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Lesson 10

Special and General Journals

Lesson Objectives:

At the end of the lesson, students are expected to:

a. Record retailer’s transactions in the special journals.

b. Subsequently post the transactions to the general ledger and subsidiary ledgers.

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DISCUSSION OF CONTENT

SPECIAL JOURNALS

A special journal (also known as a specialized journal) is useful in a manual accounting or bookkeeping system
to reduce the tedious task of recording both the debit and credit general ledger account names and amounts in a general
journal. It is used to streamline the transactions of a business especially of businesses with large volume of transactions. A
merchandiser usually has four major transactions:
1. Sales
2. Purchases
3. Cash Receipts
4. Cash Disbursements

A special journal could be maintained for each one of these major transactions. The two-column general journal
will still be used for the other transactions not involving these four major categories. The special journals, like the two-
column journal, are also books of original entry and are posted to the general ledger to arrive at the account balances.

Advantages of using the special journals:

1. It is time saving. With special columns for transactions of a repetitive nature, writing or recording is reduced.
Posting will also be minimized since many amounts are posted in total rather than per item.
2. Division of labor is possible since with the special journals several persons can work simultaneously.
3. Specialization and pinpointing of responsibility are possible with the division of labor.
4. Errors are minimized.

Four special journals that will be illustrated:

1. Sales Journal for the sale of merchandise;

2. Cash Receipts Journal for all cash receipts;
3. Purchases Journal for the purchase of merchandise;
4. Cash Disbursement Journal for all cash payments.

SALES JOURNAL

The Sales Journal of the Cruz Sea Products, shown in Exhibit 11-1, is designed for an entity using the periodic
inventory system. This journal lists all credit sales for the month of June. The information for each sale is obtained from a
copy of the related sales invoice, which should be prenumbered for control purposes. This journal is specifically
designed to record sales of merchandise on account. In contrast, cash sales are recorded in the cash receipts journal.
Credit sales of assets other than merchandise inventory (e.g property and equipment) are entered in the general journal.

For each transaction, the accountant enters the date, sales invoice no., and customer account to be debited along with the
amount. If the same credit term is extended to all customers, as assumed in the illustration, there is no need to insert a
column to describe the sales terms in the sales journal.

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Exhibit 11-1. Sales Journal and Posting to Ledgers

SALES JOURNAL Page 1

Accounts Rec.(120) Dr.
Date Inv. No. Account Debited Post. Ref.
Sales(410) Cr.
Jun. 1 1 Zamboanga Exports  20,000
Jun. 5 2 Butuan Company  10,000
Jun. 12 3 Cagayan de Oro Stores  100,000
Jun. 22 4 Dapitan Retailers  40,000
Jun. 29 5 Dipolog Traders  30,000
Jun. 30 6 Pagadian Grocers  50,000
250,000

Accounts Receivable Sales

(120) (410)
6/30 S1 250,000 6/30 S1 250,000

ACCOUNTS RECEIVABLE
SUBSIDIARY LEDGER

Dapitan Retailers Zamboanga Exports

6/22 S1 40,000 6/1 S1 20,000

Dipolog Traders Dapitan Retailers

6/29 S1 30,000 6/5 S1 10,000

Pagadian Grocers Dapitan Retailers

6/30 S1 50,000 6/12 S1 100,000

The posting of any journal to the general ledger must result in equal debits and credits. In addition, for any
posting to a control account in the general ledger, the same total amount must be posted to one or more related subsidiary
ledger accounts. Exhibit 11-1 illustrates how to post the amounts in Cruz Sea Products Sales Journal.

Amounts recorded in the sales journal are posted daily to the subsidiary ledger to keep a current record of the
accounts receivable from each customer. Daily posting permits the business to answer customer inquiry promptly. A
check mark () is placed in the posting reference column of the Sales Journal to signify that the amount has been posted
to the customer’s account in the subsidiary ledger.

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Updating the subsidiary ledger daily also allows the credit department to review and monitor a customer’s
account balance at times other than a billing date. Cycle billings may likewise be implemented; for example, billing
customers whose names begin with different letters at different times of the month. The advantage of cycle billings is that
statements of account can be mailed throughout the month rather than in one large group at the end of the month.

At the end of the month, when all sales have been recorded and the sales journal has been totaled and ruled, the
total sales figure is posted to the general ledger as a debit to the accounts receivable control account and as a credit to the
sales account. Note the double posting reference at the bottom of the sales journal; this indicates that accounts receivable
is account no. 120 in the general ledger and sales is account no. 410. When amounts are posted to the ledgers, the journal
page number is entered in the account to identify the source of the data. In Exhibit 11-1, all journal references in the
ledger are “S1” since the postings originated from page 1 of the Sales Journal.

CASH RECEIPTS JOURNAL

All transactions involving cash receipts are recorded in a cash receipts journal. Exhibit 11-2 showed the cash
receipts journal for an entity using the periodic inventory system. In a merchandising business, the main sources of cash
are collections on account and cash sales. Thus, this journal has debit columns for cash and sales discounts; and credit
columns for accounts receivable and sales. In addition, there are columns on the right-hand side of the journal which can
be used to record the account titles and credits to other accounts resulting from cash receipts not related to cash sales and
collections on account. Examples of these include investments by the owner and loan releases.

CASH RECEIPTS JOURNAL Page 1

Debits Credits
Date O. R. No. Description Sales Accounts Other Accounts
Cash Sales
Discounts Receivable Account Title PR Amount
2020
Jun.1 File Investment by owner 500,000 Cruz, Capital 310 500,000
Jun. 8 1 Zamboanga Exports 19,600 400 20,000 
Jun. 10 CM PCIBank Loan 300,000 Notes Payable 230 300,000
Jun. 15 CRT Cash sales, June 1-15 200,000 200,000
Jun. 21 2 Cagayan de Oro Stores 49,000 1,000 50,000 
Jun. 29 3 Dipolog Traders 29,400 600 30,000 
Jun. 30 CRT Cash sales, June 16-30 250,000 250,000
1,348,000 2,000 100,000 450,000 800,000
(110) (420) (120) (410) 

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GENERAL LEDGER
Cash Accounts Receivable Notes Receivable
(110) (120) (150)
6/30 CR1 1,348,000 6/30 S1 250,000 50,000 GJ1 6/21 6/21 GJ1 50,000
100,000 GJ1 6/21

Sales Discounts Sales Notes Payable

(420) (410) (230)
6/30 CR1 2,000 6/30 S1 250,000 250,000 S1 6/30 300,000 CR1 6/10
450,000 CR1 6/30

Cruz, Capital
(310)
500,000 CR1 6/1

ACCOUNTS RECEIVABLE SUBSIDIARY LEDGER

Dapitan Retailers Dipolog Retailers Pagadian Grocers
6/22 S1 40,000 6/29 S1 30,000 30,000 CR1 6/29 6/30 S1 50,000

Zamboanga Exports Butuan Company Cagayan de Oro Stores

6/1 S1 20,000 20,000 CR1 6/8 6/5 S1 10,000 6/12 S1 100,000 50,000 CR1 6/21
50,000 GJ1 6/21

Exhibit 11-2. Cash Receipts Journal and Posting to Ledgers

Cash receipts are evidenced by source documents like prenumbered official receipts(OR), cash receipts
tapes(CRT) or cash slips, and bank credit memorandum (CM). Note that the entries on June 15 and June 30, debiting cash
and crediting sales, recorded cash sales for a certain period. In practice, cash sales, which are usually supported by cash
register tapes, should be recorded daily rather than semi-monthly.

The June 8 entry recorded P19,600 cash collected from Zamboanga Exports related to sales on account on June 1
of P20,000. The cash discounts were taken. The entry debited cash for P19,600 and sales discounts for P400; and credited
accounts receivable for P20,000. Official receipt no.1 was issued to acknowledge the cash receipt of P19,600. The entry
for Dipolog Traders on June 29 is similar.

The June 21 transaction illustrated the use of two journals – cash receipts and general journal – to record a
business event. Here, Cagayan de Oro Stores settled its P100,000 June 12 account by issuing a promissory note for
P50,000 and remitting P49,000 (P50,000 less 2% sales discount) for the balance.

In the cash receipts journal, the debits are to cash, P49,000 and sales discount, P1,000; and accounts receivable is
credited for P50,000. The receipt of notes receivable in lieu of an existing accounts receivable is a non-cash transaction
that should be recorded in the general journal. The entry debits notes receivable and credits accounts receivable for
P50,000 each.

The June 1 entry represented cash received as investments by the owner, Lloyd Cruz. The June 10 cash receipt
pertained to a PCI Bank loan released through a credit to the current account of Cruz Sea Products maintained in the same
bank. In both cases, the other accounts’ columns are used.

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Before posting the cash receipts journal, each column is added and the journal balanced to make sure that total
debits equal total credits. In the illustration, P1,348,000 + P2,000 = P100,000 + P450,000 + P800,000.

The totals of the cash, sales discounts, accounts receivable, and sales columns are posted to the general ledger, as
noted by the posting references below these columns. In addition, the individual items in the other accounts’ column are
posted to the general ledger. The total of this column is used only to balance the journal and are not posted.

Individual items in the accounts receivable column are posted on a daily basis to the customers’ subsidiary ledger
to keep this ledger in balance with the accounts receivable control account. Postings to the customers’ accounts are
indicated by a check mark ().

A schedule of account balances in the subsidiary ledger is usually prepared at the end of each accounting period
to verify that the subsidiary ledger agrees with the related control account. The schedule of accounts receivable for Cruz
Sean Products indicated that the subsidiary ledger agreed with its control account in the general ledger.

Cruz Sea Products

Schedule of Accounts Receivable
June 30, 2020

Dapitan Retailers 40,000

Pagadian Grocers 50,000
Butuan Company 10,000
Total 100,000

PURCHASES JOURNAL

Merchandising businesses frequently purchase merchandise and supplies. Such purchases are usually made on
account. The Purchases Journal is designed to account for purchases of merchandise, supplies and other assets on
account. In contrast, cash purchases are recorded in the cash disbursement journal.

Exhibit 11-3 illustrated the Purchases Journal for an entity using the periodic inventory system. In the illustration,
the primary source document used as the basis for the entries in the journal is the receiving report (RR). The journal
showed special columns for debits to purchases, office supplies, and store supplies, as well as for credits to accounts
payable. A column is also provided for debits to accounts for which no special column is available.

The amounts in the accounts payable column are posted to the accounts payable subsidiary ledger on a daily basis.
A check mark in the posting reference column indicates that this has been done. At the end of the month, the columns are
totaled, and the journal is balanced to ensure that total debits equal total credits. The posting pattern for the purchases
journal is diagrammed in Exhibit 11-3 below.

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PURCHASES JOURNAL
Credits Debits
Date O. R. No. Account Credited PR Accounts Office Store Other Accounts
Purchases
Payable Supplies Supplies Account Title PR Amount
2020
Jun. 2 1 Gingoong Distributors  70,000 70,000
Jun. 9 2 Oroquieta Suppliers  190,000 190,000
Jun. 14 3 Tangub Office Systems  120,000 Office Equipment 190 120,000
Jun. 18 4 Davao Wholesalers  140,000 140,000
Jun. 25 5 Ozamiz Company  40,000 40,000
Jun. 30 6 Surigao Office Supplies  30,000 10,000 20,000
590,000 400,000 50,000 20,000 120,000
(210) (510) (160) (170) 

GENERAL LEDGER
Purchases Accounts Payable Office Equipment
(510) (210) (190)
6/30 P1 400,000 590,000 P1 6/30 6/14 P1 120,000

Store Supplies Office Supplies

(170) (160)
6/30 P1 20,000 6/30 P1 50,000

ACCOUNTS PAYABLE SUBSIDIARY LEDGER

Gingoog Distributors Oroquieta Suppliers Ozamiz Company
70,000 P1 6/2 190,000 P1 6/9 40,000 P1 6/25

Surigao Office Supplies Tangub Office Systems Davao Wholesalers

30,000 P1 6/30 120,000 P1 6/14 140,000 P1 6/18

Exhibit 11-3
CASH DISBURSEMENTS JOURNAL
All cash payments are recorded in a cash disbursement journal. Exhibit 11-4 showed the June cash disbursements
journal for Cruz Sea Products after the related transactions have been recorded, and the journal balanced and posted. Note
the special columns for credits to cash and purchase discounts, and for debits to accounts payable and purchases.
Ordinarily, these accounts will have the most entries. Shown below are Exhibit 11-4:

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CASH DISBURSEMENTS JOURNAL Page 1

Credits Debits
Date Ck. No. Description Purchases Accounts Other Accounts
Cash Purchases
Discounts Payable Account Title PR Amount
2020
Jun.2 101 Paid employees 280,000 Salaries Payable 270 280,000
Jun. 3 102 Paid June rent 60,000 Rent Expense 560 60,000
Jun. 12 103 Gingoog Distributors 68,600 1,400 70,000 
Jun. 15 104 Acquired Equipment 50,000 Store Equipment 180 50,000
Jun. 19 105 Oroquieta Suppliers 188,100 1,900 190,000 
Jun. 28 106 Purchases merchandise 15,000 15,000
Jun. 30 107 Insurance Policy 12,000 Prepaid Insurance 140 12,000
673,700 3,300 260,000 15,000 402,000
(110) (520) (210) (510) 
GENERAL LEDGER
Cash Accounts Payable Notes Payable
(110) (210) (230)
6/30 CR1 1,348,000 673,700 CD1 6/30 6/30 CD1 260,000 590,000 P1 6/30 300,000 CR1 6/10
50,000 GJ1 6/15

Purchases Discounts Store Equipment Rent Expense

(520) (180) (560)
3,300 CD1 6/30 6/15 CD1 50,000 6/3 CD1 60,000
6/15 GJ1 50,000

Prepaid Insurance Purchases Salaries Payable

(140) (510) (270)
6/30 CD1 12,000 6/28 CD1 15,000 6/2 CD1 280,000 280,000 Bal. 5/31
6/30 P1 400,000
ACCOUNTS PAYABLE SUBSIDIARY LEDGER
Gingoog Distributors Oroquieta Suppliers Ozamiz Company
6/12 CD1 70,000 70,000 P1 6/2 6/19 CD1 190,000 190,000 P1 6/9 40,000 P1 6/25

Surigao Office Supplies Tangub Office Systems Davao Wholesalers

30,000 P1 6/30 120,000 P1 6/14 140,000 P1 6/18

Exhibit 11-4
This special journal has columns for the date and the number of check issued for each cash payment. Also, the
other accounts column is available for recording debits to other accounts.

The June 2 entry in Exhibit 11-4 recorded the issue of check no. 101 for P280,000 as payment for accrued salaries
at the end of May 2020. The entries on June 12 and June 19 recorded payment on accounts to Gingoog Distributors and
Oroquieta Suppliers, less 2% and 1% purchases discounts, respectively.

Note that an equipment worth P100,000 was acquired on June 15 by giving P50,000 cash and a note payable for
P50,000. The cash payment of P50,000 was recorded in the cash disbursements journal. The issuance of notes for the
acquired equipment was recorded in the general journal rather than in the purchases journal; this is because the
purchases journal in the illustration did not provide for a special credit column for notes payable. If the entity frequently
issues notes to support acquisitions on account, then a notes payable credit column should be created in the purchases
journal. The other entries in the journal are self-explanatory.

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After both the purchases and the cash disbursements journal have been posted, the accounts payable control
account has a P330,000 balance (P590,000 from Exhibit 11-3 – P260,000 payment). This total agreed with the schedule of
accounts payable below:
Cruz Sea Products
Schedule of Accounts Payable
June 30, 2020

Ozamiz Company 40,000

Surigao Office Supplies 30,000
Tangub Office Systems 120,000
Davao Wholesalers 140,000
Total 330,000
GENERAL JOURNAL

When special journals are used, transactions that cannot be recorded appropriately in a special journal are
recorded in the general journal. Examples include merchandise returns, write-offs of uncollectible accounts, and certain
non-cash transactions involving notes receivable and notes payable.

PROVING THE LEDGERS

Finally at the end of the period, after all postings have been made, equality should exist between the following:

 Total debit balances and total credit balances of the accounts in the general ledger. These amounts are
used to prepare the trial balance.
 The balance of the accounts receivable control account in the general ledger and the sum of the
individual customer accounts in the accounts receivable subsidiary ledger.
 The balance of the accounts payable control account in the general ledger and the sum of the individual
creditor accounts in the accounts payable subsidiary ledger.

SUMMARY OF THE LESSON

 A Cash Journal is used to record ALL cash receipts and disbursements. Small businesses usually keep a Cash
Journal. All the other transactions are recorded in the General Journal.
 Special Journals are used by businesses with large volume of transactions every day.
 Special Journals have the following benefits: a. It is time saving since amounts are posted in total at the end of
the month before it is transferred to the General Ledger; b. Different people can be assigned for each journal thus
postings can be done simultaneously; c. There is a specific person responsible for each journal; d. Errors are
minimized since only the totals are posted at the end of the month in the General Ledger.
 A merchandiser has the following major transactions: a. Sales; b. Purchases; c. Cash Receipts; d. Cash
Disbursements
 A Sales Journal is used to record all sales on “account”. Only the merchandise for sale is posted in this journal.
Sale of asset other than the merchandise is recorded in the General Journal.
 A Purchase Journal is used to record all purchases on “account”. Only the merchandise for resale is posted in
this journal. Purchases other than those for resale are recorded in the General Journal.

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 A Cash Receipts Journal is used to record all “cash” received by the company other than from sales. It includes
investments, borrowings, sales, collections of sales on account, refunds, among others.
 A Cash Disbursement Journal is used to record all cash payments made by the company other than from
merchandise purchases. It includes purchases of merchandise, purchases of other assets, payment of expenses,
withdrawals of the owner, refunds to customer among others.

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