Therefore, the amount column represents a credit to accounts payable and a debit to purchases at the full invoice price. The purchases journal is mainly used to record merchandise and inventory purchases on credit. If these are the only transactions recorded in the purchases journal, then the journal is similar to the one shown in the example below.
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Using the reference information, if anyone had a question aboutthis entry, he or she would go to the sales journal, page 26,transactions #45321 and #45324. This helps to create an audittrail, or a way to go back and find the original documentssupporting a transaction. If the two amounts are added together, the company owes $305 in total to the two companies.
The Sales Journal
We would look up the account number for Utility Expense and credit the account for the amount of the check. If we received a refund from the electric company on January 28 in the amount of $100, we would find the account number for utility expense (say it is 615) and record it. The use of a reference code in any of the special journals is very important. Remember, after a sale is recorded in the sales journal, it is posted to the accounts receivable subsidiary ledger, and the use of a reference code helps link the transactions between the journals and ledgers.
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In this way, special journals make the keeping and updating of accounting records easier and less complex. Special journals are maintained to record those business transactions that are frequent or repetitive in nature. This entry would then be posted to the accounts payable and merchandise inventory accounts both for $2,500. Under the periodic inventory method, the credit would be to Purchase Returns and Allowances. Notice how these two different types of entries are recorded in different journals?
Special journals sometimes referred to as subsidiary journals are books of prime entry and are used to record similar transactions such as credit sales or purchases. The special journals are used to allow segregation of duties and to avoid posting every detailed transaction to the general ledger. The total of all accounts payable subsidiary ledgers would beposted at the end of the month to the general ledger AccountsPayable control account. The sum of all the subsidiary ledgers mustequal the amount reported in the general ledger.
At the end of the month, we total the Cash column in the cashreceipts journal and debit the Cash account in the general ledgerfor the total. In this case there were two entries in the cashreceipts journal, the cash received from Baker and the refund checkfor an overpayment on utilities for a total cash received andrecorded in the cash receipts journal of $1,550, as shown inFigure 7.24. If the transaction does not involve cash, it will be recorded in one of the other special journals.
Examples of such entries are adjusting entries, closing entries, transferring entries, and correcting entries. With such a division of labor, the employee experiences less disagreement over their duties and produces higher-quality work. Double Entry Bookkeeping is here to provide you with free online information to help you learn and understand bookkeeping and introductory accounting. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License .
Just like the purchases journal, only credit sales are recorded when preparing a sales journal. 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.
- On the other hand, routine transactions are recorded in special journals and do not require authorization.
- Using the reference information, if anyone had a question about this entry, he or she would go to the sales journal, page 26, transactions #45321 and #45324.
- In other words, transactions are recorded into the general journal as they occur.
- This list is often called the accounts payable trial balance (or a schedule of accounts payable).
- 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.
Therefore, these journals are also often referred to as subsidiary books of the ledger. A special journal (also known as a specialized journal) is useful in a manual accounting or bookkeeping system to reduce the unearned revenue benefits, examples, accounting and reporting tedious task of recording both the debit and credit general ledger account names and amounts in a general journal. Choose credit sales journal if this stock is then on-sold to customers who will pay later.
