You could not split this journal entry between two journals, because each transaction’s debits must equal the credits or else your journal totals will not balance at the end of the month. For example, if the company made a sale for $1,000 and the customer gave $300 in cash and promised to pay the remaining balance in the future, the entire transaction would go into the cash receipts journal, because some cash was received, even if it was only part of a transaction. If you receive cash, regardless of the source of the transaction, and even if it is only a part of the transaction, it goes in the cash receipts journal. How will you remember all of this? Remember, “Cash Is King,” so we consider cash transactions first. The relationship between the special journals, the general journal, and the general ledger can be seen in Figure 7.8. In addition, instead of one person entering all of the transactions in all of the journals, companies often assign a given special journal’s entries to one person. In each special journal, all transactions are totaled at the end of the month, and these totals are posted to the general ledger. This makes it easier and more efficient to find a specific type of transaction and speeds up the process of posting these transactions.

Instead of having just one general journal, companies group transactions of the same kind together and record them in special journals rather than in the general journal. What should the total be in the Accounts Receivable Control Total?Īccounts Payable Control Total is: 1,362 + 4,468 + 8,167 = 13,997Īccounts Receivable Control Total is: 2,250 + 0 + 1,500 + 8,160 = 11,910 Special Journals Here is the information from the accounts receivable subsidiary ledger. What should the total be in the Accounts Payable Control Total? Here is the information from the accounts payable subsidiary ledger: The use of special journal and subsidiary ledgers can make the accounting information system more effective and allow for certain types of information to be obtained more easily. Thus, recording all transactions to the general journal makes it difficult to find the particular tidbits of information that are needed for one of our customers, Mr. Imagine if there were 1,000 similar credit sales transactions for the month, each one would be written in the general journal in a similar fashion, and all other transactions, such as the paying of bills, or the buying of inventory, would also be recorded, in chronological order, in the general journal. Smith said, “I thought I paid part of that two weeks ago,” the company would have to go through the general journal to find all payment entries for Mr. Smith asked, “How much do I owe?” To answer this question, the company would need to review all of the pages of the general journal for nearly an entire month to find all of the sales transactions relating to Mr. This journal entry would be followed by a journal entry for every other transaction the company had for the remainder of the period. In the general journal, the company would record the following. For example, assume customer John Smith charged an item for $100 on June 1. While this is correct accounting methodology, it also can create a cumbersome general journal with which to work and may make finding specific pieces of information very challenging.

In other words, transactions are recorded into the general journal as they occur. You’ve learned that each transaction is recorded in the general journal, which is a chronological listing of transactions. The larger the business, the greater the likelihood that that business will have a large volume of transactions that need to be recorded in and processed by the company’s accounting information system.

Cogs control account