1. Accounting & Financial Analysis 11 Lecture 2
Specialised journals
General journal

2. Journals
All information relating to the transactions of a company are processed through journals into the general ledger.
There are two types of journals :
Specialist journals (Subsidiary books, day books)
General journal

3. What is a specialist journal?
Limited function nowadays, due to modern computer accounting systems
A chronological summary of similar transactions that occur regularly, recorded in a day book with the column totals summarised and posted to the general ledger at the end of a specified period usually 1 month.

4. 7 Specialist Journals There are seven specialist journal books:
Sales journal (Day book which records all the credit sales)
Sales returns journal (Day book which records credit sale returns)
Purchases journal (Day book which records credit purchases of stock)
Purchase returns journal (Day book which records the returns of stock purchased on credit)
Cash receipts journal (Day book which records all cash receipts)
Cash payments journal (Day book which records all cash payments)
Petty cash journal (Day book which records all petty cash payments and the receipt of replenishment)

5. General Journal
The general journal is the subsidiary book in which we record the details of any transaction that cannot be recorded in any other subsidiary book. (Specialist journals)

6. General Journal - 2 It has the following characteristics:
Provides a record of details in date order
Indicates the general ledger accounts to be debited or credited.
Indicates the $ amount to be processed to each general ledger account.
Gives the reason for the transaction being processed.

7. General Journal - 3
The general journal is generally used to process transactions/activities that are not recorded in any of the specialised journals.

8. General Journal - 4
These transactions generally relate to the following activities:
Start-up business entries
Correction of posting errors
End of month entries: depreciation charge, bank interest & charges, provision for bad debts, bad debts write-off etc.
Accrual of expenses
Adjustments for prepayments
Purchase of fixed assets on credit
Adjustment entries on sale of assets
Contra entries, inter-account transfers

9. JOURNALS ARE BOOKS
Each journal is a separate ledger book with analysis columns (up to 25 columns, each column for a separate account with the last column for any uncommonly used accounts). The first column is for the total $ value of the transaction.

10. JOURNAL EXAMPLES Sales (Credit Sales/Trade Debtors)
Sales returns (Credit Sales returns)
Purchases (Credit Purchases/Trade Creditors
Purchases returns (Credit Purchase returns)
Cash receipts
Cash payments
Petty cash
General journal.

11. Credit terms
Credit terms is the agreement made with the customers which specifies the time in which the account has to be paid, and sometimes
the discount allowed if the account is paid earlier.
Every business tries to collect the money owing as quickly as possible as this will help the business cash flow.
In order to get the trade debtors (accounts receivable) to pay their account quicker a discount may be offered for quick settlement.
The discount could be 3% if paid within 10 days, if not, the full amount within 30 days.
The discount will be documented as follows: Terms 3/10, net 30.

12. Credit terms - 2 For accounting purposes
Discount allowed = Debit entry
Discount received = Credit entry

13. The sales returns journal – see attachment 1
The sales returns journal is the subsidiary day book which records all the RETURNED CREDIT SALES (of trading stock) that have taken place during the month.
At the end of the month the columns are totalled (added up) and ONLY the total of each column is posted to the General Ledger.

14. Example: Sales returns journal
Date
Description
Credit.Note
Value
GST
Total
5/7/07
Goods sold on credit returned by Tuan 15
$40 $4
$44
12/7/07
Goods sold on credit returned by Barath 16
$30 $3
$33
TOTAL
$70 $7
$77

15. Purchase journal – see attachment 1
The purchase journal is the subsidiary day book which records all the CREDIT PURCHASES (of trading stock) that have taken place each day during the month.
At the end of the month the columns are totalled (added up) and ONLY the total of each column is posted to the General Ledger.
Purchases of other items such as office computer is not recorded in the purchases journal only trading stock (for resale) purchased on credit is recorded in the purchases journal.

16. Example: Purchases journal

17. The purchases returns journal – see attachment 1
The purchases returns journal is the subsidiary day book which records all the RETURNED CREDIT PURCHASES (of trading stock) that have taken place during the month.
At the end of the month the columns are totalled (added up) and ONLY the total of each column is posted to the General Ledger.

18. Example: Purchases returns journal

19. The Cash Payments and receipts journals – see attachment 2
The cash journals (payments and receipts) are the journals into which we record all the cash transactions that take place during the month.
All cash receipts are recorded in the CASH RECEIPTS JOURNAL and
All cash payments are recorded in the CASH PAYMENTS JOURNAL.

20. The cash payments journal
A business will have various cash payments to record during the month, some of which will be the payment of wages, rent, telephone, electricity, purchase of goods for cash, payments to trade creditors, GST payments etc. etc.
Each one of these payments will be recorded in the cash payments journal and
at the end of each month the columns will be totalled (added up) and ONLY the total of each expense account will be posted to the General Ledger.
The sundry column will be used to record all the payments for which there is no specific column.

21. Example: Cash Payments Journal

22. Use of Cash Payments Journal
Therefore if we want to confirm that an expense has been paid by the business we would have to refer to the Cash Payments Journal for detail of all payments.

23. The cash receipts journal
A business will have various cash receipts to record during the month, most of which will be receipts from
trade debtors (accounts receivable), and
cash sales,
GST payments etc.
Each one of these receipts will be recorded in the cash receipts journal and at the end of each month the columns will be totalled and ONLY the total of each receipt will be transferred to the General Ledger. The sundry column will be used to record all the receipts for which there is no specific column.

24. The cash receipts journal
Each one of these receipts will be recorded in the cash receipts journal and at the end of each month the columns will be totalled and ONLY the total of each receipt will be transferred to the General Ledger.
The sundry column will be used to record all the receipts for which there is no specific column.

25. Example: Cash Receipts Journal

26. Cash Receipts Journal -2
Therefore if we want to confirm receipt of income we would have to refer to the Cash Receipts Journal for detail of all receipts.
Example: If a debtor (credit sales) claims to have paid an account we would have to check the Cash Receipts Journal to see if the payment is recorded.

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