BIG PICTURE IN FOCUS: SLO (7) Record the transactions using special journals

METALANGUAGE
In this section, you will be refreshed of some terms already discussed in the previous lessons,
specifically the source documents. It is very important that you learn the various source
documents where transactions can be found and what journals you are going to use to record
these documents.
1. Sales Invoice – is a source documents prepared by the seller of goods and sent to the
buyer to document the revenue of the entity. Normally this is recorded in the “Sales
Journal”.
2. Official Receipt – is a source document that supports the receipt of cash by the seller
and normally recorded in the cash receipts journal.
3. Check – is a source document issued by a depositor ordering the bank to pay the
amount stated in the check from the depositor’s demand deposit to the person
indicated in the check (called payee). The entity issuing the check is the payor. A check is
a document that supports the cash voucher as a proof that something is being paid.
Normally the check is recorded in the “Cash Disbursement Journal”.
4. Receiving Report – is a source document containing information about the goods
received from a vendor. This source document is normally supported with vendor’s
invoice and the PO of the entity who made the purchased. This is recorded in the
“Purchase Journal”.
5. Credit Memorandum –this is a source document issued by the seller to inform the
buyer of any adjustment made of the buyer’s account which might be caused by return
of goods or price adjustment. This normally recorded in the “general journal”.
6. Debit Memorandum- this is a source document issued by the buyer to inform the seller
of any adjustment which might be caused by return of goods or price adjustment. This is
normally recorded in the general journal.

OTHER SOURCE DOCUMENTS THAT SUPPORT THE MAIN SOURCE DOCUMENTS.

7. Purchase order (PO)– is a source document made by the buyer authorizing the seller to
deliver the merchandise as detailed in the form. This document is an additional
supporting document that support the receiving report.
8. Deposit Slips – these are forms owned by the bank to be filled-up by depositor
stipulating the depositor’s name, account number, date and the details of the deposit.
These deposit slips when validated by bank indicates that cash and checks were actually
deposited or credited to the account of the holder (company). This is also an additional
source document that support the Official Receipt.

ESSENTIAL KNOWLEDGE
In the previous lessons, the discussion were limited to processing of transactions recorded in
the general journal using the general journal format and posted to the general ledger. This
system of recording is appropriate only in introducing basic accounting procedures but is not

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adequate even for micro or small business entities because of the number of transactions that
may occur in one accounting period hence the special or combination journal is more
appropriate. Entries is basically the same in the general journal format, only the format is
change. In this lesson, what we will do is record the transaction in the special journals,
therefore only the format is change but not the entries.

Why special journals is appropriate?

1. Numerous transactions can be processed daily because similar transactions are group
and recorded in an assign journal therefore it reduces the recording time.
2. In posting the transactions only totals are posted thereby reducing the posting time.
Unlike in the general journal format where all transactions are individually posted in the
GL resulting to a laborious posting work.
3. It is easy to trace transactions when they are homogenously recorded in an assign
journal.
4. For small, medium or large enterprise there is compartmentalization of task and so
different personnel may handle the recording so there is check and balance.
5. No routine explanation for each entry and with the use of column headings account titles
need not be repeated unlike in the general journal format.

There are two system in using special journal, the voucher system or the non-voucher system.
Either of the two is correct however for medium and large company the voucher system is
more appropriate. In this lesson, I will dwell on the non-voucher system because the practice
set is design using this system.

REMINDERS:
1. Special journals are books of accounts, therefore it is proper to have these books
registered first with the local government and BIR before its usage.
2. Non registration of these books of accounts is illegal, therefore subject to penalty from
the local and national taxing authorities.

WHERE DO WE RECORD THE CASH SALES AND CREDIT SALES?

Sales or income is normally recorded in the “Sales Journal”. However, there are companies
having two invoicing system. One series for cash sales invoice and another series for credit sales
invoice. When this happen the company may choose either to record the cash invoice in the
cash receipts journal or centralized the recording in the sales journal having two references the
“Cash Sales Invoice” and the “Credit Sales or Charge Invoice.” The decision lies on the
management if their control is focus on the control of cash. However, companies also give more
emphasis on the amount of revenue generated and vat output hence decided to centralize the
recording of cash sales invoice and charge invoices in the sales journal. There is no problem for
as along as whatever system they decided to adopt it has to be use consistently.

On the other hand if there is only one invoicing system, which means only one invoice is issued
whether the sales is on credit or in cash then it has to be recorded in the sales journal. This is
the system that I am going to adopt hence, my illustration shall focus on this system. Also

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because the practice set is design using this method. My illustration shall focus on recording
transactions for business engage in merchandising with annual gross sales of more than
P3million which is already subject to value-added tax.

ILLUSTRATION 1
Aquarius company (owned by Mr. Aqua) started its business operations on July 2018. The
company is engaged in buying and selling of computers and its accessories. Let us assume the
following transactions that occurred for the month of July 2018.

SUMMARY OF INVOICES:

SALES JOURNAL
All sales whether cash or on credit are recorded in this book. Figure 1 illustrates how the sales
transactions are recorded in the journal.

Figure 1.

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FIGURE 2. Illustrates how the sales journal is posted to the general ledger.

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Please note that the amount posted is the total for the month not the individual accounts as
we used to do in the general journal format.

SUBSIDIARY LEDGER
The accounts receivable ledger cannot accommodate all detailed record of the customer
because it is a controlling account. There is a need to support this with subsidiary ledgers where
the detail record of the individual customers can be found. The GL is called controlling because it
holds the total amount A/R. The subsidiary Ledger (SL) provides the detail of the controlling
account.

FIGURE 3.

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Please observed that the total amount of the SLs correspond to the total amount reflected in the
GL of A/R.

ILLUSTRATION 2
SUMMARY OF OFFICIAL RECEIPTS

CASH RECEIPTS JOURNAL

All official receipts are recorded in this book. Take note that there is the sundries column, this is
to accommodate account titles for cash receipts arising from other transactions (e.g. initial cash
investment of owner, proceeds of loans, refund from supplier etc.) other than collection of
accounts receivable. So the column headings will be as follows.
FIGURE 4.

ILLUSTRATION 3
SUMMARY OF RECEIVING REPORT

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PURCHASE JOURNAL
This journal is use to record the receiving report. All items bought merchandise or non-
merchandise, cash or on credit are recorded in this journal because we are using a centralized
record of the receiving report. For items bought in cash the entry in the purchase journal is:

Purchases or (Specific account) Pxxx

Accounts Payable . . . . . . . .. . . . .Pxxx

On the same date the accounts payable account will be closed in the cash disbursement journal
the entry of which is :
Accounts Payable . . . . . . . Pxxx
Cash . . . . . . . . . . . . . . . . . . . . Pxxx

ILLUSTRATION 4:

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CASH DISBURSEMENT JOURNAL
All cash vouchers and check issuances are recorded in this book. Take note that there is the
sundries column, this is to accommodate account titles for cash disbursements arising from
other transactions which can no longer be accommodated on the columns. The rule is, all
accounts that are repeatedly done on a monthly basis shall be placed on the columns. Accounts
that are seldom encountered can be placed on the sundries. So the column headings will be as
follows.

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Observed that the CV No. and Check No. are chronologically recorded. In case, there is a missing
number then the company has to investigate because there might be fraudulent transaction
that happen in the company. These documents have to be safekeep by the one in-charge to
avoid misuse.

ILLUSTRATION 5:

GENERAL JOURNAL:
All transactions which cannot be recorded in four journals (Sales, cash receipts, purchase and
disbursement journals) are recorded in the General Journal using the general journal format.
This journal is also used to record adjusting entries, closing entries and reversing entries.

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EXPLANATION:
Please note that Journal Voucher is also an accountable form that has to be recorded
chronologically. You notice that there are Journal Vouchers that has no entry because these are
already recorded in the CRJ or CDJ. The purpose that it is recorded in the General Journal is to
show that the journal vouchers are all accounted for. This is also true to other accountable
documents like sales invoices, official receipts, receiving reports, cash vouchers and checks.

ILLUSTRATION 6: GENERAL LEDGER

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ILLUSTRATION 7: TRIAL BALANCE

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EXPLANATION:
In posting you will post the total of each account except those on the sundries columns wherein
you will post it individually. The VAT input is greater than the VAT output therefore for the
month of July the company does not have any output tax to be remitted to the BIR in August.

ACTIVITY 39
Below are the transactions of ABC Trading . Prepare journal entries using the special journals.
Just follow the format in the illustration. All sales whether in cash or on account are recorded in
the sales journal; all purchases whether in cash or on account are recorded in the purchase
journal.
Accounts receivable of P210, 000 is related to a sale to R. Layola on Dec. 28, 2019. All credit
sales are 2/10, n/30. The account payable balance of P130,000 is attributable to a purchase on
Dec. 29, 2019 from E. Samonte Company. All credit purchases are 3/10, n/30.
During the month of Jan. 2020, the following transactions were completed:
Jan. 2 Sold merchandise on credit to B. Bandonell, P240,000. (Invoice no. 316.)
3 Purchased merchandise on account from T. Arenas Company, P90,000.
Invoice dated Jan. 2, 2020 (Invoice #20021 and RR No. 0001)
4 Collected amount due from Dec. 28 sale to R. Loyola less discounts. (OR No. 3001)
5 Sold merchandise for cash, P430,000. (Invoice No. 317)
7 Paid amount due to E. Samonte Company for the purchase of Dec. 29,
2019 less discounts. Issued check no. 83 and Cash voucher no. 5001.
8 Sold merchandise on account to G. Sevidal, P310,000. (Invoice no. 318.)
9 Returned merchandise purchased from T. Arenas Company, P10,000. JV No. 6001
10 Collected amount due from B. Bandonell less discounts. (OR No. 3002)
11 Purchased merchandise on account from L. Viray Company, P120,000.
Invoice dated Jan. 10. (Inv. No. 60023 and RR No. 0002)
11 Paid T. Arenas Company amount due less returns and discounts. Issued
check no. 84 and cash voucher no. 5002
12 Purchased merchandise for cash, P70,000. Issued check no. 85; cash voucher no.
5003 and RR No. 0003.
13 Sold merchandise on account to M. Cerda, P130,000. Invoice no. 319.
14 Paid interest on the note payable, P10,000. Issued check no. 86 and cash voucher no.
5004
15 Paid salaries, P80,000. Issued check no. 87 and cash voucher no. 5005
17 Purchased merchandise on account from E. Samonte Company,
P190,000. Invoice dated Jan. 14. (Inv. 80025 and RR No. 0004)
18 Sold merchandise on account to R. Loyola, P460,000. Invoice no; 320.
19 Pangan withdrew P100,000 from the business. Issued check no. 88 and cash voucher
5006.
21 Acquired office supplies for cash, P40,000. Issued check no. 89 and cash voucher
5007
22 Paid freight charges on the merchandise purchased from E. Samonte
Company on Jan. 17, P20,000. Issued check no. 90 and cash voucher 5008
22 Collected amount due from M. Cerda less discounts. (OR No. 3003)

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 23 Sold merchandise on credit to B. Bandonell, P110,000. Invoice no. 321.
24 Received returned merchandise from G. Sevidal, P30,000 Journal voucher (JV) No.
6002.
25 Received amount due from G. Sevidal on the sale of Jan. 8 less returns. JV No. 6003
25 Purchased merchandise on account from A. Braganza Company,
P340,000. Invoice dated Jan. 24. (Inv. 10045, RR No. 0005)
26 Paid P90,000 to E. Samonte Company in partial payment of account.
Issued check no. 91 and cash voucher No. 5009
27 Received P170,0O0 loan from the First Morayta Bank and issued a note
payable. (OR no. 3004)
28 Purchased merchandise on account from L. Viray Company, P270,000.
Invoice dated Jan. 27. (Inv. 60456 and RR. No. 0006
29 Sold merchandise on account to M. Cerda, P170,000. Invoice no. 322.
30 Purchased merchandise on account from T. Arenas Company, P360,000.
Invoice dated Jan. 29. (Inv. 20950; RR No. 0007)
30 Sold merchandise for cash, P1,310,000. Inv. 323.

ACTIVITY 40
1. In what special journal will this be recorded: Wrote checks for our employees for their weekly
wages.
a. Sales journal c. Purchases journal
b. Cash disbursements journal d. General journal

2. In what special journal will this be recorded: Wrote a check to Bean Accounting and Auditing
Services for professional services.
a. General journal c. Purchases journal
b. Cash disbursements journal d. Payroll journal

3. In what special journal will this be recorded: Billed customers for cleaning services provided.
a. General journal c. Sales journal
b. Cash receipts journal d. Not given

4. In what special journal will this be recorded: Received payment from a customer.
a. General journal c. Purchases journal
b. Cash receipts journal d. Cash disbursements journal

5. In what special will this be recorded: Received invoice from our supplier for cleaning supplies we
purchased from them.
a. Sales journal c. Cash receipts journal
b. Cash disbursements journal d. Purchases journal

6. The cash disbursements journal is used to record

a. closing entries b. all transactions c. cash purchases d. cash payments

7. The general journal is used to record

a. closing entries b. all transactions c. cash purchases d. not given

8. Adjusting entries are normally recorded on what book?

a. General journal c. Purchases journal
b. Cash receipts journal d. Cash disbursements journal

9. Special journals are used to group and record transactions of like nature.

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a. true b. false c. sometimes d. maybe

10. In what book will this be recorded: The customer returned a defective computer purchased on
account.
a. General journal c. Cash disbursements journal
b. Sales returns and allowances journal d. Purchases returns and allowances journal

11. Special journals allow a business to divide up a work among different employees.
a. true b. false c. sometimes d. never

12. Closing entries are recorded in what special journal?

a. sales journal c. general journal
b. purchases journal d. closing journal

13. In what book will this be recorded: Received a contract to sell 10 computers to a new customer
a. general journal b. sales journal c. cash receipts journal d. not given

14. In what book will this be recorded: Hired 2 new sales clerks.
a. cash disbursements journal c. payroll journal
b. general journal d. not given

15. You can modify your special journals and provide special columns you want or need for your
business.
a. yes b. no c. maybe d. never

16. Which of the following is not a special journal?

a. cash disbursements journal c. sales journal
b. cash receipts journal d. trial balance journal

17. The record that contains the summarized balances of all the accounts is called:
a. general ledger b. general journal c. chart of accounts d. not given

18. A listing of all the accounts contained in the general ledger is called:
a. trial balance b. general journal c. chart of accounts d. general ledger

19. All entries are transferred or posted to the:

a. chart of accounts c. trial balance
b. general ledger d. not given

20. Which of the following is a nominal account?

a. Prepaid expense c. accrued expense
b. Unearned income d. uncollectible accounts

21. Charge invoice issued by a supplier is recorded in what special journal of the buyer?
a. Sales journal c. Cash receipts journal
b. Cash disbursements journal d. Purchases journal

22. Charge invoice issued is recorded in what special journal of the seller?
a. Sales journal c. Cash receipts journal
b. Cash disbursements journal d. Purchases journal

Test II. Problem solving support your answer with solutions.

The following data pertain to Bee Co. at December 31, 2019, before any adjustments:
* The total receivables at year-end are P585,000.
* The allowance for doubtful accounts has a credit balance of P12,125.
* Net credit sales is P1,100,000.

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 Prepare adjusting entries at December 31, 2019: Assume each item independently.

23. It is a policy of the company to maintain an allowance of 3% of the total receivables.

24. Aging shows that P20,250 of the receivables are uncollectible.
25. It is a policy of the company to recognize uncollectible accounts at 1% of net credit sales.

26-27 Determine the net realizable value of the accounts receivable on Dec. 31, 2019 using the
condition in nos. 21, 22, and 23.

Test III. Prepare the closing entries

A portion of the December 31, 2019 worksheet for Dante Calingasan Distributors is shown below. For
simplicity all operating expenses have been combined. The periodic system is used. Prepare the
closing entries.
  Income Statement Balance sheet
Account Titles Debit Credit Debit Credit

Merchandise Inventory, beg 128,000.00      

Calingasan, capital       280,000.00

Calingasan, withdrawals     24,000.00  

Sales   1,000,000.00    

Sales Returns & Allowances 3,000.00      

Sales Discounts 9,000.00      

Purchases 660,000.00      

Purchase Returns & Allow   6,000.00    

Purchase discounts   13,200.00    

Transportation expense 16,000.00      

Operating expenses 250,000.00      

Merchandise Inventory, end   1,180,000.00 118,000.00  

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