1. INTRODUCTION TO ACCOUNTING
Special Journals and the Receivable and Payable Subsidiary Ledgers

2. Sales on Account
When the company makes a sale and the customer will not pay us until a later date, we must record the transaction in two places:
Sales Journal (to record the transaction)
Receivable Subsidiary Ledger (to track the customer’s balance)

3. Debit Accounts Receivable
Sales Journal-Page 1
Date
Customer
Invoice # PR
Credit Sales
Debit Accounts Receivable
Debit Cost-of-Sales
Credit Inventory
Let’s assume that on December 2nd we sold merchandise on credit to Ender Co. on invoice 7601 for $6,000. The cost of the products was $3,000.
The entry in the Sales Journal would be as follows:

4. Debit Accounts Receivable
Sales Journal-Page 1
Date
Customer
Invoice # PR
Credit Sales
Debit Accounts Receivable
Debit Cost-of-Sales
Credit Inventory
Dec 2
Ender Co.
7601
6,000
3,000
After the transaction has been journalized, we must immediately update the Customer’s Ledger Card.
The column with the heading “Debit Accounts Receivable” instructs us to find the Customer’s Ledger Card (Ender Co.) and Debit it for $6,000.
Notice that there is nothing in the “PR” column. A checkmark in this column signifies that the Customer’s Ledger Card has been updated.

5. Customer’s Ledger Card
Date
Explanation
(Invoice or Receipt #) PR
Debit
Credit
Balance
Dec 2
Invoice 7601 S1
6,000
The journal instructed us to Debit the Customer’s Ledger Card for $6,000.
We must then update the customer’s balance.
The “S1” in the “PR” column signifies that this transaction came from the Sales Journal Page 1.
To complete the recording of this transaction we must return to the Sales Journal and put a checkmark in the “PR” column.

6. Debit Accounts Receivable
Sales Journal-Page 1
Date
Customer
Invoice PR
Credit Sales
Debit Accounts Receivable
Debit Cost-of-Sales
Credit Inventory
Dec 2
Ender Co.
7601 √
6,000
3,000
The recording of this transaction is now complete.

7. Receipts on Account
When the company receives payment from a customer for a sale that was made in the past, we must record the transaction in two places:
Receipts Journal (to record the transaction)
Receivable Subsidiary Ledger (to track the customer’s balance)

8. Receipts Journal-Page 3
Date
Customer
Receipt # PR
Debit Cash
Debit
Sales Discount
Credit
Accounts Receivable
Let’s assume that on December 5th we received payment from Ender Co. for the sale of December 2nd. Let’s also assume that our terms state that if the customer pays us within 10 days we will allow them to take a 2% discount. We issued Receipt # 220.
The entry in the Receipts Journal would be as follows:

9. Receipts Journal-Page 3
Date
Customer
Receipt # PR
Debit Cash
Debit
Sales Discount
Credit
Accounts Receivable
Dec 5
Ender Co.
220
5,880
120
6,000
Notice we only received $5,880 (6,000 times 2% equals 120 Discount.)
After the transaction has been journalized, we must immediately update the Customer’s Ledger Card.
The column with the heading “Credit Accounts Receivable” instructs us to find the Customer’s Ledger Card (Ender Co.) and Credit it for $6,000.
Notice that there is nothing in the “PR” column. A checkmark in this column signifies that the Customer’s Ledger Card has been updated.

10. Customer’s Ledger Card
Date
Explanation
(Invoice or Receipt #) PR
Debit
Credit
Balance
Dec 2
Invoice 7601 S1
6,000
Dec 5
Receipt 220 R3
The journal instructed us to Credit the Customer’s Ledger Card for $6,000.
We must then update the customer’s balance.
The “R3” in the “PR” column signifies that this transaction came from the Receipts Journal Page 3.
To complete the recording of this transaction we must return to the Receipts Journal and put a checkmark in the “PR” column.

11. Receipts Journal-Page 3
Date
Customer
Receipt # PR
Debit Cash
Debit
Sales Discount
Credit
Accounts Receivable
Dec 5
Ender Co.
220 √
5,880
120
6,000
The recording of this transaction is now complete.

12. Purchases on Account
When the company makes a purchase from a supplier and will not pay them until a later date, we must record the transaction in two places:
Purchase Journal (to record the transaction)
Payable Subsidiary Ledger (to track the supplier’s balance)

13. Purchase Journal-Page 2
Date
Supplier
Invoice # PR
Credit
Accounts
Payable
Debit
Inventory
Other
Description
Let’s assume that on December 12th we purchased merchandise inventory on credit from Tacid Co. on invoice T64 for $38,000.
The entry in the Purchase Journal would be as follows:

14. Purchase Journal-Page 2
Date
Supplier
Invoice # PR
Credit
Accounts
Payable
Debit
Inventory
Other
Description
Dec 12
Tacid Co.
T64
38,000
After the transaction has been journalized, we must immediately update the Supplier’s Ledger Card.
The column with the heading “Credit Accounts Payable” instructs us to find the Supplier’s Ledger Card (Tacid Co.) and Credit it for $38,000.
Notice that there is nothing in the “PR” column. A checkmark in this column signifies that the Supplier’s Ledger Card has been updated.

15. Supplier’s Ledger Card
Date
Explanation
(Invoice or Cheque #) PR
Debit
Credit
Balance
Dec 12
Invoice T64 P2
38,000
The journal instructed us to Credit the Supplier’s Ledger Card for $38,000.
We must then update the supplier’s balance.
The “P2” in the “PR” column signifies that this transaction came from the Purchase Journal Page 2.
To complete the recording of this transaction we must return to the Purchase Journal and put a checkmark in the “PR” column.

16. Purchase Journal-Page 2
Date
Supplier
Invoice # PR
Credit
Accounts
Payable
Debit
Inventory
Other
Description
Dec 12
Tacid Co.
T64 √
38,000
The recording of this transaction is now complete.

17. Disbursements on Account
When the company makes a payment to a supplier for a purchase that was made in the past, we must record the transaction in two places:
Disbursements Journal (to record the transaction)
Payable Subsidiary Ledger (to track the supplier’s balance)

18. Disbursements Journal-Page 4
Date
Supplier
Cheque # PR
Credit
Cash
Inventory
Debit
Accounts
Payable
Let’s assume that on December 20th we issued cheque #502 in payment of what we owed to Tacid Co. for the purchase of December 12th . Let’s also assume that their terms state that if we pay them within 10 days we can take a 2% discount.
The entry in the Disbursements Journal would be as follows:

19. Disbursements Journal-Page 4
Date
Supplier
Cheque # PR
Credit
Cash
Inventory
Debit
Accounts
Payable
Dec 20
Tacid Co.
502
37,240
760
38,000
Notice we only paid $37,240 (38,000 times 2% equals 760 Discount.). The discount must reduce the value of the inventory (not purchase discounts).
After the transaction has been journalized, we must immediately update the Supplier’s Ledger Card.
The column with the heading “Debit Accounts Payable” instructs us to find the Supplier’s Ledger Card (Tacid Co.) and Debit it for $38,000.
Notice that there is nothing in the “PR” column. A checkmark in this column signifies that the Supplier’s Ledger Card has been updated.

20. Supplier’s Ledger Card
Date
Explanation
(Invoice or Cheque #) PR
Debit
Credit
Balance
Dec 12
Invoice T64 P2
38,000
Dec 20
Cheque 502 D4
The journal instructed us to Debit the Supplier’s Ledger Card for $38,000.
We must then update the supplier’s balance.
The “D4” in the “PR” column signifies that this transaction came from the Disbursements Journal Page 4.
To complete the recording of this transaction we must return to the Purchase Journal and put a checkmark in the “PR” column.

21. Disbursements Journal-Page 4
Date
Supplier
Cheque # PR
Credit
Cash
Inventory
Debit
Accounts
Payable
Dec 20
Tacid Co.
502 √
37,240
760
38,000
The recording of this transaction is now complete.