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Week-5-Reviewer: A. Special Journals

The document discusses four types of special journals used in accounting: sales journals to record credit sales, cash receipts journals to record cash transactions, purchase journals to track credit purchases, and cash disbursement journals to record cash payments. It also describes reconciling items in bank reconciliations such as deposits in transit, service charges, and adjustments. Finally, it outlines key aspects of internal cash controls including accurately accounting for cash transactions, having sufficient cash for bills, avoiding excess idle cash, preventing theft, and properly managing cash flows.

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Allen Hendrick Santiago
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132 views

Week-5-Reviewer: A. Special Journals

The document discusses four types of special journals used in accounting: sales journals to record credit sales, cash receipts journals to record cash transactions, purchase journals to track credit purchases, and cash disbursement journals to record cash payments. It also describes reconciling items in bank reconciliations such as deposits in transit, service charges, and adjustments. Finally, it outlines key aspects of internal cash controls including accurately accounting for cash transactions, having sufficient cash for bills, avoiding excess idle cash, preventing theft, and properly managing cash flows.

Uploaded by

Allen Hendrick Santiago
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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week-5-reviewer

A. Special Journals

Each special journal is designed to be used for recording a single kind of


transactions that occurs frequently such as:

a. sales
b. purchases
c. cash receipts
d. cash disbursements

Special journals are designed to systematize the recording of major recurring


type of transactions

TYPES OF SPECIAL JOURNALS


A. Sales Journal

used to record all sales of merchandise on account (on credit)

The sales journal is used only for sales on credit: cash sales are recorded in
the cash receipts journal

The simplest form of sales journal has only one column labeled Accounts
Receivable - Debt and Sales - Credit

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The Sales Journal may appear as follows:

B. CASH RECEIPTS JOURNAL

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The Cash receipts journal is used for all transactions involving receipt of cash
by business.

The most frequently type of cash transactions are cash sales and collections
on account receivable

Many other types of transaction may result in the receipt of cash by the
business. Therefore, separate credit columns appear for those items. A sundry
account credit column is provided for miscellaneous accounts which do not
occur enough frequency to warrant special columns

C. Purchase Journal

The purchases Journal is designed to accommodate the recording of


everything purchased on account.

A purchases journal is a specialized type of accounting log that keeps track


of orders made by a business on credit or on account. Cash purchases for
inventory are not tracked in the purchases journal.

The amount of detail provided in a purchases journal is determined by the type of


purchase and products received.

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D. CASH DISBURSEMENT JOURNALS

All transactions involving payment of cash for various purposes are recorded
in the Cash Disbursements or Cash Payments Journal.

Such transactions include:

a. purchase of cash and other items for cash


b. payment of expenses

c. payment of creditors on account

d. cash withdrawal by the owner and etc..

To have an acceptable level of control over cash disbursements, most


companies pay all bills by check, therefore, the cash disbursements journals
contains a column which to record the number of the check written for each
disbursement.

A cash disbursement journal is shown below:

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B. Reconciling Items

A reconciling item is a difference between balances from two sources that are
being compared. These items are stated in an account reconciliation, so that
the balance from one source is adjusted by reconciling items to arrive at the
balance from the other source. Examples of reconciling items in a bank
reconciliation are deposits in transit and uncashed checks. Some reconciling
items may require adjustment to the records of the recording entity, such as
an uncashed check fee that has been imposed by the entity's bank.

The following reconciling items commonly arise as part of a bank


reconciliation, and require adjustment of the book balance:

a. Interest earned. This amount is recorded in the bank statement, and must be
added to the company's book balance.

b. Service charges. These amounts are charged by the bank for its services in
maintaining the checking account, and must be subtracted from the company's
book balance. This may also include a fee for supplying check stock to the
company.
c. Adjustments to deposits. The company may sometimes record a deposit
incorrectly, or it may deposit a check for which there are not sufficient funds

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NSF. If so, and the bank spots the error, the company must adjust its book
balance to correct the error. The bank may also charge an NSF fee, which must
be recorded in the company’s books.

d. Adjustments to checks. The company may occasionally record a check


incorrectly. If so, and the bank spots the error, the company must adjust its book
balance to correct the error.

On rare occasions, the bank will have made an error instead, in which case the
bank corrects its records and the company's book balance is not adjusted.

C. INTERNAL CASH AND CONTROL

Since cash is the most liquid of all assets, a business cannot survive and
prosper if it does not have adequate control over its cash. Cash is the asset
that has the greatest chance of “going missing” and this is why we must
ensure that we have strong internal controls build around the cash process.
Since many business transactions involve cash, it is a vital factor in the
operation of a business. Of all the company’s assets, cash is the most easily
mishandled either through theft or carelessness. To control and manage its
cash, a company should:

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1. Account for all cash transactions accurately so that correct information is
available regarding cash flows and balances.

2. Make certain that enough cash is available to pay bills as they come due.
3. Avoid holding too much idle cash because excess cash could be invested to
generate income, such as interest.

4. Prevent loss of cash due to theft or fraud.


5. The need to control cash is clearly evident and has many aspects. Without the
proper timing of cash flows and the protection of idle cash, a business cannot
survive.

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