The information in the sales journal was taken from a copy of the sales invoice, which is the source document representing the sale. The sales invoice number is entered so the bookkeeper could look up the sales invoice and assist the customer. One benefit of using special journals is that one person can work with this journal while someone else works with a different special journal.

Reduction in Detailed Recording

The cash receipts journal contains credit transactions while it is debited with debit transactions. The use of a reference code in any of the special journals isvery important. Remember, after a sale is recorded in the salesjournal, it is posted to the accounts receivable subsidiary ledger,and the use of a reference code helps link the transactions betweenthe journals and ledgers. Recall that the accounts receivablesubsidiary ledger is a record of each customer’s account. At the end of the period, we would post the totals of $7,650 credit to cash, the $7,500 debit to accounts payable, and the $150 credit to merchandise inventory. The DR (debit) Other column would be handled a little differently as you need to look to the account column to find out where these individual amounts should be posted.

Sales Journal FAQs

However, not all accounting personnel should have access to the general journal. For example, if a firm has 2,000 purchases on account during the month, the purchases account will be debited once, not 2,000 times. If a particular transaction does not fit into one of the above groups, it is recorded in the general journal. A single journal is satisfactory for small business enterprises where the transaction volume is usually small.

AccountingTools

Most companies have four special journals, but there can be moredepending on the business needs. The four main special journals arethe sales journal, purchasesjournal, cash disbursements journal, andcash receipts journal. These special journals weredesigned because some journal entries occur repeatedly. Forexample, selling goods for cash is always a debit to Cash and acredit to Sales recorded in the cash receipts journal. Likewise, wewould record a sale of goods on credit in the sales journal, as adebit to accounts receivable and a credit to sales.

• Furthermore, cash receipt journals have a function to record transactions that occur on a cash basis.
• Special journals (in the field of accounting) are specialized lists of financial transaction records which accountants call journal entries.
• Thus, the proper design, implementation, andmaintenance of the accounting information system are vital to acompany’s sustainability.

Special Journals

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For example, a business concern has many transactions in which cash is received and many in which cash is paid out. It records all the transactions involving the outflow of cash from the company and includes the transactions such as cash paid to suppliers, cash paid for expenses, etc. It records all the transactions related to the return of goods back by the customers sold on credit and allowances given to the customers. They record transactions of a similar nature under one journal and do not include the general journal. It helps monitor all the transactions during a period in an organized form. It ensures that the company takes the necessary actions for those transactions.

The four main special journals are the sales journal, purchases journal, cash disbursements journal, and cash receipts journal. These special journals were designed because some journal entries occur repeatedly. For example, selling goods for cash is always a debit to Cash and a credit to Sales recorded in the cash receipts journal. Likewise, we would record a sale of goods on credit in the sales journal, as a debit to accounts receivable and a credit to sales. Companies using a perpetual inventory system also record a second entry for a sale with a debit to cost of goods sold and a credit to inventory.

This entry would then be posted to the accounts payable and merchandise inventory accounts both for $2,500. Under the periodic inventory method, the credit would be to Purchase Returns and Allowances. Notice how these two different types of entries are recorded in different journals? This system helps keeps accurate and organized records of every type of transaction, so they can be reviewed later in the accounting period.

Remember, after a sale is recorded in the sales journal, it is posted to the accounts receivable subsidiary ledger, and the use of a reference code helps link the transactions between the journals and ledgers. Recall that the accounts receivable best invoice management software to streamline ap process subsidiary ledger is a record of each customer’s account. Examples of each special journal are as follows.The sales journal contains entries for credit purchases, whereas the credit purchases journal is debited with these transactions.

Baker Co.’s account in the subsidiary ledger would show that they owe $1,450; Alpha Co. owes $625; and Tau Inc. owes $700 (Figure 7.18). Using a sales journal significantly decreases the amount of work needed to record transactions in a manual system. It also is not necessary to write an explanation of the transaction because only credit sales are recorded.Finally, the amount of time needed to post entries is reduced. Although each transaction must be posted to the subsidiary Accounts Receivable ledger, only the totals for the month have to be posted to the General Ledger accounts.