Special Journals or subsidiary Journals

I’m going to now work through an example where we deal with a sales journal. All this
means [is that] rather than recording all transactions of a business in a general journal,
we group like kind transactions based on the type of transaction it is, so we are going to
keep all sales in a sales journal and it will work like this.
We have a January 8th sale, the invoice number of that sale, the customer is Customer
B and it is a sale on account of $8,000.
What you should see is we are only having to write down the number $8,000 one time
because that $8,000 represents a debit to receivables and a credit to sales. This saves
us time, because we only have to write down the $8,000 amount one time. It also
divides labor because we can put one person in charge of just the sales journal and
someone else would be in charge of the purchases journal. Once we’ve posted this, we
would record the posting entry as account number 110 and indicating that it is Customer
B.
On January 17th we have a sale on account of $10,000 which we post to Customer A
and then on January 23rd we have a sale on account of $9,000 which we post to
Customer B.
The total of all sales is $27,000. Down here I have the subsidiary ledgers which we
post to on a daily basis when the transaction occurs but then in total we take the full
$27,000 and post to the general ledger accounts receivable account. In other words,
these amounts effectively get posted twice, once in detail to the subsidiary ledger and
another time in total to the general ledger.
Let’s move on to the cash receipts.

Here is the cash receipts journal, you can see the T is right down the middle here in this
cash receipts journal [with] debits on the left [and] credits on the right and I brought
forward the subsidiary accounts from the prior page and the general ledger account.
January 20th, we deposited into our checking account, $3,000 of cash because we
collected $3,000 on an account receivable from Customer A and recorded the posting
reference.
Then on January 29th we collected another $7,000 but this time it is from Customer C
and we posted that.
This $10,000 debit represents the total cash received during the month which we will
post to the general ledger cash account and this $10,000 is the total reduction of
receivables during the month which we post to the accounts receivable general ledger
account and we record the posting reference.
Our balance in receivables for Customer A is $10,000, for Customer B is $22,000 and
for Customer C is $0. In total the subsidiary accounts have a debit balance of $32,000,
which we reconcile at the end of the month to the general ledger account which has a
debit balance of $32,000.
So the total accounts receivable subsidiary ledgers amount to $32,000 of debit and that
equals the total of $32,000 in the general ledger for receivables. We therefore have
performed the reconciliation process of the subsidiary ledgers to the general ledger.

The purchases journal looks something like this with date, supplier, posting reference
and whenever you buy on account, you just have to record the number once and it will
represent a debit to the inventory, increasing it and a credit to accounts payable,
increasing it.
For the cash payments journal I will also put the T in the middle so you can see
that. These debits to accounts payable will reduce accounts payable and the credits to
purchases discounts, which we haven’t talked about, would increase the purchases
discounts account.
In summary, subsidiary ledgers help track individual balances for each individual
customer, for each individual supplier, for each individual inventory account. We have
subsidiary accounts for any account for which we want to track more detail.
They help improve internal control because there are monthly reconciliations of the
subsidiary ledgers to the general ledger control account. For example, receivables are
reconciled on a monthly basis.
Special journals save time because, in some cases, you can write that number only one
time and it represents both a debit and a credit.
In addition, you can divide labor. You can put one person in charge of the sales journal,
another person in charge of the purchases journal and it helps to divide labor.
The detail of the special journals is posted to the sub-ledgers on a daily basis whereas
the total is posted to the general ledger on a monthly basis.
Slide 11
I hope that gives you a better perspective on subsidiary ledgers and special journals,
wish you all the best on the quiz.