CHAPTER 10

Special and Combination Journals and Voucher System

Ma. Rona Corda-Prado, CPA University of St. La Salle

SUBSIDIARY LEDGERS
Subsidiary ledgers are a listing of individual accounts with common characteristics.
Characteristic Amounts due from customers Amounts owed to creditors Controlling Account Accounts Receivable Accounts Payable Subsidary Ledger Accounts Receivable Ledger Accounts Payable Ledger

Prepared by: RCPrado

Each general ledger control account balance must equal the composite balance of the individual accounts in the related subsidiary ledger.

Chapter 10- 2

SUBSIDIARY LEDGERS
Advantages of Subsidiary Ledgers
1.

Show in a single account transactions affecting one customer or one creditor. Free the general ledger of excessive details. Help locate errors in individual accounts.

2. 3. 4. 5.

Make possible a division of labor.

Applies to accounts receivable, accounts payable, inventory and PPE.

6.

Subsidiary ledgers may simply be a group of accounts in a binder or it may be a file card arrangement. Order is either numerical by customer number or alphabetical by customer name.
Chapter 10- 3

Prepared by: RCPrado

SUBSIDIARY LEDGERS
Review Question
All of the following are advantages of using subsidiary ledgers except they: a) show transactions affecting one customer or one creditor in a single account. b) free the general ledger of excessive details. c) eliminate errors in individual accounts. d) make possible a division of labor.

Prepared by: RCPrado

Chapter 10- 4

SUBSIDIARY LEDGERS Special Journals in Accounting

Each of the following is a subsidiary ledger except: a) accounts receivable ledger.

b) accounts payable ledger.

c) customers ledger.

d) general ledger.

Prepared by: RCPrado

Chapter 10- 5

SUBSIDIARY LEDGERS

Prepared by: RCPrado

Chapter 10- 6

SPECIAL JOURNALS IN ACCOUNTING

Cash Receipts Journal General Journal Transactions which could not be recorded in the special journals, including adjusting, correcting and closing entries All cash receipts (including cash sales)

Sales Journal All sales of merchandise on account

Cash Disbursements Journal All cash paid (including cash purchases)

Purchases Journal All purchases of merchandise on account

Chapter 10- 7

Prepared by: RCPrado

Information for each sales is obtained from a copy of the related sales invoice.

Monthly posting are done to the GL. PR: S & page # Amounts in the SJ are posted daily to the subsidiary ledger on a daily basis.
Prepared by: RCPrado 8

Sales JOURNAL SALES Journal

Under a perpetual inventory system, one entry at selling price in Sales Journal results in a debit to Accounts Receivable and a credit to Sales. Another entry at cost results in a debit to Cost of Goods Sold and a credit to Merchandise Inventory. Prepared by: RCPrado Chapter 10- 9

SALES JOURNAL

Companies make daily postings from the sales journal to the individual accounts receivable in the subsidiary ledger.
Prepared by: RCPrado Chapter 10- 10

SALES JOURNAL

Posting to the general ledger is done monthly.

Prepared by: RCPrado

Chapter 10- 11

SALES JOURNAL
Advantages of Sales Journal
One-line entry for each sales transaction saves time. Only totals, rather than individual entries, are posted to the general ledger. A division of labor results.

Prepared by: RCPrado

Chapter 10- 12

CASH RECEIPTS JOURNAL

In the cash receipts journal, companies record all receipts of cash (cash sale, collection and other sources of cash). The posting of the cash receipts journal is similar to the posting of the sale journal. Prepared by: RCPrado

Chapter 10- 13

Sourced from official receipts (OR), cash register tapes (CRT), cash slips or credit memos

Total debits and credits CASH RECEIPTS JOURNAL before posting.

Post to GL monthly.

Post to A/R SL daily.

Reconcile SL total to GL at the end of the month.

Prepared by: RCPrado

Chapter 10- 14

CASH RECEIPTS JOURNAL

Review Question
Cash sales of merchandise are recorded in the: a) cash payments journal. b) cash receipts journal.

c) general journal.
d) sales journal.

Prepared by: RCPrado

Chapter 10- 15

CASH RECEIPTS JOURNAL

Review Question
Which of the following is not one of the credit columns in the cash receipts journal: a) Other accounts. b) Accounts payable. c) Accounts receivable. d) Sales.

Prepared by: RCPrado

Chapter 10- 16

Total debits & Sourced from PURCHASES JOURNAL - PERIODIC credits and post receiving reports to GL monthly

Post to A/P SL daily.

Prepared by: RCPrado

Chapter 10- 17

PURCHASES JOURNAL - PERPETUAL

Daily postings are made from the purchases journal to the accounts payable subsidiary ledger.
Prepared by: RCPrado Chapter 10- 18

PURCHASES JOURNAL - PERPETUAL

Purchases Journal

Prepared by: RCPrado

At the end of the accounting period, the company posts totals to the general ledger.

Chapter 10- 19

CASH PAYMENTS JOURNAL

In a cash payments (cash disbursements) journal, companies record all disbursements of cash. The procedures for posting the cash payments journal are similar to Prepared by: RCPrado Chapter 10- 20 those for other journals.

Sourced from check vouchers.

Cash Disbursements Journal CASH PAYMENTS JOURNAL

Prepared by: RCPrado

Chapter 10- 21

SPECIAL JOURNALS IN ACCOUNTING

Effects of Special Journals on the General Journal
Special journals substantially reduce the number of entries that companies make in the general journal. Only transactions that cannot be entered in a special journal are recorded in the general journal. Also, correcting, adjusting, and closing entries are made in the general journal.

Prepared by: RCPrado

Chapter 10- 22

SPECIAL JOURNALS SUMMARY

JOURNAL
Sales Journal Cash Receipts Journal Purchases Journal Cash Disbursements Journal General Journal

SPECIFIC TRANSACTIONS RECORDED

Sales of merchandise on account Receipts of cash Credit purchases of merchandise and other items Payments of cashSales Journal

POSTING ABBREVIATION S CR P CD

Prepared by: RCPrado

Entries that do not fit in the other journals Merchandise Returns (Sales and Purchases) Write-off of Uncollectible Accounts Non cash transactions (i.e. issuance/receipt of a promissory note)

GJ

Chapter 10- 23

PROVING THE LEDGERS

At the end of the period, after all postings have been made, equality should exist between the following: Total Dr = Total Cr in the G/L. These amounts would be used to prepare the T/B. AR Control (GL) Account = of Individual Customer Accounts in the SL AP Control (GL) Account = of Individual Vendor/Creditor Accounts in the SL

Prepared by: RCPrado

Chapter 10- 24

INTERNAL CONTROL AND THE VOUCHER SYSTEM

Section Objectives
1. 2. 3. 4. Prepare vouchers. Record vouchers in a voucher register. Record payment of approved vouchers. Record transactions that require special treatment in a voucher system.

VOUCHER SYSTEM
Method of controlling liabilities and cash payments.
The voucher system is most appropriate for medium- and large-sized companies.

All liabilities are authorized.

Checks may be drawn only upon a written authorization in the form of a voucher approved by responsible officials. Payments, except for small petty cash items, are made by check.

Checks are issued based on properly approved vouchers.

Prepared by: RCPrado Chapter 10- 26

VOUCHER SYSTEM
Vouchers are used to set up and replenish cash funds.

Vouchers are used to cover bills and invoices received from outside parties.

Consists of vouchers, vouchers register, unpaid voucher file, check register and paid voucher file

Prepared by: RCPrado

Chapter 10- 27

STEPS IN THE VOUCHER SYSTEM

1. Compare purchase requisition, purchase order, invoice, and receiving report for agreement of quantities, prices, types of goods and terms.
2. Verify receipt of merchandise. 3. Verify prices. 4. Verify computations.

5. Prepare and approve voucher.

6. Record and file the unpaid voucher according to due date. 7. Pay the voucher. 8. File the paid voucher. Prepared by: RCPrado
Chapter 10- 28

PAYMENT VOUCHER
Form used to authorize payments
Focal point in an effective internal control system. The verified invoice is the basis for preparing a voucher. After preparing the voucher, the verified invoice should be attached to the voucher. After comparing the invoice and the voucher, it is approved for payment.

Prepared by: RCPrado

Chapter 10- 29

VOUCHER REGISTER
A voucher register is a customized journal providing for accounts used frequently.

Takes the place of the purchase journal and provides a record of all authorized check payments Vouchers Payable account maybe used in place of Accounts Payable (but still recorded in the SFP as A/P)

All expenditures are recorded first in a voucher register

Approved vouchers are entered in the register in numerical sequence (Exhibit 10-5 pp 460)
Chapter 10- 30

Prepared by: RCPrado

UNPAID VOUCHER FILE

After vouchers have been entered in the voucher register, they are filed in the order of required date of payment >>> to ensure timely payments and availment of

discounts

The absence of entries in the payment date and check number columns of the voucher register indicate that the voucher is unpaid.

Prepared by: RCPrado

Chapter 10- 31

ISSUING CHECKS FOR VOUCHERS

Record entry in the check register, debiting Accounts Payable and crediting Cash .

Make notation in the voucher register showing date paid and check number.
In a voucher system, the check register replaces the cash payments journal. (Exhibit 10-5

pp 460)

Prepared by: RCPrado

Chapter 10- 32

ISSUING CHECKS FOR VOUCHERS

Record entry in the check register, debiting Accounts Payable and crediting Cash . Make notation in the voucher register showing date paid and check number. In a voucher system, the check register replaces the cash payments journal. (Exhibit 10-6 pp 460)

Prepared by: RCPrado

Chapter 10- 33

PAID VOUCHER FILE

The paid voucher along with its supporting documents are filed in numerical sequence in a paid voucher file File is used for examination by internal or external auditors requiring information about a specific expenditure

Prepared by: RCPrado

Chapter 10- 34

SCHEDULE OF VOUCHERS PAYABLE

At

the end of the month, a list of all unpaid vouchers is prepared.

the list to the unpaid vouchers in the voucher register and the unpaid voucher file. that the totals of the unpaid vouchers in the voucher register and the unpaid voucher file equals the balance of Accounts Payable .

Compare Ensure

Prepared by: RCPrado

Chapter 10- 35

SCHEDULE OF VOUCHERS PAYABLE

CLASSIC CLOTHES, INC. Schedule of Vouchers Payable May 31, 2007

Voucher Number

Payable to Cotton Inc. Southern Paper Company P&S Office Products Hank Hills, Attorney Charles Alexander, CPAs Big Insurance Company Paper Box Company Northside Utilities Southern Gas Gulf Shores Clothiers ST & T Company Truth in Publishing Company On-Time Delivery Total

Amount $3,000.00 225.00 75.00 500.00 450.00 500.00 195.00 35.00 155.00 7,800.00 125.00 950.00 179.00 $14,189.00

Should match balance in Accounts Payable account.

4-29 5-05 5-06 5-07 5-08 5-13 5-17 5-18 5-19 5-20 5-21 5-22 5-23

TRANSACTIONS REQUIRING SPECIAL TREATMENT

Partial payments. Notes payable.

Purchases returns and allowances.

Purchases discounts lost.

Prepared by: RCPrado

Chapter 10- 37

PARTIAL PAYMENT OF PREVIOUSLY RECORDED VOUCHER

1. Cancel the original voucher. 2. Issue new vouchers for partial payments.

Prepared by: RCPrado

Chapter 10- 38

PAYMENT OF NOTES PAYABLE

If a business issues a note payable for an unpaid invoice, debit Accounts Payable and credit Notes PayableTrade. In the voucher register, enter the date of the note and enter the words By note in the Check Number column.

Prepared by: RCPrado

Chapter 10- 39

PURCHASE RETURNS AND ALLOWANCES

Method 1: Issue a new voucher and cancel the original voucher. A notation about the new voucher is made in the date paid column of the voucher register beside the entry for the original voucher. (Preferred see Exhibit 10-7 pp

460)

Method 2: Make a notation for the allowance.

Prepared by: RCPrado

Chapter 10- 40

RECORDING CASH DISCOUNTS LOST

If purchase invoices are recorded in the voucher register net of discount and an invoice is paid after the discount period, the difference is recorded in the check register by debiting Discounts Lost.

If Discounts Lost column is not available in the check register, then lost discounts would be recorded in the general journal.

Prepared by: RCPrado

Chapter 10- 41