Post on 26-Apr-2018
transcript
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Chapter 7
Special Journals and Subsidiary Ledgers
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1. Explain the purpose of special journals2. Explain the purpose of control accounts and
subsidiary ledgers3. Journalize transactions using special journals
– Sales journal– Cash receipts journal– Purchases journal– Cash payments journal
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Learning objectives
4. Post transactions from the special journals to general and subsidiary ledger accounts
5. Prepare schedules of accounts receivable and payable
6. Explain how special journals affect the general journal
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Learning objectives
Explain the purpose ofspecial journals
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Learning objective 1
Special journal:▪A record in which similar transactions are journalized▪Exact types and format used varies from business to business
Advantages:▪More efficient way to journalize transactions
– Each transaction entered on one line– Time saved by posting column totals
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The purpose of special journals
Explain the purpose ofcontrol accounts and
subsidiary ledgers
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Learning objective 2
Control account: ▪An account in the general ledger that summarizes the information contained in its related subsidiary ledger
Subsidiary ledger:▪An accounting record that stores the details summarized in the related control account ▪Not part of the general ledger
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Control accounts and subsidiary ledgers
Examples:
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Control accounts and subsidiary ledgers
Control account Subsidiary ledger
Accounts Receivable Accounts Receivable Subsidiary Ledger
Accounts Payable Accounts Payable Subsidiary Ledger
Inventory Inventory Cards
▪At the end of the accounting period:
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Control accounts and subsidiary ledgers
Control Account:
Ending Balance $600 =
Subsidiary Ledger:$
Account 1 100Account 2 200Account 3 300Total $600
Advantages: ▪Minimizes detail in the general ledger accounts▪Provides up-to-date details on the balances of each subsidiary account▪ Internal control
– Assist in detecting and preventing errors in the accounts– Allows separation of duties
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Control accounts and subsidiary ledgers
Journalize transactions using special journals
Sales journalCash receipts journal
Purchases journalCash payments journal
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Learning objective 3
Journal: Transaction type:
Sales journal Credit sales of inventory
Cash receipts journal Cash inflows to the business
Purchases journal Credit purchases (including inventory)
Cash payments journal Cash outflows from the business
General journal Any transaction that is not able to be recorded in a special journal, including:• Correcting entries • Adjusting entries• Closing entries
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Types of journals
▪Used to record sales of inventory on credit▪Perpetual inventory system – last two columns used for each sale
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Sales journal
▪Post entries to customers’ accounts in the accounts receivable subsidiary ledger daily
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Sales journal
▪Post totals to all relevant general ledger accountsat the end of the accounting period
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Sales journal
▪Used to record transactions involving a receipt of cash
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Cash receipts journal
▪Post entries to customers’ accounts in the accounts receivable subsidiary ledger daily▪Post to other accounts in the general ledger daily
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Cash receipts journal
▪Post totals to all relevant general ledger accountsat the end of the accounting period
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Cash receipts journal
▪Used to record credit purchases
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Purchases journal
▪Post entries to suppliers’ accounts in the accounts payable subsidiary ledger daily▪Post to other accounts in the general ledger daily
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Purchases journal
▪Post totals to all relevant general ledger accountsat the end of the accounting period
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Purchases journal
▪Used to record transactions involving a payment of cash
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Cash payments journal
▪Post to suppliers’ accounts in the accounts payable subsidiary ledger daily▪Post to other accounts in the general ledger daily
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Cash payments journal
▪Post totals to all relevant general ledger accountsat the end of the accounting period
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Cash payments journal
Post transactions from thespecial journals to general and
subsidiary ledger accounts
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Learning objective 4
Remember to post:▪Entry to subsidiary ledger on a daily basis▪Entry recorded in an ‘Other Accounts’ column on a daily basis▪Totals of each column (except the ‘Other Accounts’ column) at the end of the accounting period
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Posting transactions
Prepare schedules of accountsreceivable and payable
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Learning objective 5
Schedules of accounts
▪Verifies that the sum of the customer balances recorded in the accounts receivable subsidiary ledger is equal to the balance of the Accounts Receivable control account in the general ledger.
Schedule of accounts receivable:
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Schedules of accounts
▪Verifies that the sum of the supplier balances recorded in the accounts payable subsidiary ledger is equal to the balance of the Accounts Payable control account in the general ledger.
Schedule of accounts payable:
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Explain how special journalsaffect the general journal
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Learning objective 6
▪Not all transactions can be entered into special journals e.g.– Correcting entries– Adjusting entries– Closing entries
▪These are entered into the general journal
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Special journals and the general journal
▪ If a transaction recorded in the general journal involves both a control account and a subsidiary account:▪Journalizing: Both the control and subsidiary account must be identified in the general journal entry▪Posting: The amount must be posted to both the control account and the subsidiary ledger account
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Special journals and the general journal