7 3 Analyze and Journalize Transactions Using Special Journals Principles of Accounting, Volume 1: Financial Accounting

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• Because every credit sales transaction is recorded in the same way, recording all of those transactions in one place simplifies the accounting process.
• This helps to create an audit trail, or a way to go back and find the original documents supporting a transaction.
• This email will prompt you to click a link redirecting you to the ORUS site and confirming your registration.
• It will also state additional instructions if you need to submit other requirements.
• The opposite of this transaction would be a debit balance in the vendor account which will be treated as positive disbursement.

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). The first transaction, the company disbursed cash of $ 5,000 to purchase the assets which is the inventory. The journal entry is debiting inventory of $ 5,000 and credit cash on hand $ 5,000. There are additional transactions that need to be recorded for VAT-registered taxpayers. This is the reason why they should use the Sales Journal and the Purchases Journal in addition to the four books of accounts that Non-VAT taxpayers should use. These transactions are related to computing the Net VAT payable by the taxpayer at the end of a given period.

Explanation of the columns used in cash disbursements journal

For example, if we overpaid our electric bill, we could get a refund check in the mail. We would use the cash receipts journal because we are receiving cash, but the credit would be to our Utility Expense account. If you look at the example in Figure 7.23, you see that there is no column for Utility Expense, so how would it be recorded? We would use some generic column title such as “other” to represent those cash transactions in the subsidiary ledger though the specific accounts would actually be identified by account number in the special journal.

We would enter these four types of transactions into their own journals, respectively, rather than in the general journal. Thus, in addition to the general journal, we also have the sales journal, cash receipts journal, purchases journal, and cash disbursements journals. Many companies enter only purchases of inventory on account in the purchases journal. Some companies also use it to record purchases of other supplies on account. However, in this chapter we use the purchases journal for purchases of inventory on account, only.

3 Analyze and Journalize Transactions Using Special Journals

Besides above payments, refunds of cash arising from the return of goods by customers are also recorded in cash disbursements journal. Your cash disbursement journal should stay updated as you receive new merchandise, make business loan payments, or any other cash disbursing transactions. There will be a notification for every file you successfully upload. Once done, the screen will present a summary page containing the taxpayer’s information, business information, books of accounts details, and documents submitted (attachments).