Accounting Systems LO 2a- Journalizing and Posting the Revenue Journal

LO 2 Special Journals The revenue journal is used for recording fees earned on account. Cash fees earned would be recorded in the cash receipts journal. A revenue journal is used to record fees earned, on account. Revenues earned for cash are not recorded in this journal. They are recorded in the cash receipts journal.

LO 2 Revenue Journal If NetSolutions recorded its revenue transactions in the general journal, the following entries would have to be made: For the above entries, NetSolutions recorded eight account titles and eight amounts. In addition, NetSolutions made 12 postings to the ledger: 4 to Accounts Receivable in the general ledger, 4 to the accounts receivable subsidiary ledger (indicated by the check mark), and 4 to Fees Earned in the general ledger.

LO 2 Revenue Journal If NetSolutions journalized these same fees earned on account entries in the revenue journal, the process is simplified, as you can see in Exhibit 2. The preceding revenue transactions could be recorded more efficiently in a revenue journal, as shown in Exhibit 2. In each revenue transaction, the amount of the debit to Accounts Receivable is the same as the amount of the credit to Fees Earned. Thus, only a single amount column is necessary. The date, invoice number, customer name, and amount are entered separately for each transaction.

LO 2 LO 2 Exhibit 3 illustrates the efficiency gained by using the revenue journal rather than the general journal. Specifically, all of the transactions for fees earned during the month are posted to the general ledger only once—at the end of the month.

LO 2 Revenue Journal Let’s take a step-by-step look at the process used to post the first entry. This entry was made on March 2, 2012, when NetSolutions issued Invoice No. 615 to Accessories By Claire for fees earned of $2,200. On March 2, 2012, NetSolutions issued Invoice 615 to Accessories By Claire for services rendered of $2,200. This transaction will be recorded in NetSolutions’ revenue journal.

Exhibit 3 (in steps) LO 2 (continued) Revenue Journal 1 2 3 4 5 6 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2012 Mar. 2 615 Accessories By Claire 2 2 0 0 00 6 616 RapZone 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 Accessories by Claire 3 0 0 0 00 Enter the date and invoice number in the first two columns. Enter the customer’s name in the account debited column. A single amount column is used for both the debit and the credit. Special journals are designed so that each transaction is recorded on only one line of the journal. This is because at the end of the month both a debit and a credit of the same amount will be posted to the general ledger. Click here to skip “Exhibit 3 (in Steps)” (continued)

Exhibit 3 (in steps) LO 2 (continued) Revenue Journal 1 2 3 4 5 6 1 2 Page 35 2012 Mar. 2 615 Accessories By Claire 2 2 0 0 00 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 1 2 3 4 5 6 6 616 RapZone 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 Accessories by Claire 3 0 0 0 00 Accounts Receivable Subsidiary Ledger A subsidiary ledger is used to keep track of the balances owed to NetSolutions from each individual customer. Each customer’s activity is recorded on an individual page of the subsidiary ledger. A debit of $2,200 is entered into the Accessories by Claire ledger account. Enter R35 in the Post Ref. column. This is a cross-reference to the revenue journal, page 35. Accessories By Claire Date Item P.R. Debit Credit Balance Mar. 2 R35 2,200 2,200 2012 (continued)

Exhibit 3 (in steps) LO 2 (continued) Revenue Journal 1 2 3 4 5 6 1 2 Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2012 1 2 3 4 5 6 Mar. 2 615 Accessories By Claire 2 2 0 0 00 6 616 RapZone 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 Accessories by Claire 3 0 0 0 00 Accounts Receivable Subsidiary Ledger Place a check mark in the Post Ref. column of the revenue journal. This indicates that the debit was posted to the subsidiary ledger account. Subsidiary ledger accounts are not numbered; instead, they are kept in alphabetical order. Accessories By Claire Date Item P.R. Debit Credit Balance Mar. 2 R35 2,200 2,200 2012 (continued)

LO 2 Exhibit 3 (in steps) Revenue Journal Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2012 1 2 3 4 5 6 6 616 RapZone 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 Accessories by Claire 3 0 0 0 00 Mar. 2 615 Accessories By Claire 2 2 0 0 00 This slide illustrates all of the transactions for the month of March entered into the revenue journal. Each of the transactions has been posted to the subsidiary ledger, indicated by the check marks in the Post Ref. column. The same procedure would be used to post the other transactions to the individual accounts in the accounts receivable subsidiary ledger. (continued)

Exhibit 3 (in steps) LO 2 Next, the amount column would be totaled. Revenue Journal Page 35 Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit 1 2 3 4 5 6 2012 1 2 3 4 5 6 6 616 RapZone 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 Accessories by Claire 3 0 0 0 00 Mar. 2 615 Accessories By Claire 2 2 0 0 00 31 9 6 0 0 00 Each special journal must be totaled and posted to the general ledger at the end of the month. The amount column is totaled and ruled. Next, the amount column would be totaled. (continued)

LO 2 Exhibit 3 (in steps) The debit total is posted from the revenue journal to Accounts Receivable in the general ledger. ACCOUNT Accounts Receivable Account No. 12 Post. Ref. Balance Date Item Dr. Cr. Dr. Cr. The total for the month of $9,600 is debited to Accounts Receivable in the general ledger, account number, 12. Enter R35, for revenue journal, page 35, in the post ref. column. When a subsidiary ledger is used for Accounts Receivable, the Accounts Receivable in the general ledger is called a Controlling Account. This is because the total of each of the subsidiary ledger accounts should equal the balance of Accounts Receivable in the general ledger. 2012 Mar. 1 Balance 3 400 00 31 R35 9 600 00 13 000 00 Revenue Journal, page 35 (continued)

LO 2 Exhibit 3 (in steps) Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2012 6 616 RapZone 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 Accessories by Claire 3 0 0 0 00 31 9 6 0 0 00 Mar. 2 615 Accessories By Claire 2 2 0 0 00 The ledger account number for Accounts Receivable, 12, is entered below the total of the column in the revenue journal, indicating it has been posted to the general ledger. (12) Indicates a debit posting of $9,600 to Accounts Receivable (General Ledger Account 12) (continued)

LO 2 Exhibit 3 (in steps) The credit total is posted from the revenue journal to Fees Earned in the general ledger. ACCOUNT Fees Earned Account No. 41 Post. Ref. Balance Date Item Dr. Cr. Dr. Cr. Mar. 31 2012 R35 9 600 00 9 600 00 A credit is posted to Fees Earned, account number 41, in the general ledger. R35 is entered in the Post Ref. column of the ledger page. Revenue Journal, page 35 (continued)

LO 2 Exhibit 3 (in steps) Revenue Journal Invoice Post Accts. Rec. – Debit Date No. Account Debited Ref. Fees Earned – Credit Page 35 1 2 3 4 5 6 2012 6 616 RapZone 1 7 5 0 00 18 617 Web Cantina 2 6 5 0 00 27 618 Accessories by Claire 3 0 0 0 00 31 9 6 0 0 00 Mar. 2 615 Accessories By Claire 2 2 0 0 00 Fees Earned, account number 41, is entered below the total of the amount column in the revenue journal. Although there is only one column in the revenue journal, both a debit to Accounts Receivable and a credit to Fees Earned are posted to the general ledger--hence, the two posting references. (12) (41) Indicates a credit posting of $9,600 to Fees Earned (General Ledger Account 41)