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De La Salle Lipa 1 Semester SY 2018-2019

Financial Accoun0ng and Repor0ng MSPunay

Module 2:
Recording Business Transac0on
(General and Special Journals)

Chapter Objec0ves
•  Differen0ate the opera0ng cycle for service and
merchandising businesses
•  Review the purchase and sales cycle and its effect
on the accoun0ng records
•  Differen0al general and special journals
•  Determine transac0ons that are recorded in the
special journals

MSPunay2018

Service vs. Merchandising

MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Document Flow in Purchasing

Purchase Goods Receipt AP Invoice
Order PO
1.) 2.) 3.)

Warehouse
(Quan0ty)

General Ledger
MSPunay2018(Value)

Document Flow in Sales

Quota0on Order Delivery A/R Invoice

Warehouse 1.) 2.) 3.)

(Quan0ty)

General Ledger
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General ledger
•  General ledger is the principal ledger, which contains
all of the balance sheet and income statement accounts
•  Each subsidiary ledger is represented in the general
ledger by a summarizing account, called a controlling
account
•  The balance in the controlling accounts must equal the
sum of the balances in the subsidiary ledgers

MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Subsidiary Ledgers
•  Subsidiary ledgers are a listing of individual
accounts with common characteristics
– Accounts receivable ledgers
– Accounts payable ledgers

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Accounts Receivable Ledger

ACCOUNTS RECEIVABLE LEDGER
A Company
Date PR Debit Credit Balance
Jan. 1 S5 500 500
ACCOUNTS RECEIVABLE LEDGER
B Company
Date PR Debit Credit Balance
Jan. 16 S5 1,000 1,000

ACCOUNTS RECEIVABLE LEDGER

C Company
Date PR Debit Credit Balance
Jan. 25 S5 415 415

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Controlling vs Subsidiary

Controlling Subsidiary
Balance Balances

MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Accounts Receivable Ledger

ACCOUNTS RECEIVABLE LEDGER
A Company
Date PR Debit Credit Balance
ACCOUNTSJanRECEIVABLE.1S5 LEDGER500 500
B Company
Date PR Debit Credit Balance

ACCOUNTSJanRECEIVABLE.16S5 LEDGER1,000 1,000

C Company
Date PR Debit Credit Balance
Jan. 25 S5 415 415

GENERAL LEDGER
Accounts Receivable No. 106
Date PR Debit Credit
Jan. 31 S5 1,915 1,915
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Purchase on Inventory
•  Merchandise is purchased for resale to customers,
the account
–  Merchandise Inventory is debited for the cost of
goods.
•  Like sales, purchases may be made for cash or on
account (credit).
•  The purchase is normally recorded by the purchaser
when the goods are received from the seller.
•  Each credit purchase should be supported by a
purchase invoice.
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Purchase Discount
•  Credit terms may permit the buyer to claim a cash
discount for the prompt payment of a balance due.
•  The buyer calls this discount a purchase discount.
•  Like a sales discount, a purchase discount is based
on the invoice cost less returns and allowances, if
any.

MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Purchase Returns and Allowances

•  A purchaser may be dissatisfied with merchandise received
because the goods:
1) are damaged or defective,
2) of inferior quality, or
3) not in accord with the purchaser’s specifications.
•  The purchaser initiates the request for a reduction of the balance
due through the issuance of a debit memorandum (purchaser’s
debit decreases A/P!).
•  The debit memorandum is a document issued by a buyer to
inform a seller that the seller’s account has been debited
because of unsatisfactory merchandise.
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Transporta0on or Freight Cost

•  Transportation costs are the cost of moving
inventory from seller to buyer.
•  FOB stands for Free on Board and governs the
passing of title of the goods.
•  Selling/buying agreements usually specify
FOB terms.
MSPunay2018

Transporta0on or Freight Cost

A sales agreement should indicate whether the seller or
the buyer is to pay the cost of transporting the goods to
the buyer’s place of business.
•  FOB Shipping Point
1) Goods placed free on board the carrier by the seller
2) Buyer pays freight costs
•  FOB Destination
1) Goods placed free on board at the buyer’s business
2) Seller pays freight costs
MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Transporta0on or Freight Cost

Seller Buyer

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Transporta0on or Freight Cost

FOB Shipping Point

Seller Buyer
Accounts Receivable xx Purchases xx
Sales xx Accounts Payable xx

Freight-In xx
Cash (or AP) xx

MSPunay2018

Transporta0on or Freight Cost

FOB Destination

Seller Buyer
Accounts Receivable xx Purchases xx
Sales xx Accounts Payable xx

Freight-Out xx
Cash (or AP) xx

MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Transporta0on or Freight Cost

FOB Shipping - Prepaid
Seller Buyer

Accounts Receivable xx Purchases xx

Sales xx Accounts Payable xx

Accounts Receivable xx Freight-In xx

Cash xx Accounts Payable xx

MSPunay2018

Transporta0on or Freight Cost

FOB Destination - Collect

Seller Buyer
Accounts Receivable xx Purchases xx
Sales xx Accounts Payable xx

Freight-Out xx Accounts Payable xx

Accounts Receivable xx Cash xx

MSPunay2018

Recording Transac.ons

MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Recording Transac.ons

MSPunay2018

Special Journals
•  Special journals
– organizing transactions into common groups
and require less time and effort for posting
Transactions Special Journal (Abbreviation)
Sales on credit Sales Journal (S)
Purchases on credit Purchases Journal (P)
Cash receipts Cash Receipts Journal (CR)
Cash Payments Cash Payments Journal (CP)
MSPunay2018

Sales Journal
SALES JOURNAL Page 1
Account Invoice Dr. A/R Cr. Dr COGS Cr
Date Debited NumberPR Sales Inventory
2016
Feb. 2 Jason Henry 307 450 315

These two totals are

posted monthly to the
appropriate accounts

MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Sales Journal
SALES JOURNAL Page 1
Account Invoice Dr. A/R Cr. Dr COGS Cr
Date Debited Number PR Sales Inventory
2016
Feb. 2 Jason Henry 307 450 315
Daily, each RECEIVABLE LEDGER

transaction is
posted to the Jason Henry
appropriate Date PR Debit Credit Balance
Accounts
Receivable Ledger
account.

MSPunay2018

Sales Journal
SALES JOURNAL Page 1
Account Invoice Dr. A/R Cr. Dr COGS Cr
Date Debited Number PR Sales Inventory
2016
Feb. 2 Jason Henry 307 450 315

ACCOUNTS RECEIVABLE LEDGER

Jason Henry
PR Credit Balance

Feb. 2 450 450

MSPunay2018

Sales Journal

SALES JOURNAL Page 1

Account Invoice Dr. A/R Cr. Dr COGS Cr
Date Debited Number PR Sales Inventory
2016
Feb. 2 Jason Henry 307 ü 450 315
7 Albert Co. 308 ü 500 355
13 Bam Moore 309 ü 350 260
15 Paul Roth 310 ü 200 150

MSPunay2018
De La Salle Lipa 1st Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Sales Journal
SALES JOURNAL Page 1
Account Invoice Dr. A/RCr. Dr COGS Cr
Date Debited Number PR Sales Inventory

Feb.
2016
2 Jason Henry 307 ü 450 315
7 Albert Co. 308 ü 500 355
13 Bam Moore 309 ü 350 260
ü

15 Paul Roth 310 200 150

22 Jason Henry 311 ü 225 155
25 Frank Booth 312 ü 175 95
28 Albert Co. 313 ü 250 170
28 Totals 2,150 1,500

(106/413) (502/119)

On Feb. 28th,
GENERAL LEDGER
Accounts Receivable No. 106 post the
Balance column total to
Feb. 28 S1 2,150 2,150 Accounts
Receivable
MSPunay2018

Sales Journal
SALES JOURNAL Page 1
Account Invoice Dr. A/R Cr. Dr COGS Cr
Date Debited Number PR Sales Inventory

Feb.
2016
2 Jason Henry 307 ü 450 315
7 Albert Co. 308 ü 500 355
13 Bam Moore 309 ü 350 260
ü

15 Paul Roth 310 200 150

22 Jason Henry 311 ü 225 155
ü

25
28
Frank Booth
Albert Co.
312
313 ü 175
250
95
170

28 Totals 2,150 1,500

(106/413) (502/119)

th
GENERAL LEDGER On Feb. 28 ,
Sales No. 413 post the
Date PR Debit Credit Balance column total
Feb. 28 S1 2,150 2,150 to Sales

MSPunay2018

Sales Journal
SALES JOURNAL Page 1
Account Invoice Dr. A/R Cr. Dr COGS Cr
Date Debited Number PR Sales Inventory
Feb.
2016
2 Jason Henry 307 ü 450 315
7 Albert Co. 308 ü 500 355
13 Bam Moore 309 ü
ü
350 260

22
15 Paul Roth
Jason Henry
310
311 ü
ü
200
225
150
155

28
25 Frank Booth
Albert Co.
312
313 ü 175
250
95
170

28 Totals 2,150 1,500

(106/413) (502/119)

GENERAL LEDGER
Inventory No. 119
Date PR Debit Credit
Now post the
Feb. 28 S1 1,500 1,500 COGS and
Inventory
accounts

GENERAL LEDGER
Cost of Goods Sold No. 502
Date PR Debit Credit Balance
Feb. 28 S1 1,500 1,500

MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Sales Journal
SALES JOURNAL Page 1
Account Invoice Dr. A/R Cr. Dr COGS Cr
Date Debited Number PR Sales Inventory
Feb.
2016
2 Jason Henry 307 ü 450 315
7 Albert Co. 308 ü 500 355
13 Bam Moore 309 ü
ü
350 260
15
22
Paul Roth
Jason Henry
310
311 üü
200
225
150
155
25
28
Frank Booth
Albert Co.
312
313 ü 175
250
95
170

28 Totals 2,150 1,500

(106/413) (502/119)

GENERAL LEDGER
Inventory No. 119 Remember to update the
Date PR Debit Credit Balance
Feb. 28 S1 1,500 1,500 account balances and the
posting references

GENERAL LEDGER
Cost of Goods Sold No. 502
Date PR Debit Credit Balance
Feb. 28 S1 1,500 1,500

MSPunay2018

Cash Receipts Journal

CASH RECEIPTS JOURNAL Page 1
Sales
Discount Accts. Rec. Other COGS Dr.
Date Accounts Credited PR Explanation Cash Dr. Dr. Cr. Sales Cr. Accts. Cr. Inventory Cr
2016
Feb. 7 Sales Cash sale 4,450 4,450 3,150
12 Jason Henry Invoice, Feb 2 441 9 450
14 Sales Cash sale 3,925 3,925 2,950
17 Albert Co. Invoice, Feb 7 490 10 500
20 Note payable Note to bank 750 750
21 Sales Cash sale 4,700 4,700 3,400
22 Interest revenue Bank account 250 250
23 Bam Moore Invoice, Feb 13 343 7 350
25 Paul Roth Invoice, Feb 17 196 4 200
28 Sales Cash sale 4,225 4,225 3,050
28 Total 19,770 30 1,500 17,300 1,000 12,550

MSPunay2018

Cash Receipts Journal

CASH RECEIPTS JOURNAL Page 1
Sales
Discount Accts. Rec. Other COGS Dr.
Date Accounts Credited PR Explanation Cash Dr. Dr. Cr. Sales Cr. Accts. Cr. Inventory Cr
2016
Feb. 7 Sales üü Cash sale 4,450 4,450 3,150
12 Jason Henry ü Invoice, Feb 2 441 9 450
14 Sales üü Cash sale 3,925 3,925 2,950
17 Albert Co. ü Invoice, Feb 7 490 10 500
20 Note payable 245 Note to bank 750 750
21 Sales üü Cash sale 4,700 4,700 3,400
22 Interest revenue 409 Bank account 250 250
23 Bam Moore Invoice, Feb 13 343 7 350
ü

25 Paul Roth ü Invoice, Feb 17 196 4 200

28 Sales üü Cash sale 4,225 4,225 3,050

28 Total 19,770 30 1,500 17,300 1,000 12,550

(101) (415) (106) (413) (x) (502/119)

ü Amount is not posted individually to an account. ü Amount is posted

individually to subsidiary ledger.
Acct. No. Amount is posted to specified account.

MSPunay2018
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De La Salle Lipa 1 Semester SY 2018-2019
Financial Accoun0ng and Repor0ng MSPunay

Purchases Journal
PURCHASES JOURNAL Page 3
Accts. Office Other
Invoice Payable Inventory Supplies Accts.
Date Account Date Terms PR Cr. Dr. Dr. Dr.
2016
Feb 3 Horung Supply Co Feb. 2 n/30 ü 350 275 75
5 Ace Mfg. Co 5 2/10,n/30 ü 200 200
13 Wynet & Co. 10 2/10,n/30 ü 150 150
20 Smite Co. 18 2/10,n/30 ü 300 300
25 Ace Mfg. Co 24 2/10,n/30 ü 100 100
28 Store supplies/ITT Co. 28 n/30 125/ ü 225 125 25 75

28Totals 1,325 1,150 100 75

(201) (505) (124) ( üü )

üüAmount is not posted individually to an account.

! Amount is posted individually to subsidiary ledger.
Acct. No. Amount is posted to specified account.

MSPunay2018

Cash Payments Journal

CASH Payments JOURNAL Page 1
Merch. Other Accounts
Inventory Accounts Payable
Date Ch. No. Payee Account Debited PR Cash Cr. Cr. Dr. Dr.
2016
Feb. 3 105 L & N Railroad Inventory 119 15 15
5 106 East Sales Co. Inventory 119 25 25
13 107 Ace Mfg. Co Ace Mfg. Co. ü 196 4 200
20 108 Jerry Hale Salaries expense 622 250 250
ü

25 109 Wynet & Co. Wynet & Co. 147 3 150

28 110 Smite Co. Smite Co. ü 294 6 300

28 Totals 927 13 290 650

( )
(101) (119) üü (201)

üü Amount is not posted individually to an account.

! Amount is posted individually to subsidiary ledger.
Acct. No. Amount is posted to specified account.

MSPunay2018

Chapter Objec0ves
ü Differen0ate the opera0ng cycle for service and
merchandising businesses
ü Review the purchase and sales cycle and its effect
on the accoun0ng records
ü Differen0al general and special journals
ü Determine transac0ons that are recorded in the
special journals

MSPunay2018