Record transactions in specialised journals
Contents
Introduction
Specialised journals or transaction-specific journals
Integrated example
Sales returns and purchases returns
Alternative treatment
Discounts allowed
Discounts received
Summary
This learning guide is based on the following resource:Textbook
Duncan A (2006) Introductory Accounting, Core National Accounting Publications, Bondi
Key to resources
Resource / Textbook1 / Chapter 7 ‘Accounting for Merchandising Operations’, sections 7.6, 7.7, 7.8 and 7.9 (up to p 231)
Note: Return to where you were in this learning guide and consider the integrated example provided (do not study the integrated example provided in the textbook).
Introduction
The advantage of subsidiary ledgersis that there could be a considerable reduction in the number of accounts in the general ledger. There would be only one account, the control account for the subsidiary ledger, being used in the general ledger with the individual accounts being maintained in the subsidiary ledger. At this stage all transactions are being directed to the single control account in the general ledger as well as to the individual accounts in the subsidiary ledger. So, while the number of accounts in the general ledger is significantly reduced, the number of transactions remains unchanged.
Specialised journals or transaction-specific journals
The specialised journals, or transaction-specific journals, are:
cash receipts journal / records all increases to the bank account, including cash (ie cheques, credit card receipts etc) received by the businesscash payments journal / records all decreases to the bank account, including cheque payments by the business
sales journal / records all sale transactions invoiced on a credit basis
purchases journal / records all invoices for items including trading goods bought on credit
The use of specialised journals, or transaction-specific journals, results in the number of transactions appearing in the relevant control account also being considerably reduced, as only periodic—eg monthly—totals of transactions are brought to account in the control account, not all the transactions.
The individual transactions, then, are only accounted for in the appropriate accounts in the subsidiary ledger.
Periodically, again at least monthly, a reconciliation of the total (value) of the account balances in the subsidiary ledger with the balance of the control account in the general ledger would be carried out.
Note:You need to be aware of the function of these transaction-specific journals and how they facilitate the recording process and the ledger-posting process.
/ Go to Resource 1Now closely examine the integrated example below (instead of the one in the textbook).
Integrated example
Incorporating special journals
Sweet Leilani had the following assets and liabilities on 1 July:Cash at bank / $14,000
Office equipment / 8,000
Inventory / 9,000
Office furniture / 4,000
Accounts receivable: / Q. Uinn / $770 / R. Ieith / $517 / E. Plato / $495
Accounts payable: / C. Assidy / $330 / F. Ord / $440 / P. Enza / $275
All sales of Sweet Leilani include goods and services tax (GST) of 10%. Allpurchases of stock include GST of 10%. GST is also payable on all expenses except wages. The balance of GST payable (GST collected less GST paid) is calculated every three months and the amount owing is forwarded to the Australian Taxation Office (ATO).
GST collected and GST paid are recorded at the time of the original transaction, so no GST is recorded when accounts are paid.
During the month of July the following transaction took place.02/7 / R Ieith returned goods C/N 11 (original cost $15) / $ 22
03/7 / Purchased goods from C Assidy Invoice 833 / 275
05/7 / Cash sales CSD 7 (cost of goods sold was $320) / 528
08/7 / Paid wages Cheque 102 / 620
09/7 / Paid advertising Cheque 103 / 132
10/7 / R Ieith paid the amount owing to date less $20 discount CR114 / 475
11/7 / Sold goods to E Plato Invoice 341 (cost of goods sold was $310) / 506
12/7 / Cash sales CSD8 (cost of goods sold was $180) / 242
Received a credit note from C Assidy C/N 6 / 55
15/7 / Paid C. Assidy amount owing to date less $22 discount Cheque 104 / 528
18/7 / Sold goods to Q. Uinn Invoice 342 (cost of goods sold was $200) / 308
21/7 / Received payment from Q Uinn CR115 / 250
22/7 / Cash sales CSD9 (cost of goods sold was $280) / 374
23/7 / Proprietor drew cash for personal needs Cheque 105 / 400
Purchased goods for cash Cheque 106 / 330
27/7 / Paid F Ord amount owing at beginning of month Cheque 107 / 440
31/7 / Paid wages Cheque 108 / 730
Paid P Enza the amount owing on 1 July less $11 discount Cheque 109 / 264
Purchased goods from F Ord. Invoice 33 / 220
Required: / (a)Enter opening balances into ledger accounts
(b)Enter the above transactions into the appropriate journals
(c)Post from journals to the ledger accounts
(d)Prepare a trial balance as at July 31
(e)Prepare a statement of debtors and creditors as at July 31
Note: Use the following accounts:
100 / Bank110 / Accounts receivable
110.1 / Q Uinn
110.2 / R Ieith
110.3 / E Plato
210.1 / C Assidy
210.2 / F Ord
210.3 / P Enza
120 / Inventory
166 / Office equipment
174 / Office furniture
210 / Accounts payable
222 / GST collected
224 / GST paid
300 / Capital
310 / Drawings
400 / Sales
500 / Cost of goods sold
550 / Discount received
605 / Advertising
615 / Discount allowed
700 / Wages
Feedback
Credit purchases journal of Sweet LeilaniP1
Debitaccounts / Credit account
Date / Invoice # C/Note # / Particulars / Acc # / Inventory / GST
paid / Accounts payable
July 3 / 833 / C. Assidy / 210.1 / 250 / 25 / 275
12 / C/N 6 / C. Assidy / 210.1 / -50 / -5 / -55
31 / 33 / F.Ord / 210.2 / 200 / 20 / 220
400 / 40 / 440
120 / 224 / 210
Credit sales journal of Sweet LeilaniS1
Debit and creditaccounts / Debit
accounts / Credit
accounts
Date / Invoice # C/Note # / Particulars / Acc # / COGS / Accounts receivable / Sales / GST
collected
July 2 / C/N 11 / R. Ieith (Return) / 110.2 / -15 / -22 / -20 / -2
11 / 341 / E. Plato / 110.3 / 310 / 506 / 460 / 46
18 / 342 / Q. Uinn / 110.1 / 200 / 308 / 280 / 28
495 / 792 / 720 / 72
120/500 / 110 / 400 / 222
Note: The cost of goods sold (COGS) column is posted as a debit to the cost of goods sold account and a credit to the inventory account.
Cash payments journal of Sweet LeilaniCP1
Debitaccounts / Credit
accounts
Date / Chq
# / Particulars / Acc
# / Accounts payable / Inventory / Wages / Sundry / GST
paid / Bank / Discount
received
July 8 / 102 / Wages / 620 / 620
9 / 103 / Advertising / 605 / 120 / 12 / 132
15 / 104 / C. Assidy / 210.1 / 550 / -2 / 528 / 20
23 / 105 / Drawings / 310 / 400 / 400
106 / Purchases / 300 / 30 / 330
27 / 107 / F.Ord / 210.2 / 440 / 440
31 / 108 / Wages / 730 / 730
109 / P. Enza / 210.3 / 275 / -1 / 264 / 10
1,265 / 300 / 1,350 / 520 / 39 / 3,444 / 30
220 / 120 / 700 / 224 / 100 / 550
Cash receipts journal of Sweet LeilaniCR1
Debitand creditaccounts / Debit
accounts / Credit
accounts
Date / Rec. # / Particulars / Acc # / COGS / Bank / Discount
allowed / Account
receivable / Sales / GST
collected
July 5 / CSD 7 / Sales / 320 / 528 / 480 / 48
10 / 114 / R. Ieith / 110.2 / 475 / 18 / 495 / -2
12 / CSD 8 / Sales / 180 / 242 / 220 / 22
21 / 115 / Q.Uinn / 110.1 / 250 / 250
22 / CSD 9 / Sales / 280 / 374 / 340 / 34
780 / 1,869 / 18 / 745 / 1,040 / 102
120/500 / 100 / 615 / 110 / 400 / 222
Note: The cost of goods sold (COGS) column is posted as a debit to the cost of goods sold account and a credit to the inventory account.
Ledger of Sweet LeilaniCash at bank 100
01/07 / Balance b/d / 14000 / 31/07 / Payment / CP1 / 3444
31/07 / Receipts / CR1 / 1869 / 31/07 / Balance c/d / 12425
15869 / 15869
01/08 / Balance b/d / 12422
Accounts receivable 110
01/07 / Balance b/d / 1782 / 31/07 / Bank & discount / CR1 / 745
31/07 / Sales / S1 / 792 / Balance c/d / 1829
2574 / 2574
01/08 / Balance b/d / 1829 / 2,574
Inventory 120
01/07 / Balance b/d / 9000 / 31/07 / COGS / S1 / 495
31/07 / Accounts payable / P1 / 400 / COGS / CR1 / 780
Bank / CP1 / 300 / Balance c/d / 8425
9700 / 9700
Balance b/d / 8425
Office equipment 166
01/07 / Balance b/d / 8000
Office furniture 174
01/07 / Balance b/d / 4000
Accounts payable control 210
31/07 / Bank and discount / CP1 / 1265 / 01/07 / Balance b/d / 1045
Balance c/d / 220 / 31/07 / Purchases / 440
1485 / 1485
01/08 / Balance b/d / 220
GST collected 222
31/07 / Balance c/d / 174 / 31/07 / Accounts receivable / S1 / 72
03/07 / Bank / CR1 / 102
174 / 174
01/08 / Balance b/d / 174
GST paid 224
31/07 / Accounts payable / P1 / 40 / 31/07 / Balance c/d / 79
Bank / CP1 / 39
79 / 79
01/08 / Balance b/d / 79
Capital 300
01/07 / Balance b/d / 35737
Drawings 310
23/07 / Bank / CP1 / 400
Sales 400
31/07 / Balance c/d / 1760 / 31/07 / Bank / CR1 / 1040
Accounts receivable / S1 / 720
1760 / 1,760
01/08 / Balance b/d / 1760
Cost of goods sold 500
31/07 / Inventory / S1 / 495
Inventory / CR1 / 780
1275
Discount received 550
31/07 / Accounts payable / CP1 / 30
Advertising605
09/07 / Bank / CP1 / 120
Discount allowed 615
01/07 / Accounts receivable / CR1 / 18
Wages700
31/07 / Bank / CP1 / 1350
Accounts receivable ledger 110.1
Q. Uinn
01/07 / Balance b/d / 770 / 21/07 / Bank / CR1 / 250
18/07 / Sales / S1 / 308 / 31/07 / Balance c/d / 828
1078 / 1078
01/08 / Balance b/d / 828
R. Ieith 110.2
01/07 / Balance b/d / 517 / 02/07 / Sales returns / S1 / 22
10/07 / Bank and discount / CR1 / 495
517 / 517
E. Plato 110.3
01/07 / Balance b/d / 495 / 31/07 / Balance c/d / 1001
11/07 / Sales / S1 / 506
1001 / 1001
01/08 / Balance b/d / 1001
Accounts Payable ledger
C. Assidy 210.1
12/07 / Purchase returns / P1 / 55 / 01/07 / Balance b/d / 330
15/07 / Bank / CP1 / 550 / 03/07 / Purchases / P1 / 275
605 / 605
F. Ord 210.2
27/07 / Bank / CP1 / 440 / 01/07 / Balance b/d / 440
31/07 / Balance c/d / 220 / 31/07 / Purchases / P1 / 220
660 / 660
01/08 / Balance b/d / 220
P. Enza210.3
31/07 / Bank / CP1 / 275 / 01/07 / Balance b/d / 275
275 / 275
Sweet Leilani – Trial balance as at 31July
A/c No / Account / Debit / Credit
100 / Bank / 12425
110 / Accounts receivable control / 1829
120 / Inventory / 8425
166 / Office equipment / 8000
174 / Office furniture / 4000
210 / Accounts payable control / 0 / 220
222 / GST collected / 0 / 174
224 / GST paid / 79 / 0
300 / Capital / 0 / 35737
310 / Drawings / 400 / 0
400 / Sales / 0 / 1760
500 / Cost of goods sold / 1275 / 0
550 / Discount received / 0 / 30
605 / Advertising / 120
615 / Discount allowed / 18
700 / Wages / 1350
37921 / 37921
Schedule of Accounts receivable at 31 July
110.3 / E. Plato / 1001110.1 / Q. Uinn / 828
1829
Schedule of Accounts payable at 31 July
210.2 / F. Ord / 220220
Sales returns and purchases returns
Some businesses will use separate general ledger accounts to record when the business either receives goods back from a customer (sales returns) or returns goods to a supplier (purchase returns). If they do use separate general ledger accounts, these accounts will need to be offset against the original sales general ledger account or purchases general ledger account at the end of the reporting period for the business (usually each year).
The journal entry to offset the balance of the sales returns account to the sales account would be:
Debit SalesCredit Sales returns
Alternative treatment
You do not need to use separate general ledger accounts for returns. You can simply record them directly in the same general ledger accounts used when goods were sold or purchased (as a reduction to theaccount).
Sales returns can be recorded in the sales account. For purchase returns, it will depend on what inventory method is being used,ie the perpetual or the periodic method.
If you are using the periodic inventory method, the original purchase would have been recorded as a debit entry in the purchases account so the purchase return will be recorded as a credit entry in the purchases account.However, if you are using the perpetual method, the original purchase would have been recorded as a debit entry in the inventory account. Therefore the return would be recorded as a credit entry in the inventory account.
To record these returns in the journals, they should be shown as a negative entry under the sales column in the sales journal or the inventory column in the purchases journal.
Example
SDJDate / Invoice no / Particulars / Fol / Accounts receivable / Sales / GST clearing / General
20xx / $ / $ / $ / $
Mar 17 / 100024 / North East Wholesalers / 550.00 / 500.00 / 50.00
Mar 18 / C00895 / North East Wholesalers / (55.00) / (50.00) / (5.00)
Discounts allowed
When goods are sold on credit, the customer will pay their account at a later date. In some cases we may offer a discount to encourage an earlier payment. It is important to record these discounts as part of the receipt transaction. As a result, you will see cash receipt transactions that also include the discount allowed. The cash receipts journal may use a separate column (and general ledger account) to record the discount allowed.
CRJDate / Receipt no / Particulars / Fol / Bank / Accounts receivable / Disc allowed / GST clearing / General
20xx / $ / $ / $ / $
Mar 17 / 87652 / South East Retailers / 495.00 / 550.00 / (50.00) / (5.00)
However, the accounting standards require that the value of sales be recorded after offsetting any discounts allowed to customers. Therefore the discounts allowed will need to be deducted from the sales account. If the receipt transaction is recorded using a discount allowed account, this offsetting transaction will be done at a later date—usually at the end of the reporting period for the business (usually each year). This is the method used in the recommended textbook. However, as an alternative, this offsetting transaction may be done at the same time that the receipt is recorded. In this case the discount allowed would be shown in the cash receipts journal as a negative entry in the sales column.
CRJDate / Receipt no / Particulars / Fol / Bank / Accounts receivable / Sales / GST clearing / General
20xx / $ / $ / $ / $
Mar 17 / 87652 / South East Retailers / 495.00 / 550.00 / (50.00) / (5.00)
Either method is suitable. It is important to note that at the end of the reporting period the value of the sales account to be recorded in the income statement would be the total of sales less any discounts allowed.
Discounts received
When goods are purchased on credit, the business will pay the supplier’s account at a later date. In some cases we may be offered a discount to encourage an earlier payment. It is important to record these discounts as part of the cash payment transaction. As a result, you will see cash payment transactions that also include the discount received. The cash payments journal may use a separate column (and general ledger account) to record the discount received.
CPJDate / Cheque no / Particulars / Fol / Bank / Accounts payable / Discount received / GST clearing / General
20xx / $ / $ / $ / $
Mar 17 / 87652 / South East Retailers / 495.00 / 550.00 / (50.00) / (5.00)
However, the accounting standards require that the value of inventory (when using the perpetual inventory method) be recorded after offsetting any discounts received from suppliers. Therefore the discounts received will need to be deducted from the inventory account. If the payment transaction is recorded using a discount received account, this offsetting transaction will be done at a later date—usually at the end of the reporting period for the business (usually each year). This is the method used in the recommended textbook. However, as an alternative, this offsetting transaction may be done at the same time that the payment is recorded. In this case the discount received would be shown in the cash payments journal as a negative entry in the inventory column. See the sample that follows.
CPJDate / Cheque no / Particulars / Fol / Bank / Accounts payable / Inventory / GST clearing / General
20xx / $ / $ / $ / $
Mar 17 / 87652 / South East Retailers / 495.00 / 550.00 / (50.00) / (5.00)
Either method is suitable. It is important to note that at the end of the reporting period the value of the inventory account to be recorded in the balance sheet would be reduced by the effect of any discounts received.
Summary
In this learning guide you’ve looked at the use of specialised journals which help to reduce the number of transactions appearing in the relevant control account.
Record transactions in specialised journals1
© NSW DET 2006 2006/053/12/2006 LRR 4665//4668