Special Journals and Subsidiary Lecgers - Chapter 6 Mohd Nizal

6
Special Journals and Subsidiary Ledgers

Learning Outcomes
After studying this chapter, you should be able to:

 Describe the nature and purpose of a subsidiary
ledger
 Explain why special journals are created
 Record the transactions to the special journals and
cash book
 Post (transfer) the journal entries in the special
journals and cash book to the ledgers
Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

© Oxford Fajar Sdn. Bhd. (008974-T), 2018 6–3
6.0 Introduction
This chapter illustrates the recording of transactions

in the appropriate journals and ledgers.
 The journals used are:
– sales & returns inwards journals, purchases &
returns outwards journals, and the general journal
 The ledgers used are:

– sales ledger, purchases ledger and general ledger
 A cash book is both a journal and a ledger.

6.1 Subsidiary Ledgers
 A subsidiary ledger is a group of accounts with a

common characteristic. It frees the general ledger
from the details of individual balances.
 The subsidiary ledger facilitates the recording

process by freeing the general ledger from the
details of individual balances.

6.1 Subsidiary Ledgers (cont.)
 They might be customer or creditor accounts:

– Customers (sales ledger)
– Creditors/suppliers (purchases ledger)
– Each debtor/creditor has its own account in the
respective subsidiary ledgers

6.1 Subsidiary Ledgers (cont.)
 The
different
ledgers
are as
follows:

6.2 Special Journals
 The
different
types of
journals
that
businesses
use are as
follows:

6.2 Special Journals (cont.)
 Sales Journal
– Used to record sales of goods on credit
• Cash sales of goods are entered in the cash book
• Credit sales of assets other than stocks of goods
are entered in the general journal
– Entries in a sales journal are made from sales
invoices
– Posting from the sales journal is made daily to the
individual debtor accounts in the sales ledger, and
monthly to the general ledger.
 Returns Inwards Journal

– When goods sold to customers are returned
(return inwards or sales return), a credit note will
be issued.
– Daily postings are done in the sales ledger while
the total sales returns will be posted at the end of
the month to the sales returns account in the
general ledger.

 Purchases Journal
– All purchases of goods on credit are recorded in
the purchases journal. Entries are made from
purchases invoices.
– The journalising procedure is similar to the
procedures for a sales journal, but the purchases
journal may not have an invoice number column
because invoices received from different suppliers
will not be in numerical sequence.

– Postings are made daily to the purchases ledger

and monthly to the purchases account in the
general ledger.
 Returns Outwards Journal

– A credit note will be sent by the supplier to the
business when goods are returned by a business
to its supplier.
– It indicates that the liability of the business to the
supplier has been reduced accordingly.
 Samples of the special journals are as follows:


6.4 Cash Receipts Journal
 The cash receipts journal is used to record all cash

(and/or bank) received by the business.
– E.g. cash sales, income and cash received from
debtors.
– The ‘Discount Allowed’ column records the amount
of cash discounts given by the business to the
debtors for early settlement of their accounts
(accounts receivable).

6.4 Cash Receipts Journal
(cont.)
 The format of the cash receipts journal:

6.5 Cash Payments Journal
 The cash payments journal is used to record all

transactions where cash (and/or bank) has been
paid out.
– E.g. cash purchases, payments made to creditors,
expenses paid and also discounts received.
– Discounts received are the cash discounts
received by the business from its creditors for early
settlement of accounts payable.

6.5 Cash Payments Journal
(cont.)
 The format of the cash payments journal:

6.6 Cash Book
 The cash book is an alternative to the cash

receipts and cash payments journals.
 The cash received and paid out is entered into

this book. It is a book of original entry (journal)
and a ledger account.
 Posting in cash book:

– money received is recorded on the debit side
– money paid is entered on the credit side
6.6 Cash Book (cont.)
 Two-column Cash Book

– The cash amount and the bank account are placed
side by side.
– This is to ensure that all money received and paid
out are properly accounted for.

– A summary of entries that can be found in a cash

book:


 Three-column Cash Book

– It is similar to a two-column cash book, but with two
extra columns:
• ‘Discounts Allowed’ column on the debit side
• ‘Discounts Received’ column on the credit side


6.7 General Journal
 Transactions that cannot be entered in special journals

are recorded in the general journal. These include:
– Opening entries at the commencement of a business
– Infrequently-occurring transactions, i.e.
• purchase of non-current assets on credit
• writing off of bad debts
• goods drawn by owner for personal use
– Entries to correct errors of posting to ledger accounts
– Adjusting entries
– Closing entries at end of period

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6

Special Journals and Subsidiary Ledgers

After studying this chapter, you should be able to:

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

This chapter illustrates the recording of transactions

 The ledgers used are:

 A cash book is both a journal and a ledger.

 A subsidiary ledger is a group of accounts with a

 The subsidiary ledger facilitates the recording

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

 They might be customer or creditor accounts:

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

 Returns Inwards Journal

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

– Postings are made daily to the purchases ledger

 Returns Outwards Journal

 Samples of the special journals are as follows:

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

 The cash receipts journal is used to record all cash

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

 The format of the cash receipts journal:

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

 The cash payments journal is used to record all

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

 The format of the cash payments journal:

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

 The cash book is an alternative to the cash

 The cash received and paid out is entered into

 Posting in cash book:

 Two-column Cash Book

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

– A summary of entries that can be found in a cash

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

 Three-column Cash Book

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

Fundamentals of Financial Accounting (SECOND EDITION) All Rights Reserved

 Transactions that cannot be entered in special journals

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