Class : K1

M. Dwi Rizki R (11130210132)

Appendix E Subsidiary Ledger and Special Journals

SECTION 1 : EXPANDING THE LEDGER SUBSIDIARY LEDGERS

Nature and purpose of subsidiary ledgers

It would be nearly impossible to determine the balance owed by an individual costumer at any specific time, when all the transactions only using one general ledger account, in this case, Account Receivable. Similarly, the amount payable to one creditor would be difficult to locate quickly from a single Account Payable account in the general ledger. Instead, companies use subsidiary ledgers to keep track of individual balances. A subsidiary ledger is a group of accounts with a common characteristics (ex: all accounts receivables ). It is an addition to, and an expansion of, the general ledger. The subsidiary ledger frees the general ledger from the extra details of individual balances. Two common subsidiary ledgers are : 1. The account receivable (or customers) subsidiary ledger, which collects transaction data of individual customers. 2. The account payable (or creditor) subsidiary ledger, which collect transaction data of individual creditors. Companies usually arrange individual accounts in alphabetical orders. A General ledger account summarizes the detailed data from a subsidiary ledger. The General Ledger account that summarizes subsidiary ledger data is called a control account. At the end of an accounting period, each general ledger control account balance must equal the composite balance of the individual accounts in the related subsidiary ledgers. Advantages of subsidiary ledgers 1. They show in a single account transactions affecting one customer or more creditor, providing up-to-date information on specific account balances. 2. They free the general ledger of excessive details, making the trial balance of general ledger doesnt contain vast numbers of individual account balances. 3. They help locate errors in individual accounts by reducing the number of accounts in one ledger and by using control account. 4. They make possible a division of labor in posting, means one employee can post to the general ledger while someone else posts to the subsidiary ledgers.

SECTION 2 : EXPANDING THE JOURNAL SPECIAL JOURNALS

To expedite journalizing and posting, most companies use special journals in addition to general journal. A special journal is used to record similar types of transactions. Below are the journals that mainly used by most merchandising enterprises Sales Journal : All sales of merchandise on account Cash Receipts Journal : All cash received (including cash sales) Purchases Journal : All purchases of merchandise on account Cash Payment Journal: All cash paid (including cash purchases) General Journal : Transactions that cannot be entered in a special journal, adjusting, and closing entries. If a transaction cannot be recorded in a special journal, the company records it in the general journal. Similarly, correcting, adjusting, and closing entries also are recorded in the general journal. In some situations, the company may use another special journals than those listed above, for example, a sales returns. Special journals permit greater division of labor because several people can record entries in the journal at the same time. The use of special journals also reduces the time needed to complete the posting process. With special journals, companies may post some accounts monthly, instead of daily.

Sales Journal
In the sales journal, companies record sales of merchandise on account. Cash sales of merchandise go in the cash receipts journal. Credit sales of assets other than merchandise go in the general journal. o Journalizing Credit Sales

Using sales journal with two amount columns, the company can show on only line a sales transaction at both selling price and cost. An explanation is not required for each entry in a special journal. Also, use of pre-numbered invoices ensures that all invoices are journalized o Posting the Sales Journal

Companies make daily posting from the sales journal to the individual accounts receivable in the subsidiary ledger. Posting to the general ledger is done monthly. A check mark is inserted in the reference posting column to indicate that the daily posting to the costumers account has been made. If the subsidiary ledger accounts were numbered, the account number would be entered in the place of the check mark.

o Proving the Ledgers The total of the general ledger debit balance must equal the total of the general ledger credit balances. The sum of the subsidiary ledger balances must equal the balance in the control account. o Advantages of the Sales Journal

The one-line entry for each sales transaction saves time. Only totals (rather than individual entries) are posted to the general ledger. A division of labor results. CASH RECEIPTS JOURNAL In the Cash Receipts Journal, companies record all receipts of cash. Journalizing Cash Receipts Transactions Debit Columns : Cash and Sales Discounts. Credit Columns : Accounts Receivable, Sales, and other accounts. Debit and Credit : Cost of Goods Sold and Merchandise Inventory Posting the Cash Receipts Journal

1. At the end of the month, the company posts all column totals (except cash or account receivable) 2. The company separately posts the individual amounts comprising the other account total to the general ledger accounts specified in the account credited column. 3. The individual amounts in a column, posted in total to a control account, are posted daily to the subsidiary ledger.

PURCHASES JOURNAL In the purchases journal, companies record all purchased of merchandise on account. Journalizing Credit Purchases of Merchandise Companies make entries in the purchase journal from purchase invoices.

Posting the Purchases Journal Posting to subsidiary ledger accounts are done daily because it is often necessary to know a current balance for the subsidiary accounts.

Expanding the Purchases Journal A single column purchases journal needs only to be footed to prove the equality of debits and credits.

CASH PAYMENTS JOURNAL In a Cash Payments (cash disbursements) Journal, companies record all disbursements of cash paid. Journalizing Cash Payments Transaction Each transaction on one line and for each line there must be equal debit and credit amounts. Posting the Cash Payments Journal Post the amounts recorded in the accounts payable column individually to the subsidiary ledger and in total to the control accounts.

EFFECTS OF SPECIAL JOURNALS ON THE GENERAL JOURNAL

Special journal for sales, purchases, and cash substantially reduce the number of entries that companies make in the general journal. Only transactions that cannot be entered in a special journal are recorded in the general journal. When control and subsidiary accounts are involved, companies make two changes from earlier procedures : 1. In journalizing, they identify both the control and the subsidiary accounts. 2. In posting, the must be a dual posting : once to the control accounts and once to the subsidiary accounts.