3

Journal: Transaction type:

Sales journal Credit sales of inventory

Cash receipts journal Cash inflows to the business

Purchases journal Credit purchases (including inventory)

Cash payments journal Cash outflows from the business

General journal Any transaction that is not able to be

recorded in a special journal, including:

• Correcting entries

• Adjusting entries

• Closing entries

Types of journals

▪ Used to record sales of inventory on credit

▪ Perpetual inventory system – last two columns

used for each sale

Sales journal

▪ Post entries to customers’ accounts in the

accounts receivable subsidiary ledger daily

Sales journal

▪ Post totals to all relevant general ledger accounts

at the end of the accounting period

Sales journal

▪ Used to record transactions involving a receipt of

cash

Cash receipts journal

▪ Post entries to customers’ accounts in the

accounts receivable subsidiary ledger daily

▪

Post to other accounts in the general ledger daily

Cash receipts journal

▪ Post totals to all relevant general ledger accounts

at the end of the accounting period

Cash receipts journal

▪ Used to record credit purchases

Purchases journal

▪ Post entries to suppliers’ accounts in the accounts

payable subsidiary ledger daily

▪

Post to other accounts in the general ledger daily

Purchases journal

▪ Post totals to all relevant general ledger accounts

at the end of the accounting period

Purchases journal

▪ Used to record transactions involving a payment of

cash

Cash payments journal

▪ Post to suppliers’ accounts in the accounts

payable subsidiary ledger daily

▪

Post to other accounts in the general ledger daily

Cash payments journal

▪ Post totals to all relevant general ledger accounts

at the end of the accounting period

Cash payments journal

Post transactions from the

special journals to general and

subsidiary ledger accounts

Learning objective 4

Remember to post:

▪ Entry to subsidiary ledger on a daily basis

▪ Entry recorded in an ‘Other Accounts’ column on a

daily basis

▪

Totals of each column (except the ‘Other Accounts’

column) at the end of the accounting period

Posting transactions

Prepare schedules of accounts

receivable and payable

Learning objective 5

Schedules of accounts

▪ Verifies that the sum of

the customer balances

recorded in the accounts

receivable subsidiary

ledger is equal to the

balance of the Accounts

Receivable control

account in the general

ledger.

Schedule of accounts receivable:

Schedules of accounts

▪ Verifies that the sum of

the supplier balances

recorded in the accounts

payable subsidiary

ledger is equal to the

balance of the Accounts

Payable control account

in the general ledger.

Schedule of accounts payable:

Explain how special journals

affect the general journal

Learning objective 6

▪ Not all transactions can be entered into special

journals e.g.

– Correcting entries

– Adjusting entries

–

Closing entries

▪ These are entered into the general journal

Special journals and the general journal

▪ If a transaction recorded in the general journal

involves both a control account and a subsidiary

account:

▪ Journalizing: Both the control and subsidiary

account must be identified in the general journal

entry

▪ Posting: The amount must be posted to both the

control account and the subsidiary ledger account

Special journals and the general journal