JOURNAL

WEEK 5

NECESISTY OF JOURNAL CONVENIENT RECORDING OF

TRANSACTION MAINTAINING AND PRESERVING THE

IDENTITY OF TRANSACTION ASCERTAINING THE TRUE NATURE OF

TRANSACTION MAINTAINING PERMANENT RECORD OF

TRANSACTION

FUNCTION OF JOURNAL TO ANALYZE EACH TRANSACTION INTO

DEBIT OR CREDIT TO ARRANGE TRANSACTION

TIPES OF JOURNAL GENERAL JOURNAL: Used by small

companies that have limited transactions

SPECIAL JOURNAL: used by companies that have high frequency of transactions

NECESSITY OF SPECIFIC JOURNAL

Collect and classify all of transactions

Reduce the clerical work

Internal control

TIPES OF SPECIFIC JOURNALS

1. Sales journal. The sales journal lists all credit sales made to customers. Sales returns and cash sales are not recorded in this journal. Entries in the sales journal typically include the date, invoice number, customer name, and amount. Invoices are the source documents that provide this information. In its most basic form, a sales journal has only one column for recording transaction amounts. Each entry increases (debits) accounts receivable and increases (credits) sales.

2. Purchases journal. The purchases journal lists all credit purchases of merchandise. Entries in this journal usually include the date of the entry, the name of the supplier, and the amount of the transaction. Some companies include columns to identify the invoice date and credit terms, thereby making the purchases journal a tool that helps the companies take advantage of discounts just before they expire. The purchases journal to the right has only one column for recording transaction amounts. Each entry increases (debits) purchases and increases (credits) accounts payable.

3. Cash receipts journal. Transactions that increase cash are recorded in a multi-column cash receipts journal. If sales discounts are offered to customers, the journal includes a separate debit column for sales discounts. Credit columns for accounts receivable and for sales are normally present, but companies that frequently receive cash from other, specific sources use additional columns to record those types of cash receipts. In addition, the cash receipts journal includes a column named Other, which is used to record various types of cash receipts that occur infrequently and therefore do not warrant a separate column. For example, cash receipts from capital investments, bank loans, and interest revenues are generally recorded in the Other column. However, a company that provides consumer loans and receives interest payments from many customers would probably include a separate column for interest revenue. Whenever a credit entry affects accounts receivable or appears in the Other column, the specific account is identified in the column named Account.

4. Cash disbursements journal. Transactions that decrease cash are recorded in the cash disbursements journal. The cash disbursements journal to the right has one debit column for accounts payable and another debit column for all other types of cash payment transactions. It has credit columns for purchases discounts and for cash. Since each entry debits a control account (accounts payable) or an account listed in the column named Other, the specific account being debited must be identified on every line.

5. General journal entries. The general journal is used for adjusting entries, closing entries, correcting entries, and all transactions that do not belong in one of the special journals. If a general journal entry involves an account in a subsidiary ledger, the transaction must be posted to both the general ledger control account and the subsidiary ledger account. Both account numbers are placed in the general journal's reference column to indicate that the entry has been posted correctly.

PRINCIPLE OF CREATING JOURNAL

Adequate Name of column = name of account The column of journal is created to sum

the account’s value and transfer to general ledger

Effective and efficient Internal control