7 2: Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders Business LibreTexts

The cash receipts journal is used to record all receipts of cash (recorded by a debit to Cash). In the preceding example, if Baker Co. paid the $1,450 owed, there would be a debit to Cash for $1,450 and a credit to Accounts Receivable. A notation would be made in the reference column to indicate the payment had been posted to Baker Co.’s accounts receivable subsidiary ledger. After Baker Co.’s payment, the cash receipts journal would appear as in (Figure). After Baker Co.’s payment, the cash receipts journal would appear as in Figure 7.21.

What is a sales journal?

LO 7.1For each of the following, indicate if thestatement reflects an input component, output component, or storagecomponent of the accounting information system for a bank. LO 7.1For each of the following, indicate if thestatement reflects an input component, output component, or storagecomponent of an accounting information system. 11 Financial is a registered investment adviser located in Lufkin, Texas.

Advantages of Special Journals

If we received a refund fromthe electric company on June 10 in the amount of $100, we wouldfind the account number for utility expense (say it is 615) andrecord it. The use of a reference code in any of the special journals isvery important. Remember, after a sale is recorded in the salesjournal, it is posted to the accounts receivable subsidiary ledger,and the use of a reference code helps link the transactions betweenthe journals and a special journal that is intended only for credit sales is called a journal. ledgers. Recall that the accounts receivablesubsidiary ledger is a record of each customer’s account. At the end of the period, we would post the totals of  $7,650 credit to cash, the $7,500 debit to accounts payable, and the $150 credit to merchandise inventory. 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.

How much will you need each month during retirement?

Also at the end of the month,the total debit in the cost of goods sold column and the totalcredit to the merchandise inventory column would be posted to theirrespective general ledger accounts. The reason is that some transactions do not fit in any special journal. However, most firms enter those transactions in the general journal, along with other transactions that do not fit the description of the specific types of transactions contained in the four special journals. The general journal is also necessary for adjusting entries (such as to recognize depreciation, prepaid rent, and supplies that we have consumed) and closing entries. There are three types of special journals – the sales journal, the purchases journal and the cash receipts journal.

• As a refresher, debits and credits affect accounts in different ways.
• Transactions recorded in special journals are subject to pre-transaction authorization.
• For example, if we overpaid our electric bill, we could get a refund check in the mail.
• Modern accounting systems do this type of categorization automatically.
• LO 7.3Record the following transactions in thecash receipts journal.

The sales journal is used to record sales on account (meaning sales on credit or credit sale). Selling on credit always requires a debit to Accounts Receivable and a credit to Sales. Because every credit sales transaction is recorded in the same way, recording all of those transactions in one place simplifies the accounting process.

Accounting Information Systems

Many companies enter only purchases of inventory on account inthe purchases journal. Some companies also use it to recordpurchases of other supplies on account. However, in this chapter weuse the purchases journal for purchases of inventory on account,only. It will always have a debit to Merchandise Inventory if youare using the perpetual inventory method and a credit to AccountsPayable, or a debit to Purchases and a credit to Accounts Payableif using the periodic inventory method.

3: Analyze and Journalize Transactions Using Special Journals

The use of special journal and subsidiary ledgers can make the accounting information system more effective and allow for certain types of information to be obtained more easily. This journal entry would be followed by a journal entry forevery other transaction the company had for the remainder of theperiod. ”To answer this question, the company would need to review all ofthe pages of the general journal for nearly an entire month to findall of the sales transactions relating to Mr. Smith. And if Mr.Smith said, “I thought I paid part of that two weeks ago,” thecompany would have to go through the general journal to find allpayment entries for Mr. Smith. For example, inventory is purchased, sales are made, customers are billed, cash is collected, employees work and need to be paid, and other expenses are incurred.

• The transactionsthemselves end up on transaction files rather than in paperjournals, but companies still print or make available on the screensomething that closely resembles the journals.
• 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.
• All of our content is based on objective analysis, and the opinions are our own.
• Think interms of the timing of inventory orders and cash flow needs.

The sales journal is used to record sales on account (meaningsales on credit or credit sale). Selling on credit always requiresa debit to Accounts Receivable and a credit to Sales. Because everycredit sales transaction is recorded in the same way, recording allof those transactions in one place simplifies the accountingprocess. Note there isa single column for both the debit to Accounts Receivable and thecredit to Sales, although we need to post to both AccountsReceivable and Sales at the end of each month. There is also asingle column for the debit to Cost of Goods Sold and the credit toMerchandise Inventory, though again, we need to post to both ofthose.

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