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Chapter 7
Special Journals and
Subsidiary Ledgers
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Learning objectives
1. Explain the purpose of special journals
2. Explain the purpose of control accounts and
subsidiary ledgers
3. 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 objective 1
Explain the purpose of
special journals
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The purpose of special journals
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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Learning objective 2
Explain the purpose of
control accounts and
subsidiary ledgers
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Control accounts and subsidiary ledgers
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:
Control account
Subsidiary ledger
Accounts Receivable
Accounts Receivable Subsidiary Ledger
Accounts Payable
Accounts Payable Subsidiary Ledger
Inventory
Inventory Cards
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Control accounts and subsidiary ledgers
▪ At the end of the accounting period:
Control Account:
Ending Balance
Subsidiary Ledger:
$600
=
Account 1
Account 2
Account 3
Total
$
100
200
300
$600
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Control accounts and subsidiary ledgers
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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Learning objective 3
Journalize transactions using
special journals
Sales journal
Cash receipts journal
Purchases journal
Cash payments journal
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Types of journals
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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Sales journal
▪ 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 accounts
at the end of the accounting period
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Cash receipts 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 accounts
at the end of the accounting period
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Purchases 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 accounts
at the end of the accounting period
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Cash payments 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 accounts
at the end of the accounting period
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Learning objective 4
Post transactions from the
special journals to general and
subsidiary ledger accounts
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Posting transactions
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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Learning objective 5
Prepare schedules of accounts
receivable and payable
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Schedules of accounts
Schedule of accounts receivable:
▪ 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.
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Schedules of accounts
Schedule of accounts payable:
▪ 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.
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Learning objective 6
Explain how special journals
affect the general journal
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Special journals and the general journal
▪ 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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