Financial Accounting
Subsidiary Ledgers
and Special Journals
Study Objectives
1.
Describe the nature and purpose of a subsidiary
ledger.
2. Explain how companies use special journals in
journalizing.
3. Indicate how companies post a multi-column journal.
Subsidiary Books
Used to keep track of individual balances.
Common subsidiary books are:
1.Purchases Journal
2.Sales Journal
3.Purchase Returns Journal
4.Sales Returns Journal
5. Cash Book
6.Bills Receivable (customers’) Journal
7. Bills Payable (suppliers’) Journal
Cash book serves as a primary book as well as ledger
Various types of cash book:
•
Single column
•
Double column
•
Three column
•
Multiple Column
•
Petty Cash book
Subsidiary Ledgers
Relationship of general ledger and subsidiary ledgers
Illustration E-2
.
Subsidiary Ledgers
Advantages of Subsidiary Ledgers
1.
Transactions affecting one customer or one
creditor are shown in a single account
2. Avoid excessive details in General ledger
3. Help locate errors in individual accounts.
4. Make possible division of labor.
Special Journals
Used to record similar types of transactions.
Illustration E-4
If a transaction cannot be recorded in a special journal,
the company records it in the General Journal.
Special Journals
Sales Journal
Illustration E-5
Under a perpetual inventory system, one entry at selling price in Sales
Journal results in a debit to Accounts Receivable and a credit to Sales.
Another entry at cost results in a debit to Cost of Goods Sold and a
credit to Merchandise Inventory.
.
Special Journals
Illustration E-6
POSTING THE SALES JOURNAL
Companies make daily postings
from the sales journal to the
individual accounts receivable
in the subsidiary ledger.
Special Journals
Illustration E-6
POSTING THE SALES JOURNAL
Posting to the general ledger is
done monthly.
Special Journals
Advantages of Sales Journal
One-line entry for each sales transaction saves
time.
Only totals, rather than individual entries, are
posted to the general ledger.
A division of labor results.
Special Journals
Cash Receipts Journal
Illustration E-8
In the cash receipts journal, companies record all receipts of cash.
The posting of the cash receipts journal is similar to the posting of
the sale journal. See complete Illustration E-8 in the text.
Special Journals
Illustration E-11
Purchases Journal
In the purchases journal,
companies record all purchases of
merchandise on account.
Special Journals
Purchases Journal
Illustration E-11
Special Journals
Cash Payments Journal
Illustration E-15
In a cash payments (cash disbursements) journal, companies
record all disbursements of cash.
The procedures for posting the cash payments journal are similar to
those for other journals.
Special Journals
Effects of Special Journals on the General/Proper Journal
Special journals substantially reduce the
number of entries that companies make in the
journal proper.
Only transactions that cannot be entered in a
special journal are recorded in the journal
proper.
Also, correcting, adjusting, and closing entries
are made in the journal proper.