UM Digos College

Department of Accounting Education

Roxas Extension, Digos City

Big Picture in Focus: ULOb. Learn how to account for the different special
journals and ledgers

Metalanguage

The most essential terms below are operationally defined for you to have a better
understanding of this section in the course.

1. Special journals. These are journals of original entry other than the general journal that
are designed for recording specific types of transactions of a similar nature.
2. Voucher system. Under this system, checks may be drawn only upon a written
authorization in the form of a voucher approved by responsible officials.
3. Control account. This is the general account or main account of a receivable, payable,
inventory or property, plant and equipment where items are posted in the general ledger.
4. Subsidiary ledger. This consists of individual accounts of assets, customers or suppliers and
has detailed information regarding such assets, customers or suppliers. The total amounts of
the subsidiary ledger should always coincide with the balance in the control account.
5. 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.
5.1 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.

Essential Knowledge

In the previous chapters, the discussions were limited to processing of transactions

recorded in a general journal and posted to the genera/ ledger. This type of accounting
system is satisfactory for introducing basic accounting procedures. However, this system
would be inadequate for a business having even a moderate volume of transactions for
some reasons:
 Only a limited number of transactions can be processed daily because only one
person at any one time can introduce entries into the general journal.
 Transactions recorded in the general journal must be posted individually in the
general ledger, resulting to a great deal of posting labor.

To overcome these limitations, entities adopt an accounting system that

incorporates either the use of the usual special journals (non-voucher) or the voucher
system.

Also, the illustrations have utilized only one account for accounts receivable and
another one for accounts payable. Entities that maintain accounts with numerous
customers and creditors will find it burdensome to work with a general ledger containing a
ACCBP 100 *Property of UMDC
Page 113 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

large number of customer and creditor accounts. Therefore, entities adopt an accounting
system that uses control accounts in the general ledger and separate subsidiary ledgers to
record and control the accounts of individual customers and creditors.

Control Accounts and Subsidiary Ledgers

When an entity keeps charges to and payments from all customers in a single
accounts receivable account in the general ledger, the account in T-account form would
appear as follows:
Accounts Receivable
38,000 9,000
3,000 4,000

However, the entity cannot easily bill or mail statements to customers and answer
queries about individual customer balances, or make any collection efforts if it has only a
single record showing total claims against all customers. The general ledger can become
unreasonably large when hundreds of customers’ accounts are involved.

This problem can be best addressed using an accounts receivable control account in
the general ledger; and individual customer accounts in a subsidiary ledger. The sum of all
the individual balances in the accounts receivable subsidiary ledger must equal the balance
in the accounts receivable control account in the general ledger. For every amount posted
to the accounts receivable control account, an equal amount must be posted to one or more
of the customers' accounts in the accounts receivable.
Subsidiary Ledger
Accounts Receivable
Customer A Customer B
3,000 7,000 General Ledger
Accounts Receivable
Control Account
Customer C Customer D 28,000
8,000 10,000

Special Journals

Journal Specific Transactions Recorded Posting

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

ACCBP 100 *Property of UMDC

Page 114 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

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.

SALES JOURNAL

The sales journal of the Nazario Sea Products, shown in Exhibit 10-1, 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 sale 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. In contrast, cash sales are recorded in the cash
receipts journal. Credit sales of assets other than merchandise inventory (e.g. property and
equipment) are entered in the general journal. When the credit terms are the same, you
can omit the column same as the example below.

At the end of the month, when all sales have been recorded and the sales journal
has been totaled and ruled, the total sales figure is posted to the general ledger as a debit
to the accounts receivable control account and as a credit to the sales account.

CASH RECEIPTS JOURNAL

All transactions involving cash receipts are recorded in a cash receipts journal.
Exhibit 10-2 showed 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.

The totals of the cash, sales discounts, accounts receivable, and sales columns posted
to the general ledger, as noted by the posting references below these In addition, the
individual items in the other accounts' column are posted to the general ledger. The total
of this column is used only to balance the journal and are not posted.
Individual items in the accounts receivable column are posted on a daily basis to the
customers' subsidiary ledger to keep this ledger in balance with the accounts receivable
control account. Postings to the customers' accounts are indicated by a check mark.

ACCBP 100 *Property of UMDC

Page 115 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

ACCBP 100 *Property of UMDC

Page 116 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

ACCBP 100 *Property of UMDC

Page 117 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

PURCHASES JOURNAL

Most merchandising business purchase their merchandise and supplies on account.

The purchases 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.

Exhibit 10-3 illustrated the purchases journal for an entity using the periodic
inventory system. In the illustration, 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.

CASH DISBURSEMENTS JOURNAL

All cash payments are recorded in a cash disbursements journal. Exhibit 10-4 showed
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 cash payment. Also, the other accounts column
is available for recording debits to other accounts.

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.

ACCBP 100 *Property of UMDC

Page 118 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

ACCBP 100 *Property of UMDC

Page 119 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

ACCBP 100 *Property of UMDC

Page 120 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

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. 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
Before the designated official approves the voucher for payment, various personnel
perform verification procedures that include the following:
a. comparison of purchase requisition, purchase order, invoice, and receiving report for
agreement of quantities, prices, types of goods, and terms.
b. review of extensions and footings in the invoice.
c. approval of account distribution (i.e. the general ledger accounts to be debited).

Copies of the purchase requisition, purchase order, invoice, and receiving report
should be attached to the voucher. These documents will comprise the voucher package.
The voucher is recorded in the book of original entry called the voucher register.

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.
Observe in Exhibit 10-5 that all entries in the voucher register resulted to a credit to
accounts payable control account. The vouchers payable account may also be used in place
of the accounts payable account. If an entity opted for the use of the vouchers payable
account, the balance in this account may be properly reported in the balance sheet as
accounts payable.

Unpaid Voucher File

The voucher register has columns to record payment date and check number, which
are entered when the voucher is paid. After vouchers have been entered in the voucher
they are filed in the order of required date of payment. In this way, the entity will not miss
discounts, and its credit standing will not be impaired. When a voucher is the due date is
written on the face of the voucher for filing convenience.

Check Register
The check register in Exhibit 10-6 is a simplified form of the cash disbursements
journal. The register is a record of all check payments. Since checks are entered in the
register in numerical sequence, this record provides a convenient reference check number
and the date of payment.

ACCBP 100 *Property of UMDC

Page 121 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

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.

Self-Help: You can also refer to the sources below to help you further
understand the lesson:

Procurement of services, audit of accounting and financial statements, advice on the

preparation of financial statements [tender documents : T450069990]. (2019). MENA
Report, Retrieved from
https://www.proquest.com/docview/2330981419?accountid=31259

Ballada, W. (2016). Basic Accounting 2016 issue (21st edition). DomDane Publishers and Made
Easy Books: Manila

Let’s Check
Activity 1. Matching Type. Special Purpose Journals

A. Sales
B. Cash Receipts
C. Purchases
D. Cash Payments
E. General

Required: Indicate in which of the five journals each transaction must be recorded:

1. Sale of merchandise for cash.

2. Sale of merchandise on account.
3. Cash refund to a customer.
4. Receipt of cash from a customer in settlement of an account.
5. Purchase of merchandise for cash.
6. Purchase of merchandise on account.
7. Payment of salaries.
8. Note payable sent to a creditor in settlement of an account.
9. Payment of interest on a mortgage.
10. Receipt of a note in settlement of a customer's account.

ACCBP 100 *Property of UMDC

Page 122 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

Let’s Analyze
Activity 1. Recording and Posting Purchase Transactions Using Special Journals

The following are the purchase transactions for the Mark Ramos Company for the month of
Oct. 2020. Merchandise purchased on account has a 2/10, n/30 credit terms.

Oct 1 Purchased merchandise on account from E. Dulay Supply Company,

P54,000. Invoice dated Oct. 1.
4 Paid E. Dulay Supply Company amount due less discounts. Issued check no.
79.
6 Purchased merchandise on account from L. Campos Company, P92,000.
Invoice dated Oct. 6.
7 Paid freight charges on the merchandise purchased from L. Campos
Company, P3,000. Issued check no. 80.
9 Returned P5,000 of merchandise purchased from L. Campos Company on
Oct. 6.
10 Paid L. Campos Company amount due less returns and discounts. Issued
check no. 81.
15 Paid salaries, P 12,000. Issued check no. 82.
16 Purchased merchandise for cash, P19,000. Issued check no. 83.
17 Purchased merchandise on account from E. Cernias Company, P39,000.
Invoice dated Oct. 16.
19 Purchased merchandise on account from D. Palsado Company, P41,000.
Invoice dated Oct. 19.
21 Paid insurance premiums, P2,000. Issued check no. 84.
24 Ramos withdrew P15,000 from the business. Issued check no. 85.
25 Purchased merchandise from L. Sedanto Company, P58,000. Invoice dated
Oct. 24.
30 Paid D. Palsado Company P11,000 on account from the Oct. 19 purchase.
Issued check no. 86.
31 Returned P8,000 of merchandise purchased on Oct. 25 from L. Sedanto
Company.

Required:
1. Record the transactions in the appropriate journals.
2. Total the journals and post to the general and accounts payable ledgers. Use the
following account numbers. Cash (110); Accounts Payable (210); Ramos, Capital
(310); Ramos, Withdrawals (320); Purchases (510); Purchases Returns and
Allowances (520); Purchases Discounts (530); Transportation In (540); Salaries
Expense (610); Insurance Expense (620). The journals with their corresponding page
numbers: Purchases (25); Cash Payments (43) and General (13).
3. Prepare a schedule of accounts payable.

ACCBP 100 *Property of UMDC

Page 123 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

In a Nutshell

Activity 1. This unit discussed the different types of special journals including the voucher
system. In this part, you will be required to draw conclusions, perspectives, arguments and
ideas from the unit lesson.

1.

2.

3.

4.

5.

6.

ACCBP 100 *Property of UMDC

Page 124 of 125
 UM Digos College
Department of Accounting Education
Roxas Extension, Digos City

7.

8.

9.

10.

ACCBP 100 *Property of UMDC

Page 125 of 125