CHAPTER 10 – SPECIAL JOURNALS

Special Journals – journals of original entry other than the general journal that are designed for recording specific types of transactions
of a similar nature. Most entities use the following special journals:

Posting
Journal Specific Transactions Recorded Abbreviation

Sales Journal Sales of merchandise on account S

Cash Receipts Journal Receipts of cash CR
Credit purchases of merchandise
Purchases Journal and other items P
Cash Disbursements Journal Payments of cash CD
Entries that do not fit in the other
General Journal journals GJ

Cash sales are usually recorded in the cash receipts journal rather than in the sales journal because cash is best controlled when all
routine cash receipts are recorded in one journal. Similarly, an entity can increase control over cash disbursements by recording cash
purchases of merchandise or other items in the cash disbursements journal rather than in the purchases journal.

When special journals are used, the general journal is maintained for adjusting, closing and reversing entries; and for recording
transactions that do not fit in other special journals. Examples of the latter include the recording of purchases returns and allowances
and sales returns and allowances.

Advantages of Using Special Journals:

1. They permit division of labor.

2. The use of special journals often reduces recording time. (explanations, headings, posting to the general ledger)
3. Flexible

SALES JOURNAL

The sales journal of Nazario Sea Products is designed for an entity using the periodic inventory system. This journal lists all credit sales
for the month of June. The information for each sales is obtained from a copy of the related sales invoice, which should be prenumbered
for control purposes. This journal is specifically designed to record sales of merchandise on account.

SALES JOURNAL

Date Invoice No. Account Debited Post. Ref. Accounts Rec. Dr./Sales Cr.
2007
June
1 001 Zamboanga Exports 20,000
5 002 Butuan Company 10,000
12 003 Cagayan de Oro Stores 100,000
22 004 Dapitan Retailers 40,000
29 005 Dipolog Traders 30,000
30 006 Pagadian Grocers 50,000
250,000

(120/410)

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 GENERAL LEDGER

Accounts Receivable Sales

(120) (410)
Jun 30 S1 250,000 Jun 30 S1 250,000

ACCOUNTS RECEIVABLE

SUBSIDIARY LEDGER

Dapitan Retailers Zamboanga Exports

6/22 S1 40,000 6/1 S1 20,000

Dipolog Traders Butuan Company

6/29 S1 30,000 6/5 S1 10,000

Pagadian Grocers Cagayan de Oro Stores

6/30 S1 50,000 6/12 S1 100,000

CASH RECEIPTS JOURNAL

All transactions involving cash receipts are recorded in a cash receipts journal. The illustration shows the cash receipts journal for an
entity using the periodic inventory system. In a merchandising business, the main sources of cash are collections on account and cash
sales. Thus, this journal has debit columns for cash and sales discounts; and credit columns for accounts receivable and sales. In addition,
there are columns on the right-hand side of the journal which can be used to record the account titles and credits to other accounts
resulting from cash receipts not related to cash sales and collections on account. Examples of these include investments by the owner
and loan releases.

Cash receipts are evidenced by source documents like prenumbered official receipts (OR), cash register tapes (CRT) or cash slips, and
bank credit memorandum (CM). Note that the entries on June 15 and June 30, debiting cash and crediting sales, recorded cash sales for
a certain period. In practice, cash sales which are usually supported by cash register tapes, should be recorded daily rather than semi-
monthly.

CASH RECEIPTS JOURNAL

Debits Credits
Sales Accounts Other Accounts
Date OR No. Description Cash Discounts Receivable Sales Account Title PR Amount
2007
June
1 File Investment by owner 500,000 Nazario, Capital 310 500,000
8 001 Zamboanga Exports 19,600 400 20,000
10 CM PCIBank Loan 300,000 Notes Payable 230 300,000
15 CRT Cash sales, June 1-15 200,000 200,000
21 002 Cagayan de Oro Stores 49,000 1,000 50,000
29 003 Dipolog Traders 29,400 600 30,000
30 CRT Cash sales, June 16-30 250,000 250,000
1,348,000 2,000 100,000 450,000 800,000
(110) (420) (120) (410)

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PURCHASES JOURNAL

Merchandising businesses frequently purchase merchandise and supplies. Such purchases are usually made on account. The purchase
journal is designed to account for purchases of merchandise, supplies and other assets on account. In contrast, cash purchases are
recorded in the cash disbursements journal.

The purchases journal for an entity using the periodic inventory system is being illustrated in the sample below. The primary source
document used as the basis for the entries in the journal is the receiving report (RR). The journal showed special columns for debits to
purchases, office supplies and store supplies, as well as for credits to accounts payable. A column is also provided for debits to accounts
for which no special column is available. In practice, a column for input taxes may be included. A separate column for purchase terms
may also be provided to help identify the due date and the discounts available.

The amounts in the accounts payable column are posted to the accounts payable subsidiary ledger on a daily basis. A check mark in the
posting reference column indicates that this has been done. At the end of the month, the columns are totaled, and the journal is balanced
to ensure that total debits equal total credits.

PURCHASES JOURNAL

Credits Debits
Accounts Office Store Other Accounts
Date RR No. Account Credited PR Payable Purchases Supplies Supplies Account Title PR Amount
2007
June
2 001 Gingoong Distributors 70,000 70,000
9 002 Oroquieta Suppliers 190,000 190,000
14 003 Tangub Office Systems 120,000 Office Equipment 190 120,000
18 004 Davao Wholesalers 140,000 140,000
25 005 Ozamiz Company 40,000 40,000
30 006 Surigao Office Supplies 30,000 10,000 20,000
590,000 400,000 50,000 20,000 120,000
(210) (510) (160) (170)

CASH DISBURSEMENTS JOURNAL

All cash payments are recorded in a cash disbursements journal. Example shows the June cash disbursements journal for Nazario Sea
Products after the related transactions have been recorded, and the journal balanced and posted. Note the special columns for credits to
cash and purchases discounts, and for debits to accounts payable and purchases. Ordinarily, these accounts will have the most entries.
This special journal has columns for the date and the number of check issued for each cash payment. Also, the other accounts column
is available for recording debits to other accounts.

CASH DISBURSEMENTS JOURNAL

Credits Debits
Purchases Accounts Store Other Accounts
Date Ck. No. Description Cash Discount Payable Supplies Account Title PR Amount
2007
June
2 101 Paid employees 280,000 Salaries Payable 270 280,000
3 102 Paid June rent 60,000 Rent Expense 560 60,000
12 103 Gingoong Distributors 68,600 1,400 70,000
15 104 Acquired Equipment 50,000 Store Equipment 180 50,000
19 105 Oroquieta Suppliers 188,100 1,900 190,000
28 106 Purchased merchandise 15,000 15,000
30 107 Insurance policy 12,000 Prepaid Insurance 140 12,000
673,700 3,300 260,000 15,000 402,000
(110) (520) (210) (510)

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GENERAL JOURNAL

When special journals are used, transactions that cannot be recorded appropriately in a special journal are recorded in the general
journal. Examples include merchandise returns; write-offs of uncollectible accounts; and certain non-cash transactions involving notes
receivable and notes payable.

PROVING THE LEDGERS

At the end of the period, after all postings have been made, equality should exist between the following:

 total debit balances and total credit balances of the accounts in the general ledger. These amounts are used to prepare the trial
balance.
 the balance of the accounts receivable control account in the general ledger and the sum of the individual customer accounts
in the accounts receivable subsidiary ledger.
 the balance of the accounts payable control account in the general ledger and the sum of the individual creditor accounts in the
accounts payable subsidiary ledger.

This control procedure is important because this helps ensure the accuracy of the accounting records.

VOUCHER SYSTEM

Most entities control purchases and cash disbursements by formalizing the process of verification and approval of payments using a
method known as the voucher system. Under this system, checks may be drawn only upon a written authorization in the form of a
voucher approved by responsible officials. The system consists of vouchers, voucher register, unpaid voucher file, check register and
paid voucher file. The voucher register takes the place of the purchases journal while the check register substitutes the cash
disbursements journal.

VOUCHER

The voucher is a serially numbered form that identifies the name and address of the payee, the due date, terms, description and invoice
amount. This form includes a section for designated officers to sign their approval for payment. It also has spaces for details such as the
date of payment, check number and ledger entries.

Before the designated official approves the voucher for payment, various personnel perform verification procedures that include the
following:

1. comparison of purchase requisition, purchase order, invoice, and receiving report for agreement of quantities, prices, types of
goods and terms.
2. review of extensions and footings in the invoice.
3. approval of account distribution (i.e. the general ledger accounts to be debited)

VOUCHER REGISTER

As noted, the voucher register takes the place of the purchases journal, and provides a record of all authorized check payments. In a
voucher system, all expenditures are recorded first in the voucher register.

Approved vouchers are entered in the voucher register in numerical sequence. The vouchers should be prenumbered so they can be
accounted for and referred to easily. All entries in the voucher register will result to a credit to accounts payable control account.

The register has columns for expense and asset accounts frequently debited such as purchases, transportation in, office supplies and
transportation out. Debits and credits to accounts for which columns are not provided for are made in the other accounts section.

Credits Debits
Voucher Date Accounts Office Other Accounts
No. Date Payee Paid Ck. No. Payable Purchases Trans. In Supplies Trans. Out Account Title PR Debit Credit
121 12/1 Rodriguez Co. 12/9 528 35,000 35,000
122 12/2 Rubinos Freight 12/5 527 3,000 3,000
12/5 Escutin, Inc. 12/15 531 12,000 12,000
… … … … … … … … … … … … … …
146 12/21 Sonza Co. 12/31 539 120,000 Office Equipment 150 120,000
147 12/27 Gamboa Co. 25,000 25,000
148 12/30 Espinosa Delivery 2,500 2,500
1,850,000 1,220,000 85,000 46,000 32,000 467,000 -
(320) (550) (560) (160) (680)

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UNPAID VOUCHER FILE

The voucher register has columns to record payment date and check number, which will be entered when the voucher is paid. After
vouchers have been entered in the voucher register, they are filed in the order of required date of payment in order for the company to
not miss discounts.

CHECK REGISTER

The check register is a record of all check payments. Since checks are entered in the check register in numerical sequence, this record
provides a convenient reference for the check number and the date of payment.

Checks are issued only in payment of approved and recorded vouchers. Every check is recorded by a debit to accounts payable and credit
to cash, and to purchases discounts, if appropriate.

On or before the due date, the voucher package is removed from the unpaid file and forwarded to the disbursing officer for final approval
of payment. After signing the voucher, the disbursing officer has a check drawn. The check number and payment date are recorded in
the voucher, which is then turned to the accounting department.

To safeguard against irregularities, the voucher and its underlying documents should be canceled by the disbursing officer before the
voucher is returned to the accounting department. The department is now responsible for the recording of the check payment in the
check register and the voucher register.

Debits Credits
Check Voucher Accounts Purchases Cash in
No. Date Payee No. Payable Discounts Bank
525 12/2 Palma Corporation 120 25,000 25,000
527 12/5 Rubinos Freight 122 3,000 3,000
528 12/9 Rodriguez Company 121 35,000 700 34,300
… … … … … … …
530 12/31 Sonza Co. 146 120,000 120,000
1,670,000 12,000 1,658,000
(320) (570) (110)

PAID VOUCHER FILE

The paid voucher along with its supporting documents are filed in numerical sequence in a paid vouchers file. This file is then available
for examination by internal or external auditors requiring information about a specific expenditure.

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