SPECIAL JOURNAL

“Special Journal records one particular type of transaction that occurs frequently.”

Advantages of using Special Journals:

1. It saves time in journalizing.
2. It saves time in posting.
3. It eliminates the detail from the general ledger.
4. It promotes division of labor.
5. It aids in management analysis.

“The special journals are designed to systematize the original recording of major
recurring types of transactions.”

The special journals illustrated:

• Sales Journal
• Cash Receipts Journal
• Purchases Journal
• Cash Disbursement Journal

The following abbreviations are used for the five journals:

JOURNAL TRANSACTION ABBREVIATION

Sales Journal Merchandise sold on account. S
Cash Receipts Journal Cash receipts from all sources. CR
Merchandise and other items purchased
Purchase Journal P
on account
Cash Disbursements Journal Cash payments for various purposes. CD
Any transaction that is not included in
General Journal G
the special journals.

CONTROL ACCOUNT AND SUBSIDIARY LEDGER

Control Account
-an account in the general ledger that shows the total balance of all the subsidiary
accounts related to it.

Subsidiary Ledger Account

-show the details supporting the related general ledger control account balance.
These accounts are normally arranged alphabetically by the name of customers or
suppliers. The sum of the subsidiary accounts in a subsidiary ledger should agree with the
balance in the related general ledger control account when the company prepares the
financial statement.
Subsidiary Ledger
-group of related account showing the details of the balance of a general ledger
control account. It is separated from the general ledger in order to relieve the general
ledger of a mass of details and thereby shorten the general ledger trial balance. Also,
having separate ledgers promotes a division of labor.

POSTING THE SALES JOURNAL

The individual amounts are posted daily to each individual customer’s account in the
subsidiary ledger. The posting is done daily to show the amount currently due to the
customer. As each individual amount is posted, a check mark is placed in the Posting
Reference column to show that the item has been posted. At the end of the month, the
total of the money column is posted in the general ledger as a debit to Accounts
Receivable control account and as a credit to Sales Account.

Sales Journal
Inv. Post Acct. Rec. - Dr.
Date No. Account Debited Ref Sales - Cr.
20x2
Jan.
3 815 Sanchez Corporation  2,550.00

8 816 Vera & Sons  4,550.00

1
0 817 Jugo & Company  7,380.00
2
3 818 Ramos Company  3,198.00
25 819 Vera & Sons  4.080.00
21,708.00
(112) (411)

The Accounts Receivable subsidiary ledger is presented below. It is customary to

use three-column journal to display the current balance of the accounts at all times.

Jugo & Company

Date Items Post Debit Credit Balance
Ref.
20x2 Balance  4,800
Jan.
1
1 S1 7,380 12,180
0
Ramos Company
Date Items Post Debit Credit Balance
Ref.
20x2 Balance  2,550
Jan.
1
2 S1 3,198 5,748
3

Sanchez Corporation
Date Items Post Debit Credit Balance
Ref.
20x2 Balance  2,070
Jan.
1
S1 2,550 4,620
3

Vera & Sons

Date Items Post Debit Credit Balance
Ref.
20x2 Balance S1 4,500 4,500
Jan.
1
2 S1 4,080 8,580
5

The Accounts Receivable account and Sales Account are shown in the general
ledger below. The illustration shows the four-column type of account. The four-column
format has columns for debit, credit, debit balance, and credit balance. One advantage of
this format is that the balance of account is shown after posting each item.

Accounts Receivable Acct. No.

112
Date Items Post Balance
Ref. Debit Credit Debit Credit
20x 1 Balance  9,420
2
Jan
31 S1 21,708 31, 128
 Sales Acct. No.
411
Date Items Post Balance
Ref. Debit Credit Debit Credit
20x2 31
Jan S1 21, 708 21,708

After completing the posting of the account receivable, the Accounts Receivable
control account is equal to the sum of the balances in the Accounts Receivable subsidiary
ledger accounts. The subsidiary ledger accounts are not numbered, since their
composition is constantly changing, but are kept alphabetical order.

Some companies do not use formal sales journal for sales on account. Instead,
they enter the amount of each sales invoice directly in the subsidiary ledger account of
the customer. They arrange the sales invoices for a month in numerical order and fasten
them together. At the end of the month, they total all of the sales invoices for the month
and make an entry debiting the Accounts Receivable control account and Crediting Sales
for the total amount. This procedure eliminates the need for separate recording of each
credit sales in the sales journal.

RECORDING SALES RETURNS AND ALLOWANCES

A sales return or allowance is a reduction in sales revenue and a reduction in

accounts receivable. If the sales account is debited, the balance of the account at the end
of the period will represent net sales, and will not disclose the volume of returns and
allowances.

Assume that the Friendly Variety Store issued a credit memorandum to Jugo &
Company the entry in the general journal is as follows:

General Journal Page 1

Post
Date Description Ref. Debi Credi
t t
20X 1
2 4 Sales Returns and Allowances 412 330
Jan
.
Accounts Receivable – Jugo & Company 112/√ 330
Issued Credit Memorandum No.1.
 In each transaction involving sales returns, both the controlling account and the
customer’s account are posted to the General Ledger and to the Subsidiary Ledger.

Accounts Receivable Subsidiary Ledger

Jugo & Company

Post
Date Items Ref. Debit Credit Balance
20X2
Jan. 1 Balance  4,800

5 CR1 4,800 -
10 S1 7,380 7,380
14 G1 330 7,050
25 CR1 7,050 -

Ramos Company
Post
Date Items Ref. Debit Credit Balance
20X2
Jan. 1 Balance  2,550

9 CR1 2,550 -
10 S1 3,198 3,198

Sanchez Corporation
Post
Date Items Ref. Debit Credit Balance
20X2
Jan. 1 Balance  2,070

3 S1 2,550 4,620
12 CR1 2,070 2,550

Vera & Sons

Post
Date Items Ref. Debit Credit Balance
20X2
Jan. 8 S1 4,500 4,500
25 S1 4,080 8,580
General Ledger

Accounts Receivable Acct. No. 112

Post Balance
Date Items Ref. .Debit Credit Debit Credit
20X
2 1 Balance  9,420
Jan.
3 S1 21,708 31,12
1 8
3 CR1 16,470 14,65
1 8
1 G1 330 14,32
4 8

SCHEDULE OF ACCOUNTS RECEIVABLE

A schedule of accounts receivable is prepared at the end of the month to ensure

that the total of the balances in the subsidiary ledger account agrees with the control
account.

FRIENDLY VARIETY STORE

Schedule of Accounts Receivable
January 31, 20X2

Ramos Company P 3,198

Sanchez Corporation 2,550
Vera & Sons 8,580 .
Total P 14,328

THE PURCHASES JOURNAL

 A merchandising business may purchase a wide variety of assets. The property,
frequently purchased on account by a trading concern, includes merchandise for resale to
customers, supplies used in conducting the business, and plant assets. The Purchases
Journal is designed to accommodate the recording of everything purchased on account.
The number and the purpose of the special columns provided in the journal depend upon
the nature of the business and the frequency of purchases of the various assets.

Posting the Purchases Journal

Bong Bongcac
Date Items Post Ref. Debit Credit Balance
20x2
Jan. 2 P1 6,720 6,720

The equality of the debits and the credit

Debit Totals
Purchases P 16, 080
Store Supplies 165
Office Supplies 96
Sundry Accounts 12, 150
Total P 28, 491

Credit Totals
Accounts Payable P 28, 491
_________
Total P 28, 491

Purchases Journal
Store Office Sundry Accounts – Debit
Post Accounts Purchases
Date Accounts Credited Supplies Supplies Post
Ref. Payable Credit Debit Account Titles Amount
Debit Debit Ref.
20x2 
2 Bong Bongcac 6,720 6,720
Jan.

3 Evalle Supply Co. 4,950 Equipment 121 4,950
Mallari & 
17 6,480 6,480
Company

22 Evalle Supply Co. 210 114 96
 Mongalo 
24 2,931 2,880 51
Manufacturing
Punsalan Furniture 
29 7,200 Furniture 122 7,200
Store
28,491 16,080 165 96 12,150
(211) (511) (115) (116) ( √)

CASH DISBURSEMENTS JOURNAL

All transactions involving payments of cash for various purposes are recorded in
the Cash Disbursements or Cash Payment Journal. Such transactions include purchases of
merchandise and other items for cash, payment of expenses, payment to creditors on
account, cash withdrawal by the owner, etc. All these transactions are credited to Cash;
hence, it is necessary to have a Cash Credit column. Payments to creditors on account are
sufficiently frequent to require columns for Accounts Payable Debit and Purchase
Discount Credit. If payment for one or more specific operating expenses were sufficiently
numerous, other special columns are added to the journal.

POSTING THE CASH DISBURSEMENTS JOURNAL

At frequent intervals during the month, the amounts enter in the accounts payable
debit column are to the creditors account in the Accounts Payable Subsidiary Ledger. The
source of the entries is indicated by inserting “CD” and the appropriate journal page
number in the posting reference column of the accounts. A check mark placed in the
posting reference column of the Cash Payments Journal to indicate that the amounts have
been posted. The items in their Sundry Accounts Debit column are also posted to the
appropriate accounts in the General Ledger at frequent intervals. Posting is indicated by
writing the account numbers in the posting reference column of the Disbursements
Journal.

At the end of the month, the Cash Disbursements Journal is ruled, and their totals of
each money column are taken. The equality of the debits and the credits are determined
as follows:

DEBIT TOTALS CREDIT TOTALS

Sundry accounts P11, 214 Purchase discounts P315
Accounts Payable 27,480 Cash 38, 379
P38, 694 P38, 694

A check mark is place below the total of the Sundry Accounts Debit column to
indicate that is not posted, Each of the totals of the other three columns is to a General
Ledger account and the appropriate posting reference is written below the column totals.
Recording Purchase Returns and Allowances

In recording Purchase returns, both creditor’s account and the controlling account
must be debited, and the account of commodity originally purchased must credited. Thus,
if the returns to the Office Equipment, the amount of reduction is credited to the Office
Equipment. If the reduction is in the cost of the merchandise purchased for resale,
Purchases is credited. If management wishes to know both the total amount of the
merchandise returned, a separate account entitled Purchase returns and Allowances is
credited.

On January 5, the friendly variety store received a credit memorandum from Bong
Bongcac for merchandised returned. The entry is recorded in a two column journal a
follows:

General Journal
Date Description Post Debi Credit
Ref. t
Jan. 5 Accounts Payable- Bong Bongcac 211/ 270
Purchased returns and Allowances 512 270
Received credit memorandum for
Merchandised returned.

Note that the debit to the Account Payable account is posted in the General Ledger
and also to the creditors account in the subsidiary ledger. The necessity for posting this
item to two different accounts is indicated by placing the diagonal line in the posting
reference column when the transaction is recorded.

The account number (211) and the check mark are written after the respective
accounts are posted.

The Accounts Payable Ledger and the Accounts payable control account appear as
follows after posting the purchases, cash disbursement, and the general journals.

Accounts Payable Subsidiary Ledger

Bong Bongcac
Date Items Post Debit Credit Balance
Ref.
Jan. 2 P1 6,720 6,720
5 G1 270 6,450
15 CD1 6,450

Evalle Supply Co.

Date Items Post Debit Credit Balance
 Ref.
Jan. 3 P1 4,950 4,950
22 P1 210 5,160
26 CD1 4,950 210

Mallari & Company

Date Items Post Debit Credit Balance
Ref.
Jan. 1 2,430
10 CD1 2,430
17 P1 6,480 6,480
Mongalo Manufacturing Co.
Date Items Post Debit Credit Balance
Ref.
Jan. 1 9,300
5 CD1 9,300
25 P1 2,931 2,931

Punsalan Furniture store

Date Items Post Debit Credit Balance
Ref.
Jan. 1 Balance 4,350
11 CD1 4,450
29 P1 7,200

THE GENERAL JOURNAL

The General Journal is used for each transaction that does not belong in a special
journal. For example, the General Journal could be used to record Sales Returns and
Allowances if the original sale was made on account, Purchase Returns and Allowances
if the original purchase was made on account, the receipt of a note from a customer in
settlement of an accounts receivable, the purchase of equipment or some other asset by
giving a note, and the payment of Accounts Payable by giving a note. All Adjusting and
Closing entries are also recorded in the general journal.

ADJUSTING THE ACCOUNTS RECEIVABLE

 When a company sells merchandise and services on account, a portion of the
claims against customers ordinarily proves to be uncollectible. This is usually the case
regardless of care used in granting credit and the efficiency of the collection procedures
employed. Uncollectible Accounts Expense, Doubtful Accounts Expense, or Bad Debts
Expense is an operating expense incurred because of failure to collect receivables.
There are several reasons why an account or a note becomes uncollectible, like
bankruptcy of the debtor, discontinuance of the debtor’s business, disappearance of the
debtor, failure of repeated attempts to collect and the barring collection by the statute of
worthlessness of the receivables.
There are two generally accepted methods of accounting for receivable though to
uncollectible:
1. The direct write-off method
2. Allowance or reserve method
Both conform to acceptable accounting practice when used in appropriate
circumstances. However, for income tax purposes, only the Direct write-off method is
permissible.

DIRECT WRITE OFF UNCOLLECTIBLE ACCOUNTS

The direct write off method is used by the small businesses who sell most of its
merchandise or services on cash basis. The amount of its receivable is small in relation to
its total current assets, the credit period is short, and the credit and collection procedure
are adequate.
The entry to write off an account believed to be uncollectable is as follows:

Uncollectable Accounts Expense 900

Account Receivable-O. Bueno 900

The entries to reinstate that account and to record the collection are as follows:

Account Receivable- O. Bueno 900

Uncollectable Account Expense 900
To reinstate account written off earlier in the year.
CASH 900
To record the collection from O. Bueno. 900
WRITING – OFF UNCOLLECTABLE ACCOUNT UNDER THE
ALLOWANCE METHOD

When positive evidence is available concerning the partial or complete

worthlessness of an account, the account is written off as follows:

‌
Allowance for Doubtful Accounts XXX
Accounts Receivable XXX
To write-off uncollectible account.

When an account that has been charged to the allowance account is subsequently
colleted, the account should be reinstated by an entry that is just the reverse of the write-
off entry.

Accounts Receivable XXX

Allowance for Doubtful Accounts XXX
To reinstate account written off earlier in the year.

ESTIMATING UNCOLLECTABLE ACCOUNTS BASED ON TRADE

RECEIVABLES

Instead of using sales data, many businesses base their estimate on an analysis of
trade receivable accounts at the end of the period. The process of analyzing the accoumts
is called aging the receivables.

Aging of Receivables – December 31, Year1

 Not more More
31-60 61-180 181-365
Not Than Than
Customer Amount Days Days Days
Yet Due 30 days One Year
Past Due Past Due Past Due
Past Due Past Due
Alzona 1,350 1,350
Besinga 900 300 600
Castro 3,750 3,750
De Leon 600 600
===== ===== ===== ===== ===== ===== ===== =====
Yuzon 1,800 1,200 600
142,650 120,000 9,000 3,600 3,450 2,400 4,200

Estimated Amount of Uncollectible Accounts- December 31, Year1

Uncollectible Estimated
Classification Balances Accounts Accounts
Percentages Percentages
Not yet due P 120,000 2% P 2,400
Not more than 30 days past due 9,000 5% 450
31-60 days past due 3,600 10% 360
61-180 days past due 3,450 20% 690
181- 365 days past due 2,400 30% 720
More than one year past due 4,200 50% 2,100
P 142,650 P 6,720

ESTIMATING UNCOLLECTIBLE ACCOUNTS BASED ON SALES

The estimated uncollectible account may be based on sales for the period or the
amount of receivables outstanding at the end of the period. When the company uses the
sales basis, the amount of the uncollectible account’s in the past year are compared to the
total sales to get the percentage of the estimated uncollectible. Since doubtful accounts
occur only with sales on account, it would be logical to develop a percentage of doubtful
accounts to credit sales only. However, since it would require extra work to separate cash
sales from credit sales, or to analyze sales data, the percentage is developed in terms of
total sales. In other cases, the percentage is adapted to net sales only.
 To illustrate, assume that the total sales for the period is P500, 000, and the
estimated uncollectible account is 1% of sales, the charge for the doubtful accounts
would be P5, 000 (1% of P500, 000). The adjusting entry to record doubtful accounts
would be:

Doubtful Accounts Expense 5, 000

Allowance for Doubtful Accounts 5, 000

Note that the existing balance in the Allowance for Doubtful Accounts resulting
from charges to doubtful accounts in the part is not considered in computing the current
adjustment.

The sales percentage method for estimating doubtful account is widely used in
practice because of its simplicity.

ACCRUING INTEREST

Interest accrues, or accumulates, on an interest-bearing note on a day-to-day basis,

but is usually accrued only at the maturity date. If, however, the note is outstanding at the
end of the accounting period, the time period of the interest overlaps at the end of the
accounting period and an adjusting entry is needed. Both parties, the maker and the
payee, must make the adjusting entry to record the accrued interest so that the proper
assets and revenue for the payee, and the proper liabilities and expenses for the maker are
reported. Failure to record accrued interest would understate the maker’s expenses and
liabilities by the interest expense incurred bout not yet paid.

To illustrate how to record accrued interest on the payee’s books and the maker’s
books, assume that on November 1, Miguel Company issued a 90-day, 12% note, for
P10,000 to Pablo Company on account. Both companies are using the calendar year as
their accounting period.

Transactions Maker Payee

Nov. 1 – Issuance of note Accounts Payable 10, 000 Notes Receivable 10, 000
Notes Payable 10, 000 Accounts
Receivable 10, 000
Dec. 31 – Adjusting entry Interest Expense 200 Interest Receivable 200

Interest Payable 200 Interest

Income 200

Jan. 1 – Reversing entry Interest Payable 200 Interest Income 200

Interest Expense 200 Interest
Receivable 200

Jan. 30 – Payment of note Notes Payable 10, 000 Cash 10, 300
Interest Expense 300 Notes
Receivable 10, 000
Cash 10, 300 Interest
Income 300