Look at the following transactions of Fooz Ball Town: Show
You can see how these journal entries (using the perpetual inventory method) would be recorded in the general ledger as by clicking fooz ball town to save space. Note: The entries would be slightly different under the periodic inventory method as cost of goods sold and merchandise inventory are not updated until the end of the period instead of with each sale or purchase. The list of entries for these 9 transactions is long…can you imagine what it would look like when a company has hundreds of transactions a day? It will be overwhelming so there needs to be a better way. Special journals are a quicker and more efficient way to enter transactions. Remember, we have 5 special journals:
Now we will classify Fooz Ball Town’s transactions into the proper special journals:
The July 10 sales is not recorded in the sales journal — why not? It was a cash sale and not on credit. The discussion continues by looking at each special journal in detail. Sales JournalThe sales journal is used to record all sales on credit. This means the customer has not paid but we will receive payment in the future. The video shows an example of a sales journal under the periodic inventory method: Under the perpetual inventory system, the Sales Journal would have another column to show Debit to Cost of Goods Sold and a Credit to Inventory. For Fooz Ball Town, we identified the following transactions for the sales journal:
These entries would be recorded in the sales journal (instead of general journal entries) as:
The subsidiary (customer) ledgers would be updated daily but at the end of the period, the TOTALS only would be recorded in posted directly into the accounts listed with no journal entry necessary. Cash Receipts JournalThe cash receipts journal is used to record all receipts of cash for any reason. Anytime money comes into the company, the cash receipts journal should be used. The cash receipts journal, under the perpetual inventory would, would also contain a column to Debit cost of goods sold and Credit inventory used for any cash sales. For Fooz Ball Town, we identified two transactions for the cash receipts journal:
The cash receipts journal for these transactions would be:
At the end of the period, the TOTALS only would be recorded in posted directly into the accounts listed with no journal entry necessary. Purchase JournalThe purchases journal is used to record all purchases on credit. This means purchases we have not paid for but will pay for in the future. There was one transaction identified for the purchase journal for Fooz Ball Town:
This would be record in a purchases journal (under the perpetual inventory system as):
The purchase from Gus Grass would be recorded in the accounts payable subsidiary ledger and the total would be recorded at the end on the period by posting directly to merchandise inventory and accounts payable. This video demonstrates the purchase journal and cash disbursement journal: Cash Disbursement JournalThe cash disbursement journal is used to record all payments of cash regardless of the reason. Anytime cash leaves the company, it should be recorded in the cash disbursement journal. We identified these transaction from Fooz Ball Town for the cash disbursement journal:
These entries would be recorded into a cash disbursement journal (under the perpetual inventory method) as:
At the end of the period, we would post the totals of $7,650 credit to cash, the $7,500 debit to accounts payable, and the $150 credit to merchandise inventory. The DR (debit) Other column would be handled a little differently as you need to look to the account column to find out where these individual amounts should be posted. In this case, we would post a $200 debit to merchandise inventory and a $300 debit to utility expense. Under the periodic inventory method, the July 6 shipping costs would go to a Transportation In account and the July 25 discount would go to Purchases Discounts. General JournalWhen using special journals, the general journal is used to record all adjusting entries, closing entries and anything else that doesn’t fit into the other special journals. An example of this would be any returns or allowances coming from either the sales or purchase side. For Fooz Ball Town, there is one transaction for the general journal:
This journal entry is recorded, under the perpetual inventory method as:
This entry would then be posted to the accounts payable and merchandise inventory accounts both for $2,500. Under the periodic inventory method, the credit would be to Purchase Returns and Allowances. In which journal is the cash purchase of merchandise inventory recorded?Cash sales of inventory are recorded in the cash receipts journal. Both cash and credit sales of non-inventory or merchandise are recorded in the general journal.
In what special journal will this transaction be recorded sold merchandise for cash?In the sales journal, companies record sales of merchandise on account. Cash sales of merchandise go in the cash receipts journal. Credit sales of assets other than merchandise go in the general journal.
Which of the following items would be recorded in the purchases journal?All types of purchases made on credit are recorded in the purchases journal, including office supplies, services, and goods acquired for resale.
What are the four main special journals in a merchandising business?Special journals are designed as a simple way to record the most frequently occurring transactions. There are four types of Special Journals that are frequently used by merchandising businesses: Sales journals, Cash receipts journals, Purchases journals, and Cash payments journals.
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