Topic 6 - Special Journal, Subsidiary & Control Accounts

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This article is a topic within the subject Accounting 1A.

Contents

Required Reading

Trotman, K. & Gibbins, M., 2009 Financial Accounting: An Integrated Approach, 4th edition, Melbourne: Thomson Nelson ITP pp. 267-278.

Special Journals, Subsidiary Ledgers And Control Accounts

  1. Special journals allow the quick recording of the most frequent transactions that a firm makes.
  2. Subsidiary Ledgers provide detailed information about specific transactions with a specific party (e.g. a customer specific account that when transferred affects accounts receivable)

Trade And Cash Discounts

  1. Trade Discounts are simply reductions in the actual price charged per good (no recording complications)
  2. Cash Discounts are a 'conditional adjustment' after the actual selling price per unit sold has been finalised.
    • 2.5/10. n/30 means that a 2.5% cash discount will be given if the customer pays within 10 days, otherwise the net amount is due within 30 days.
    • Discount Allowed - expense item
    • Discount Received - revenue item

Operation of Special Journals and Subsidiary Ledgers

The key is knowing the format of these accounts as the actual process of using them will be reinforced by the Perdisco Online Practice Set.

Sales Journal

The sales journal helps to eliminate detailed recording (DR Accounts Receivable, CR Sales and DR COGS, CR Inventory)

so all we do is enter in the following data as per the image below from UNSW [1]

SJ6.jpg

  • Post daily transactions into the sales journal and the accounts receivable subsidiary ledger (each customer will have their own one)
    • The final balance in the sales journal (for COGS/Inventory, Accounts Receivable/Sales) is posted to the general ledger monthly
    • The sum of all the final balances in the subsidiary ledgers will show the total in the control account

Purchases Journal

  • Monthly - DR Inventory, CR Accounts Payable (5220 - example)
  • Daily - fill in subsidiary ledger (accounts payable for each customer)
    • Total of all subsidiary ledgers will equal the amount in accounts payable

PJ6.jpg

Cash Receipts Journal

  • Daily Posting - Accounts Receivable Subsidiary Ledger (usually reducing receivables as we have received cash)
  • Monthly Posting - to the cash and sales account

CRJ.jpg

Cash Payments Journal

  • Daily Posting - Accounts payable subsidiary ledgers (reduces accounts payable as we are paying cash)
  • Monthly Posting - Cash and the total of various expenses - e.g. salaries.

CPJ.jpg

End

This is the end of this topic. Click Accounting 1A to go back to the main subject page for Accounting 1A

References

Textbook refers to Trotman, K. & Gibbins, M., 2009 Financial Accounting: An Integrated Approach, 4th edition, Melbourne: Thomson Nelson ITP

  1. Lecturer: Dr. Tami Dinh Thi School of Accounting UNSW, ASB Lecture Notes
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