Financial Accounting – Subsidiary & Special Journals | Robert Steele | Skillshare

Financial Accounting – Subsidiary & Special Journals

Robert Steele

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17 Lessons (2h 55m)
    • 1. Financial Accounting – Subsidiary Ledgers & Special Journals Overview

      6:44
    • 2. 2 Special Journals Subsidiary Ledgers

      16:02
    • 3. 5 Accounts Receivable AR Subsidiary Ledger Explained

      9:00
    • 4. 6 Accounts Payable AP Subsidiary Ledger

      7:52
    • 5. 10 Sales Journal Service Company

      9:16
    • 6. 20 Sales Journal Merchandising Co

      10:39
    • 7. 30 Purchases Journal Service Company

      10:29
    • 8. 33 Purchase Journal Merchandising Co

      9:26
    • 9. 40 Cash Receipts Journal

      18:59
    • 10. 50 Cash Payments Journal Service Company

      13:40
    • 11. Discussion Question 1 Subsidiary Ledgers

      5:16
    • 12. Discussion Question 2 Subsidiary Ledgers

      6:51
    • 13. Discussion Question 3 Subsidiary Ledgers

      7:35
    • 14. Multiple Choice Question 1 Special Journals

      8:13
    • 15. Multiple Choice Question 2 Special Journals

      8:27
    • 16. Multiple Choice Question 3 Special Journals

      10:00
    • 17. 700 CPA Exam Part 1 Subsidiary ledgers %26 special journals CPA exam %26 other accounting test pre

      16:35

About This Class

We record transactions using special journals and track accounts receivable by customer and accounts payable by vendor using subsidiary ledger. 

We should have a good understanding of debits and credits before this course and we have courses covering debits and credits. We can construct an accounting system where we record every financial transaction using debits and credits in a general journal, posting each journal entry to the general ledger, making the trial balance form the general ledger, and the financial statements from the trial balance. The process of recording every transaction using debits and credits is the process we have used in the past. 

To reduce the amount of data input when using a manual system, we can group transactions by transaction type and create special journals to record them. An accounting system using special journals can reduce data input by limiting the amount data needed to be input for each transaction due to the format of the special journal. Special journals can also eliminate the need to post each transaction to the general ledger. Rather than posting each transaction to the general ledger special journals are added up at the end of the period and one transaction is then posted for the entire period.  

Special journals are typically used in a manual system but understanding them helps any system because it helps to see what components of an accounting system are necessary to all accounting systems, which components can be changed, and when changing the format of the system would be beneficial. Automated systems also often general useful reports in a similar format as the special journals. 

Subsidiary ledgers for accounts receivable and accounts payable are necessary for any system where we make sales on account and purchases on account. In other words, if we make sales and collect money at a later date, we will need to track who owes us money, and if we make purchases and pay at a later date, we will need to track who we owe money to. 

In addition to instructional video, this course will include downloadable

•    Downloadable PDF Files

•    Excel Practice Files

•    Multiple Choice Practice Questions

•    Short Calculation Practice Questions

•    Discussion Questions

The PDF files allow us to download reference information we can use offline and as a guide to help us work through the material.

Excel practice files will be preformatted so that we can focus on the adjusting process and learning some of the basics of Excel, like addition, subtraction, and cell relationships.

Multiple choice example question helps us improve our test-taking skills by reducing the information into the size and format of multiple choice questions and discussing how to approach these questions.

Short calculation questions help us reduce problems that have some calculation down to a short format that could be used in multiple choice questions.

Discussion Question will provide an opportunity to discuss these topics with the instructor and other students, a process many students find very helpful because it allows us to see the topic from different viewpoints.

Who will we be learning from?

You will be learning from somebody who has technical experience in accounting concepts and in accounting software like QuickBooks, as well as experience teaching and putting together curriculum.

You will be learning from somebody who is a:

•    CPA – Certified Public Accountant

•    CGMA – Chartered Global Management Accountant

•    Master of Science in Taxation

•    CPS – Certifies Post-Secondary Instructor

•    Curriculum Development Export

As a practicing CPA the instructor has worked with many technical accounting issues and helped work through them and discuss them with clients of all levels.

As a CPS and professor, the instructor has taught many accounting classes and worked with many students in the fields of accounting, business, and business applications.

The instructor also has a lot of experience designing courses and learning how students learn best and how to help students achieve their objectives. Experience designing technical courses has also benefit in being able to design a course in a logical fashion and deal with problems related to technical topics and the use of software like QuickBooks Pro. 

Content Includes: 

  • Accounts receivable subsidiary ledger
  • Accounts payable subsidiary ledger
  • Special journals
  • Sales journal 
  • Purchases journal
  • Cash receipts journal 
  • Cash payment journal 
  • Accounting Cycle
  • Comprehensive problem
  • Excel
  • Definitions and key term

Transcripts

1. Financial Accounting – Subsidiary Ledgers & Special Journals Overview: if we are a business owner who would, like Teoh, run our business better by better understanding accounting systems and how to track accounts receivable and accounts payable. Who owes us money and who we owe money to over a business professional who would like to advance our career by better understanding subsidiary ledgers and special journals? Or an accounting student who would like to be able to understand material related to accounting special journals subsidiary ledgers better and be able tow work problems much faster. This course is a course for us. What will we learn? We're gonna learn accounting system using special journals, also focusing in on subsidiary ledgers for accounts receivable and accounts payable. We'll talk about why we would use it. This type of system. Why use special journals to record transactions? We're gonna record transactions using special journals, which is different than we may see a accounting system set up when we have an automated system or in some of the manual systems in the past, where we used the General Journal to record everything by looking at the accounting system through different perspective, different lenses, Then we can see what is similar between the accounting systems and what will differ. Subsidiary ledgers will be something that will be needed for any type of accounting system that has accounts that would need subsidiary ledgers, including accounts receivable and accounts payable. So those are components of the course, which will be applicable to anybody that has those needs needs to track who owes the money , who we owe money to. We're gonna talk about how to record transactions using this system, using special journals, the pros and cons of using special journals, as opposed to just recording everything to the to the general journal or putting stuff into an automated system. We'll talk about the financial statements creating the financial statements. When we look at the comprehensive problem, our focus here will be on recording transactions similar to some of the prior courses where we talked about journal entries to record every transaction. Using the General journal. We're now going to group some of those entries together in something called special journals in order to save time. But the end goal, of course, is always the financial statements. We will put this into context with a cumulative problem, comprehensive problem and see the financial statement in the entire accounting cycle. We will be talking about the accounting cycle in that comprehensive problem again focusing in here on recording transactions with the use of special journals and tracking the accounts receivable and accounts payable with subsidiary ledgers. But we really want to take a step back every time we zoom into a new topic and think about how it fits into the big picture. Looking at the entire accountant cycle, as we will do in the comprehensive problem will also be learning. Excel will be learning this information through instructional video but also having Excel type problems We can walk through. The Excel format will give a practice file, so it'll show the answer that we will be working on and give another pre formatted Excel worksheet that we can enter the data into alone with instructional videos. In so doing, we'll learn the concepts and be able to apply the concepts as well as learn a bit of excel , not formatting. We're not going to spend a lot of time learning all the formatting of excel. However, we're gonna learn the basics, the fundamentals of things that we always need to know within excel addition, subtraction cell relationships. Why choose this course? Although this course will have a lot of instructional videos, we will have more than just instructional videos, including PdF files, pdf files that can be downloaded and used as a reference and used to fall along with the instructional videos. We have Excel practice files, those practice files being pre formatted, typically having the answer already given, so you can go through the answer and try to see where it is. Work things backwards and then used the practice formatted file a pre formatted worksheet to follow, along with instructional videos going through the problems, applying the techniques in a step by step process. We also have practice test questions. They will be in video format eso. We'll go through these tests questions that will be multiple choice and some short calculation questions. The goal here is to talk through these questions in the format that they're typically tested on to practice test taking skills and see how the wording will be put in place. When we shorten this information into multiple choice type questions and short calculation questions, we're then gonna have discussion forms those discussion forms designed to facilitate discussion with other students as well as instructors, which is something that many students find it useful to see this information put into different ways and different perspectives from different people. Who will we be learning from? We're gonna be learning from a practicing certified public accountant, someone who has business experience, accounting, experience and experience teaching, as well as curriculum, development, experience, experience putting together courses as well. A serious, of course, is in a way that students can get from them what they want. Someone who is a chartered global management accountant, someone who has a master's of science in taxation, someone who is a certified postsecondary instructor and curriculum design experts. Someone who has experience putting together the courses. Courses that are typically in a linear fashion have to be learned in order in such a way that we could move forward to go back in time and pick up from the course what we would like to. How will we be taught through viewing and then doing? We will have instructional videos, and we will include PdF files that will be used to follow along or can be used to follow along with those instructional videos and or used as reference before or after viewing the instructional videos, but will also include those Excel practice files so we can work through the information and actually put this into practice, having an answer file as well as another file that will be pre formatted where you can enter the information. Along with the instructional video, we've got the practice tests and questions in video format basically going over test taking skills and, of course, the discussion questions designed to facilitate discussion with both other students and instructor. Please join US four financial accounting subsidiary ledgers and special journals. It will be a great 2. 2 Special Journals Subsidiary Ledgers: in this presentation, we're gonna talk about special journals and subsidiary ledgers. First, we're gonna list out the special journals and talk about when we would use them, why we would use them and how they fit into the accounting system. The special journals are basically going to group types of transactions. So when we think about all the transactions that happened during the month, we typically see them in order of when they happen in the accounting system, we're gonna record transactions. In other words, by date as they occur. But if we are able to group those transactions into special journals that can't simplify the process, the types of special journals will typically be a sales journal. So we're going to recruit. We're gonna group sales transactions, in other words, into the sales journal. Then we have the purchases journal. So when we make purchases, we will group those items. Indie purchases journal, the cash receipts journal. So any transaction where we receive cash, cash is going up well, when the cash receipts journal and then the cash payments journal, any time where the cash is going down when we have cash payments, were looking at the cash Payments Journal. Now, why would we do this? We've seen accounting systems in the past. Either a manual system or an automated system where we haven't seen so much of the special journals. Why would we want to implement special journals? The special journals are usually gonna be used when we're using more of a manual system because it's gonna be designed to limit the type of data input that we have to put in place Now if we are using an automated system, it's still really important to know different types of accounting systems, such a special journals for a few different reasons. One is that when we process reports in print reports, we often want to see them in a similar fashion as the special journals that we will see as we make the information. And two, it's good to see how different types of accounting systems can be set up. To be able to tell what accounting system would be best in a certain situation and in order to know what is crucial to an accounting system and what could differ in accounting system and how to make those differences and those changes those tweaks into whatever accounting system that we are putting together. So when we think about this as compared to a manual system where we enter everything into the general journal, this is going to save time by allowing us to set up special ledgers which allow us to put less information into the ledgers. I will allow us to not have to put a debit and credit in each transaction as we go and not force us to post that, then Teoh the General Ledger and then to create the financial statements but instead to wait until the end of the time period sum up what is in the special journals and then record that activity will talk about that in more detail as we look at these special journals one by one, we also want to take a look at the subsidiary ledgers, and these are gonna be things that anytime an account, need some added need to it that's not given it by its controlling accounts, typically the General Ledger account. Then we want something like a subsidiary Ledger. The examples that we will be working with are the accounts receivable subsidiary Ledger and the accounts payable subsidiary Ledger. Now, these air gonna have similarities in that. For example, the accounts receivable subsidiary Ledger is going to give us more detail. Then we find on the balance sheet or the trial balance or the general Ledger. In other words, if we were to see an amount for accounts receivable on the balance sheet, say, 10,000 that would represent people owing the company $10,000. However, the fact that it's on the balance, she doesn't give us a lot of detail. We could get more detailed by going to the General Ledger as we can with any account, and that would give us the detail by date. But of course, what we really want is the detail by customer. And in order to get the detail by customer, we need another type of ledger to do so we'll call that and accounts receivable subsidiary Ledger. Similar story can be made for the accounts payable in that accounts. Payable represents who we owe money to. But the amount on the balance sheet doesn't tell us much more detail than that, how much we owe to somebody. If we want to know more detail, we can go to the General Ledger, which will give us detailed by date, order of transactions that made up that amount on the balance sheet. But we also want to see it by who we owe. Will call that by vendor. So those are gonna be the subsidiary ledgers. We'll get into a little bit more detail now, in terms of the special journals and the subsidiary ledgers, the sales journal could look something like this. Now, remember, what we're doing here is work grouping everything together. We're gonna take all these transactions and anything that has to do with a sales journal type transaction instead of recording a debit and credit into the general journal, posting it to the General Ledger, creating the trial balance and the financial statements as we go, we are just gonna post this to the sales journal, which is designed just to accommodate a very limited type of transaction meaning Onley transaction that has accounts receivable and sales can go into this journal. Note the names a little deceiving then, because really, it's the sales on account. If we made a sale for cash, in other words, wouldn't go into sales General even though we made a sale because we got cash, and therefore it would go on the cash receipts journal. So we're gonna have to very limited transaction here. It has to be a sale for on account to go on the sales journal here. If we sold inventory and we have a perpetual system, we would also have the cost of goods sold and inventory. You know, we just record this with one line item here. In order to do that, we don't need four accounts as we would when we record the journal entry weaken. Just record it into these two amounts here. We also don't need to post it until the end of the time period, at which point will sum everything up and then make one transaction to the general journal for the entire time period, whether it be the day, the week or the month will be working with a month's worth of data. So we'll enter this into here for the entire month and then just make one journal entry for the entire month's worth of data. That should save a lot of data input time. Then we'll post that information to the General Ledger as we would in a normal process. That's being the controlling account and use that to generate the financials. That trial balance, which will use to create the financial statements. Similar process for the purchases. Journal Purchases Journal again a very specific type of journal here. So any time we make a sale, I mean any time we make a purchase on account, so it's gonna be, in this case, just inventory for a merchandising company. Wait, make a lot of purchases. Are accounts payable? In other words, all has to do with inventory purchases. Then this is a very nice journal, because we can just record this in one journal entry format. One journal format here when Rick Rick Record into the journal here, rather than making a debit and credit into the general journal and having the post that to the gym to the General Ledger each time. So once again, we just record this information every time we make a purchase here and then post it for the entire month or the tire period. Whether that be the day the week of the month will be working with a month to the General Journal, remember that this, although it says purchases, doesn't mean purchase for cash Onley means purchase for accounts payable. If we purchase for cash, it'll go into the cash payment journal. So we're gonna we're gonna be able to save time. But I recorded all this into this journal, then making the general journal at the end, which will be the total of all the transactions. They're using that then to create THEAN, General Ledger or post to the General Ledger the activity for the entire period in our case the month and then make the trial bounce from that as well as the financial statements. Then we have the cash receipts journal, similar type of process notice. It does look a bit more complex because there could be more than one really restrictive thing we get cash for. So the Castle Receipts journal will group transactions by the process of receiving cash. So that's gonna any time we receive cash. That's gonna be the deriving format. Now, hopefully we received cash or this will be most effective if we receive cash for a limited amount of things. Such as? If we make a lot of cash sales, then this journal will be very effective if we if we get a lot of our cash receipts are all coming from accounts receivable. This will be effective. However, if we get cash from kind of random areas we taking a loan out or the owners putting money into the business and stuff like that, then we might have some other type of accounts and we might have to post it into other. And summing this up could be a little bit more complicated, resulting in at the end of the time period a general journal, the total of each of these accounts being a bit more complex than it would for example, the sale journal or the sales journal, which is gonna be pretty straightforward in terms of the journal entry. So this one could look a little bit more complex. And again, these journals work best if we can really categorise our expenses well on and then track all the same expenses and not need any kind of extra columns here or not need to many extra columns. So we'll talk more about that when we go specifically into the cash receipts journal. In work through that, then we would do the same thing here. We're gonna record the General Journal to the General ledger using the General Ledger, then to create the trial balance, which would then be used to create the financial statements. Finally, we have the cash receipts journal. Same kind of story here. We're gonna group all these transactions together this time by the common characteristic of the cash payment is the cash payment journal. So many times, in other words, cash goes out of the company. We would record it here to the cash payment journal again, it's a bit more complex of a journal because we could be paying for many, many different things. Cash payments, Probably the most diverse type of thing we have within our journals because we could be paying for different things, such as different types of expenses. But it's best to have the journal if we have a limited amount of transactions, meaning if our cash payments are going for something in particular most of the time, such as buying supplies or buying merchandise or always paying off on account. That's when the cash payment journal will be most effective. And any days we're gonna do the same thing, we're gonna enter this information into the cash payments journal any time we're paying cash and that's transaction. And then we'll take the totals and record that to the general journal, using that authentic to post to the general Ledger that will then be used to create the trial bounds and financial statements. Now we're also taking a look at the subsidiary ledgers, and remember, that's gonna be the accounts receivable and payable. So, for example, if we look at the Receivable subsidiary Ledger, and this would be applicable to any type of system that has accounts receivable or payable , meaning even if we're using an automated system, we need more than just the General Ledger data. And most automated systems will do this automatically. But we need to know what the automated system is doing. And if we have a manual system, then we would have to do this manually. We would have to not only have this recorded in our journals, but also be put in this information by customers. So we know who owes us money so we could track that. So, for example, if we have accounts receivable on the trial balance, that means that people owe us money. And if we can want more detail than that we can go to the General Ledger that controlling account, Justus Weaken do for any other account on the trial balance. And it does give us a lot more detail. This is the activity that made up that 27,000 That's on the trial balance. But all it's doing is it's given this activity by date. I can guess what happened. This is probably an invoice. This is probably we got paid on on the invoice. We probably made a sale here. We probably made a sale here. We got paid for this sale we made up here and so on and so forth. But what I don't know very easily from this is who we made the sale to and who still has not yet paid us. Therefore, we need to get to the same data the same 27,000 not by date, but by subsidiary Ledger, which is going to say something like Will Smith. Those is 5000 rhinos. Is 15 Adams owes of 7000. That's what gives us the 27,000. And then, of course we can go. Hey, Smith and Ryan and Adams. Could you We would like to be paid in some point in the future. If it's not, if it's not too much of a problem and go through and go through their attractive. So note that this should always match what's on the General Ledger and the trial balance. Now the same is true for the accounts. Payable the accounts payable is gonna tell us who we owe money to. We purchase something, we owe money somewhere else. We will get more detail from that, like we would with any account from looking at the General Ledger account for accounts receivable. But again, it doesn't give us the type of detail we need or not the type, the only the type of detail we need. In other words, it gives us transactions by date. We could get information from it. This means that this looks like we bought something on account. We bought something on account. Count's evil went up, we paid something off. Then we bought something else again. We bought something else again, and then we paid some of it off. So that's gonna be that the trend there, but it doesn't tell us who we owe who were going to write a check to who do we? Who do we make the payment to for this 6 1040 to know that we're gonna need the subsidiary Ledger, which would say something like Office Depot? Well, 682. And as food well 640 Al's Auto, we owe 3 20 That's what may accept the 6 1040 that's who we actually have Teoh contact in pay and some format to make the accounts payable go down. So remember the special journals are gonna be those types of journals will use in more of a manual system rather than posting everything to the general journal and or recording everything to the general that journal and then post into the General Ledger each time we have a transaction, which could take a lot of time in a manual system. We will group information throughout the month by similarities of transactions, some them up at the end of the time period and then make one journal entry for the entire month's worth of transactions. For each special journal, which will save time, the typical special journals will be the sales journal, the purchases journal, the Cash Receipts Journal and the cash Payments Journal. Of course, the names given indication of how we're going to group this information, but they're a bit deceiving. The sales journal only means sales on account if we make sales on for cash. Even though we made a sale, it's gonna go in the cash receipts journal. The purchases Journal is going to be for purchases we made on account. If we make purchases for cash, it's going to go in the cash payment journal. Now the cast receives Journal and Cash Payment Journal or what they are. If if we receive cash or if we pay cash, then it's going to go into the cash receipts or cash payments journal, respectively. Then we have the subsidiary ledgers. We've talked about the two subsidiary ledgers. A subsidiary ledger would be needed any time. We have some kind of grouping of information that's over and above what is given by the controlling account given by the General Ledger that being information in order of date of transaction, the examples that we have are gonna be the accounts receivable account where we need to know information by customer who owes us money and the accounts payable accounts where we need to know information by vendor, those two things being something not shown on the balance sheet or the controlling account the General Ledger account. 3. 5 Accounts Receivable AR Subsidiary Ledger Explained: Hello. When this lecture, we're gonna talk about the accounts receivable subsidiary Ledger, the subsidiary Ledger being the ledger that will be backing up the account of accounts receivable showing on the trial balance with 27,000 in it in this case accounts receivable . Being that accounts, that represents what is owed to us. If we were the owner of the company, we might ask our accounting department How much money do people owe us? In this case, it would be 27,000 would be the reply. Next follow up Question would most likely be who owes us that money and have we called them when we're going to get paid that money? In order to answer that question, we cannot look at the normal backup balance for all accounts that being the General Ledger accounts, if we look at the G l, we do get some detail in terms of the activity of that has happened. However, that activity is not going to be in terms off. Who owes us the money? It's in terms of date, so every account has the general ledger, which does give very good detail, but not the detail we need in this case. What we will then need is that information broken out by customer, which will be in terms of a subsidiary ledger such as this. For example, it might say that Smith those is 5000 and Ryan knows is 15,000 and Adam's owes a 7004 a total of the 27,000 the accounts receivable subsidiary Ledger matching the general ledger matching the trial bounce, which, of course, would match the balance sheet. It's important to note that this information is all put together using the same data. So the General Ledger and is often thought of as how we create or put together the information which the end result will be reported in terms over the trial balance. We could put that same data the same General Ledger data into the subsidiary Ledger. That's what we'll do in this process. Also important to note that because of that relationship, when we look at the end result meaning the accounts receivable account in terms of the trial bounce or the balance sheet weaken, sort that data and back up that data in terms of a general ledger or a subsidiary Ledger. Let's take a look at some transactions. First transaction is a familiar one. We've seen it before. We're gonna invoice the clients. So we're going Teoh do work on account. Therefore accounts people is going to go up. The IRA is gonna go up with a debit and we're gonna credit the income account. I'm gonna post out the income account. I'm not gonna post it to the General Ledger account. It would have won, but we want to focus in on the G l for that receivable. So if we post out that income, first income would increase increasing revenue for that time period. When the invoice was issued. Accounts receivable. We're gonna first post to the General Ledger. So the general ledger for accounts receivable increasing by that 35,000 which would then increase the total in the accounts payable G L to 35,000. And of course, the same would impact on the trial balance increasing The trial bounced to that 35,000. We can see then that after this journal entry, we have 35,000 in accounts able, we have 35,000 in the general ledger. But we also want to see that information in terms of who Rose is the money. And in order to do that, we have the subsidiary Ledger broken out by client by customer, and we want to post the same information that same 35,002 the information by customers. So it's the same as the G. L accept. It's a bit more detailed in that it's by customer and then by date. And if we post that out, we see the 35,000 is owed by Smith. Now, we have a total in the subsidiary ledger 35,000 total in the general ledger of 35,000 as well as in the trial bounce. And what would be on the balance sheet of that 35,000? That relationship always has to be there Next transaction. We're gonna assume that we paid. So the customer then paid us. We're receiving cash. Cash is going to increase, and we're gonna credit the accounts receivable, not revenue, because we didn't do the work. We did the work last time or crediting the receivable. So one as it's going up, one assets going down, I'm gonna post the cash first cause I don't want to focus on cash we're not going to be looking at the Geo for cash is going to say cash is gonna be a debit increasing the cash, and then we'll focus on the receivable, which we will post to the General Ledger. So that's gonna bring the balance down. We can think of that in two ways. One, the running balance. 35,000 debit minus the new activity, which is a credit bringing the bounce down to zero or summing up the debits. 35. Summing up the credits. 35 debits minus the credits would then equal zero same activity. Same thing would happen to the trial bounce bringing the tribe balance down to zero. Meaning trial bounce now zero General Ledger now zero Subsidiary Ledger Need that same information. So we're just gonna post that same information of the Geo. It's the same thing that is, will be impacting the accounts table subsidiary Ledger. However, it will be there by client or customer bringing that ballot down. We're back down to zero on the Subsidiary Ledger for a R and the General Ledger for A Are and the trial balance for a our new customer were saying new customer, We're gonna invoice a new customer. We did work and voice goes out. That means debit accounts receivable. Credit the revenue account. We're gonna post the revenue first again because we're not really focusing on revenue. So although it has a general Ledger account, like all accounts do we're just gonna posted to the trial balance, increasing revenue. Then we're going to focus on the receivable. We're gonna post that out to the Geo. What would that do to the Geo debit to the G L the General ledger? Four accounts of people going up by that 14 that would bring the balance up to 14. Calculated in one of two ways we could say it. Zero running balance was zero before, plus a debit bringing it up in the debit direction. Or we can say the debits. 35 plus 14 minus two credits of 35. Bring us two of the 14. Same thing. What happened to the accounts? Evil up here. So we're seeing a counselor before the trial bounces going up to 14,000. Now we see that we have 14,000 in the trial bounce for a council table. We see we have 14,000 in the General Ledger for accounts receivable, and we need to post that same 14,000 of this. Same 14,000 needs to be posted to the subsidiary Ledger, but by customer in this case, and that customer being Adams here. So Adams is going up by that 14. Now we have zero plus 14 plus zero brings us to that same 14 the subsidiary Leisure time out to the General Ledger tying out to the trial balance. Then we're gonna have another invoice. Were invoicing another customer? Same thing we did work in voice in the customer accounts is Table's gonna go up with the debit over that 27,000. We're gonna credit the revenue again. I'm gonna post the revenue first, not to the General Ledger, although it doesn't have a General Ledger account. But we're not focusing on the Geo for this particular count, but revenue within increase in the credit direction. Now we'll post out the receivable. It's gonna be another debit to the receivable in this case, increase in the receivable. We can think of that two ways. The 14 prior balance plus the 27,000 current activity brings it to the 47 or 35,000 debit plus 14,000 debit plus 27,000 debit. That total, minus the 35,000 credit total, would also bring us to that 41,000. That's the T account for Matt, and this is the running balance format free posted out to the trial bounce. We see the same activity the 14 plus 2 27 bring us to that 41 1000. We can see that then about 41,000 on the trial balance is equivalent to the General Ledger account for accounts table 41,000. We need to post that same 27,000 to the accounts receivable subsidiary Ledger, but by a customer, that customer bringing Ryan in this case bringing the balance up to 27,000. Now we have, ah, balance of 41 total, including the 14,000 atoms. Zero for Smith because Smith paid off the balance and 27,004 Ryan Point being that subsidiary Ledger is the same data, in essence as the General Ledger. It just posted in a bit more detailed of a fashion. We want to be able to know that relationship so that we can one build the trial balance. And also we need to know it so that if we are using software, we know that we can sort this data one by geo by date, but also by customer and then date. And that's also why much of the software when we work with accounts receivable, will require a customer. Every time we posted the receivable that the salt were saying, Hey, I can't make a subsidiary ledger unless you assign a customer. Therefore, we're not gonna let you both to the to the receivable account unless you assign a customer . 4. 6 Accounts Payable AP Subsidiary Ledger: Hello. When this lecture, we're gonna talk about the accounts payable subsidiary Ledger accounts payable Subsidiary Ledger will be backing up the accounts payable accounts on the trial bounce or the balance sheet, as we can see in the example. Here we have a balance of 1640 in accounts payable. If a new owner asks the question of how much money do we owe to vendors? The answer would then be 6 1040 which we can see on the balance sheet or the tribe bounce. But the next question that will follow will be Who do we owe that money to? And how do is it? Which of these vendors should we be paying first? In order to answer that question, we may try to go to the detailed account, which is the General Ledger. Typically, every account is backed up by the general ledger. We can see that we have the same balance here, and we can see that we have activity. However, the activity is in order by date, and that's not really helpful for us to determine who exactly we still owe at this point in time. In order to determine who we Oh, we need to organize this information not just by date, but by vendor. So that will be the subsidiary Ledger, for example. We might over Office Depot 680 we might Doan's food 640. We might Oh, al's Auto 320. That would then some up to the 6 1040 that is on the General Ledger. And that is on the trial bounce and which would be on the balance sheet. And this gives us some indication of who we owe and gives us an idea of how we should then go about making the payments. Who should we make these payments to? Let's look at some transactions. Teoh. See how this works. Let's say we got a bill here. We're gonna receive a bill. We're gonna record the transaction. Four of the bill and the bill was for supplies. We're gonna debit supplies and we will then credit accounts payable. We have not yet paid the cash for the bill. We're just recording the bill. I'm gonna record the supplies first. I'm just gonna record it to the tribe bounce to see the activity on the trial bounce not to the General Ledger for supplies, although supplies, of course would have a G l account. But we want to focus in on accounts payable, so these supplies within increased. So we have an increasing supplies, then the accounts payable. I'm gonna post it to the General Ledger Note. The general ledger is in order by the order of transactions that are happening here, increasing the balance to that 680. That 680 would also then be reflected in the trial balance. Therefore, we would then have the 680 on the trial bounds on the balance sheet. And then it would also be on the General Ledger. But we also want to track that information by vendor. Who is it that we owe the 682 in this case? Office Depot Increasing Office Depot Subsidiary Ledger account in terms of accounts payable . Now, if we add up all the subsidiary ledger accounts, the people we'll be only, oh, Office Depot. It adds up to that 680. The subsidiary ledger ties out to the General Ledger ties out the trombones would tie out to the balance sheet as well. Note that the subsidiary Ledger is really just posting the same information that is being posted to the General Ledger. But it will be by vendor if we have another transaction in which we're gonna pay off the vendor in this case, then we know that the journal entry would say that cash is going down with a credit and we would then debit the accounts payable, reducing the accounts payable. I'm gonna post the cast just because we're not focusing on cash. We're focusing on accounts payable, so cash would obviously go down. We're thinking of post the accounts payable to the general ledger. So we're going to show the detail decreasing the general ledger. That would bring the balance down to zero. We could do that two ways. We can say its the running balance of a credit of 16 80 minus the debit. Or we can add up the debit 6 80 out of two credit. Six agents have tracked them. Either way, we get Teoh that zero, which then would appear on the trial balance as well. Therefore we could see that they trial balance matches the general ledger. We also want to see that information. However, in terms of vendor. That's what the accounts payable subsidiary Ledger will do. In this case. We're going to say that this transaction is reducing the amount for Office Depot bringing that balance down. We're back down to zero in the Subsidiary Ledger, the General Ledger and the trial bounce as well as the balance sheet. Let's see what we have Another bills. We got another bill in this case, the ballots for auto service. So we're gonna debit auto expense and we're gonna credit accounts payable. We have not yet paid for it. I'm gonna record the auto expense first, cause we're focusing on the payable. So I'm just gonna record the expense directly to the trial balance. That would, of course, increase of the expense for auto expense. Then the accounts payable. We want to focus in on. We're gonna record to that General Ledger account. General Ledger account goes back up with a credit, and that would increase the balance again. We could do this by saying it's the prior balance, the running balance of zero, plus the credit bringing us up to a credit bounce of 3 20 Or we can add up the dead. It's 680. At the credit 680 plus 3 20 subtract them and see that the credits are winning by the 320. That would, of course, also be on the trial balance. That 3 20 Therefore, the trial bounce on accounts payable would match the General ledger, and we would need to record that. Also, however, in terms of who do we owe? What's the vendor? That's where the Accounts Table subsidiary Ledger comes in. In this case, we owe Al's auto that 3 20 increasing the 3 24 hours auto. If we add up all the people in the subsidiary Electoral, the vendors in the subsidy religion, we then get to that 320 subsidiary Ledger matching General Ledger matching the trial balance Knicks transaction and say, We got another bill. We're gonna record another bill for the 700 that 700 being for entertainment, meals and entertainment. We're gonna increase the 700 with a debit, and we're gonna credit the accounts payable. We haven't yet paid for it again. We've got another bill that we are then entering going to record the entertainment first because we're not focusing on that. We're focusing on many towns available. That's gonna increased the expense. Then we're gonna record the accounts payable to the GLC. Vogl is then gonna increase again by the 700 that's gonna increase the balance to 1020 can be calculated two ways. One, It could be the balance before 320 plus 700 bringing us to 1020. Or we can add up the debits 680 out of the credit. 6 80 close 3 24 700 Subtract them out and see that the credits are winning by $1020. That would, of course, also be reflected on the trial balance. Therefore, we can see that once again, the trial balance matches the general ledger. But we also want to see that in terms of the subsidiary, ledgers of the subsidiary Ledger by vendor would then show that ANZ food has been increased by that 7 700 Therefore, if we add up the balances of 0 700 and the 3 20 we see that we have a balance of the 1020 in the Subsidiary Ledger as well as the General Ledger as well as the trial balance. So the Subsidiary Ledger is going to be basically the the same information as the General Ledger. It's gonna be broken out in a different way by vendor first and then by date, if we're using computerized systems, oftentimes this will happen at the same point. Time in a computerized system will often not let us post to the accounts payable accounts unless we assign a vendor because the system saying, Hey, if you want me to post to the accounts payable account, I need a vendor so we can create the subsidiary Ledger by vendor as we do this. 5. 10 Sales Journal Service Company: in this presentation, we will take a look at the sales journal for a service company will use the sales journal in a manual system or a system we do by hand when we make sales. However, it's a little bit more complicated than that, because if sales general really means sales that we make on account, meaning we're not to receive in cash at the point in time we make the sale. If we do receive cash at the point in time, we make sail, even though we have sales being recorded or revenue accounts being recorded, it should be going to the Cash Receipts Journal because that's the journal we use whenever we get cash. So the better term for this journal, maybe something like accounts receivable or, more specifically, sales made on account or sales and accounts receivable. But it's typically called The Sales Journal, so don't let that confuse you. Make sure that if a sale happens for cash, we don't recorded Did he sail Journal but recorded Toothy Proper Journal, the Cash Receipts journal and this journal, then is the most specific or pretty much tapped in the most explosive IQ type of journal We have meaning. We really couldn't do this, which is one column, because it is so specific. It's when we make a sale on account, and we will use this one column to record both sides of the transaction, a debit to account receivable and a credit to sales. In our case, it's gonna be revenue or income. We're gonna keep the term sales because that's just the typical term used when having a sale journal. This is gonna be very useful because it will save time win recording. Ah, lot of sales if we're in a company that has a lot of sales during the day. But we don't have an automated system than recording. The sale Journal will allow us to do that very quickly throughout the day and then some them up at the end of the day. If we do have an automated system, it's still useful to know what the Sale general does for a few different reasons. One. It's good to be able Teoh know what the sale Journal will look like so that we can generate those reports when we are using an automated system. In other words, we may want a report at in an automated system similar to a sales journal. Another reason is just that we want or the second reason is that we want to see how different accounting systems will work so that we know the similarities and the differences . We know what needs to be in place and what can be adjusted. That then helps us to understand any system. So if we look at the sales journal, we're gonna have the sales. Ural, first, we're gonna record all the sales throughout the time period. Then we will some of those up and make one general journal entry, that being the component, that saves time instead, in other words, of having a separate journal entry for each transaction within the sale journal, we will record one transaction at the end of the time period. At the end of in our case, the month the time period could be a week or a day. In our case, it will be for a month. Then we're gonna take that General General posted to the General Ledger used that General ledger than Teoh create the subsidiary Ledger as well notes that the subsidiary ledger is going to be something that will be breaking out the accounts receivable. The account we will be dealing with often with the sale Journal every time with sales journal and that shows us how much people owe us, how much people owe us or customers owe us. We need to say that not just by the total, but also by who owes us the money and that will be done here in the Subsidiary Ledger. And that's where it's needed along with The General Ledger. Then we'll have the trial balance and will take the The General Ledger and generate the trial balance with it. Let's take a look at some transactions were going to say First we had the sales and the sales are all going to be the same. Well, just listen these out here. So on 7 17 p company made a sale 7 20 and you can kind of imagine just writing these out. This would just be if we're doing a manual system, we're making sales throughout the day. We were just be writing this out in our sales journal and this one number, then recording the sale for in this case, the service company, therefore not having to deal with the inventory items just increasing accounts receivable and increasing sales. The revenue account, the income account being sales. Then we're gonna record this as we go to the accounts receivable. Subsidiary Ledger note. What we are not doing is recording this to the General Ledger or making a general journal entry. We will do that at the end of a time period when we sum everything up and then record one general journal and record that then to the General Ledger we are gonna recorded to the Subsidiary Ledger recording who owes us the money as we go because we need to know more than just what ISO to us. We need to know who owes the money so that we can then collect on it. So we're gonna give this 722 p company. Here's the subsidiary Ledger. These are our customers not very imaginative names. But those are the customers that we are going to receive money from 7 20 at this point. This will not match at this time. What's on the general ledger or trial balance? Not until we finish the process. Add everything up, do the Indian journal entry and record it to the General Ledger. Next, we're going to say that, um, we have the same process on 7 24 again, we'll just list these out. So this is gonna be P company as well for 425. So 425 4 p. Company made another sale. This is just gonna be the normal process. We're just gonna make sales as we go recording those sales in the accounts receivable ledger and then posting them Not to the General Ledger put to the subsidiary Ledger as we go. In this case, the 4 25 here we're just getting That's gonna be the same transactions every time we have the sale journal. 7 30 No variation here, except for the company that customers we have as company this time. And we're going to say that we sold 425 2 s company. Then we'll just record that for 25 once again to the subsidiary Ledger. Not to the General Ledger, not toe the end. So we're gonna record that too. The subsidiary ledger. This is gonna be the normal transactions. Note that if anything varies if anything is different than a sale on account a sale other than just debit accounts receivable and crediting sales, it will not to go in the sales journal. Most likely the ones most similar to that which we would think would go here would be a sale made for cash, cause that would be what sales, right, But not a sale on account. Therefore, not going into the sales journal, which really is on accounts receivable type journal, the sales on account type journal. So next we're gonna have on 7 30 Another one m company. We made a sale, and we're gonna say that was for 500 that we made this sale for. Then we're just going to sum this up. So all these transactions all the same type of transactions. If we sum up the entire sales journal 7 20 plus 4 25 plus 4 25 plus, the 500 gives us the 2070. We also want to record this 500 to M company in the Subsidiary Ledger once again, not to the General Ledger we are recording to the subsidiary Ledger. Now, I know that this sales channel could be very long, depending on the type of company that we have. We just have a few transactions here to demonstrate the process. We might be doing this even on a daily basis or weekly basis and have a lot of sales depending on the attack of company this then saving a lot of time when that is the case. Next, we're gonna take this entry and just make our journal entry. We're gonna debit the account Aceval and credit sales. So that's gonna be our journal entry here. We're gonna put that in the general journal. We'll just debit accounts receivable for the total amount of it and credit sales. Now, in our case, we're dealing with a service company. We still called it a sales journal because that's the typical name for it. But when we put it to the General Ledger will probably gonna call it something like revenue or income or fees earned. When talking about a service company, we will talk about a company that deals with inventory where the typical term will be sales for the revenue and income account. Note that accounts receivable has a debit balance. Were increasing it by doing the same thing to it. Another debit, because this represents the money owed to us by customers. Then we credit the revenue account because revenue has a credit balance, it typically only goes up in the credit direction. Therefore, we do the same thing to it. Another credit. Well, then make the General German the General ledger. So here's the accounts receivable being debited accounts receivable. General Ledger account going from zero up by that debit of 2072. 2070 Then we've got the credit here in revenue. Here's our revenue. Ah, General Ledger going from zero up by 2070. Credit amount to that 2070. Then we're gonna use this, of course, to help generate the trial balance. So our trial balance. We've got 2070 here in the accounts receivable matching up to the 2070 on the trial balance 2070 of revenue matching up to the 2070 on the trap balance. We can see that the total here, then being that 2070 representing just the net income here. Well, the total here being meaning that the debits equal the credits and we just have the 2070 at this time in the net income of revenue minus expenses. This being income and not a loss 6. 20 Sales Journal Merchandising Co: In this presentation, we will take a look at a sales journal for a merchandising company. When recording transactions related to a sale journal, we will be recording transactions for sales into the sale journal, those being journal entries that are typically used when we have a system done by hand rather than an automated system. So a sale journal will be used typically when we're having more of a manual system. It is good to know this for a automated system as well, because the automated system one might want to run reports that are similar to the sales journal and to it's good to know different types of formats for the accounting process to know what's the same and what is different so that that will better help us to understand any type of system we are using. Remember that the sales journal is typically looking at sales type of transactions, but more specifically, it's looking for sales transactions on account or transactions that are dealing with sales that were made revenue being recorded but cash not to be in received. Instead, we will be debited accounts receivable. It's a very specific type of journal in that we always have the same transaction, so we're gonna have the debit to account receivable in the credit to sales. Now, if we sell inventory, then we could have another column here on every transaction which will record the second component of the sales type transaction when we sell inventory. That being the decrease in the inventory credit to Indian Doria and the related expense of sewing that inventory in order to help generate revenue that going to cost of goods sold when we record the sales General, we're gonna enter these data in during the month. It's going to stay with a lot of time because we're gonna enter one line item per transaction rather than having four line items for A for a normal journal entry each time we record something, then recording that to the General Ledger than making trial balance for it. Then at the end of month will sum up these columns and will make the journal entry making a one journal entry instead of a journal entry. Every time we make a sale note, we will be doing this in our case for a month. We could be doing it for a day or a week. We will do it for a month and then some up at the end of that time period and then make that one journal entry at the end of the time period. Then I will record this journal entry for the entire month's worth of data to the general Journal. The General Ledger accounts this just being one account, but to the General Ledger accounts, and then we will generate or see the effect on the trial balance of our information. So know that the information that we record in the sales journal will not report be reported in the financial statements or the trial balance until the end of the month. So we're gonna record the sales. They're all gonna be the same, so we'll just list out the sales here. This general works best when we have a lot of similar types of sales. So if we have a lot of transactions during the day, we make the same type of inventory sale. If we're selling the same type of thing, then the sales journal works well. So on 7 17 we're gonna say a customer P company sale 720 cost 554. So notice how much short of this? This journal would be it in the journal entry. If we wrote this out in a journal entry, we would have to debit accounts receivable, credit sales, that being similar to a service company type of transaction for the sale and then debit, cost of good soul and credit inventory for the cost of the goods sold. Reducing the inventory and recorded the related to expense for it. Ah, here. We just have one line item to do that. We are not gonna be posting this to the General Ledger, but we will. We will at the end, once we sum everything up for the entire time period. But as we go, we're gonna posted to the accounts receivable subsidiary Ledger, because we're gonna have to do this. Ah, line by line, no matter what. So we might as well do it as we go. So we're going to say that this 7 20 we sold it to P company. Here's P company here in our subsidiary Ledger. So we're going to say it goes up by 7 22 7 20 next transaction, and this will all be pretty repetitive this will be the same transaction, and it will sum it up That the answer, We'll just do a few of these p company again. We're going to sell a 425 cost, then, is gonna be 3 27 So the sales price that we're we have for 25 it costs us 3 27 once again, this representing a debit to accounts receivable. Credit to sales or revenue or income. And this, representing a debit to cause to get sold and credit to inventory, which is thes two numbers. Then we're gonna record that not to the General Ledger put to the subsidiary Ledger for the Fort 25 owed. And that's gonna be four p company, bringing the balance up from 720 by 425 to 1145. Next transaction on three on 7 30 s. Company we sold 425 again caused. Also, once again, 3 27 Same transaction here. Just a new vendor. We're gonna post our new customer. We're gonna post this not to the general Ledger, but to the subsidiary Leger. We will be posting to the General Ledger at the end. Once we sum up this column of numbers, so we'll post this over here to s company in the accounts receivable subsidiary Ledger bringing the zero balance up by 4 25 to 4 25 Next, we have the same icon for em company. We're going to skip this one. Just a total it up here. So 7 30 AM company 503 85. And then we're just gonna some this This cones up. So we got the two columns and note. We don't have a couple transactions here. But even in some companies, even if we did this on on a day by day basis, depending on what we're selling, the quantity that we sell, we could have a lot of transactions, even if we just do the sales journal daily or weekly. Ah, in this case, we got it monthly. So we're gonna take this 720 plus two four 25 plus two for 25 plus 500 gives us the 2070 for these sales and the accounts receivable on the other side. We got the 5 54 that 3 27 3 27 and 3 85 Given us the 5 1093 if we record, this transaction will record it. Just at the sales Journal tells us to debuting accounts receivable, crediting sales. This being our typical merchandising type transaction. When we sell merchandise, we debit the accounts receivable. We credit the sales. Sales is revenue councils, tables, an asset. Assets go up with a debit balance. We're going to the same thing to it, and I want to make it go up. Another debit sales is a revenue account. Revenue or income has a credit balance. We're gonna make it to go up by doing the same thing to it. Another credit. Then we'll do the second component as if there's two separate journal entries here. This is typically the way we see this win. We are doing this by hand because it helps us to visualize of the sales and a our portion and the caustic it sold and inventory portion. If you see it in the computer system or some textbooks may have that, too. Deb, it's on top and record this all in one transaction, since it is taking place at the same time, So this is gonna be a debit or too caustic. It sold a credit to inventory. I typically think of the inventory first, because when constructing the journal entry inventories, something tangible I can visually imagine it going down. And therefore, I know it's the debit balance accounts. We're gonna make it go down doing the opposite thing to it, and then we'll debit the cost of goods sold it being a expense, a type of expense. And the expense is only go up in the debit direction. We will increase the expense making net income go down. So here's our journal entry for the month. We will be recording based on this data we recorded during the month. Then we'll record that toothy General Ledger. So we'll just look at the accounts that will be affected here in the General Ledger accounts receivable. We'll start with this accounts receivable 2070 taken accounts receivable from zero up by 2072 2070. Then we've got the sales take in the sails. Ah, from zero up by 2072 to 3 out to 2070 and then we're going to the cost of goods sold. It has a zero starting balance. We're bringing up by 1 1093 to 1001 of 5 93 5 1093 and then we have the inventory on it is going to negative zero going down negative now. The reason it's negative here is because we are recording this in result in the sales journal that four doing the purchases journal and, ah, since they're all happening at the end of the month, then UM, way just record one before the other once we record the other. We should, of course, have a debit balance after we, we record all journals as of the end of the month, so this will flip back to a Devon. Once that happens, then we can see that information on the trial balance. So here's the 2070 here. Here it is on the trial balance. Here's 2070 in sales on the General Ledger. Here it is on the trial balance. Here's the 5 1093 cost of goods sold on the general ledger. Here's the 5 1093 costs could sold on the trial balance. Here's the 5 1093 of inventory General Ledger Negative balance. And here it is on the trial balance. Note that we also want to compare the Subsidiary Ledger note. What we're looking at is the accounts receivable account is what we're working with primarily are a lot of in the purchase it or the sales journal. They Sales Journal could really be called the accounts receivable or sales and accounts receivable or sailed on accounts journal. This number here represents how much money is owed to the company, but it doesn't tell us who owes us the money. The detail in The General Ledger tells us the dates that it happened and because we're using a sales journal that's really only given us, ah, limited information to We'd have to go back to the sales journal to see the dates of the sales within that time period. But either one doesn't tell us who owes us the money for that. We need a subsidiary Ledger. And so we recorded this subsidiary Ledger as we go note that if we added all the accounts up for P Company 1 1045 for S Company, 425 M Company 500. That adds up to 2070 which of course, matches what's on the general ledger and what's on the trial balance. 7. 30 Purchases Journal Service Company: In this presentation, we will take a look at the purchases journal for a service company. The purchases journal will be made when we make purchases, but that name can be a little bit deceiving because it means purchases not for cash but on account. Or, in other words, it's really an accounts payable journal. Anything we have that's gonna be dealing with accounts payable typically purchases usually thinking of if we have inventory than it would be inventory. But for a service company, it might be something like supplies. That would be our typical purchase that we would make on account. Note. The purchase of journal, like many of these special journals, will be something that will be used in more of a manual system, a system done by hand. However, it's also useful to use or know about when using an automated system and computer system, because one it's often the case that we want to print out reports similar to what would be look like a purchase journal. And two, it's good to know different types of systems to know what the similarities and differences are in order to better understand any system and the critical components to them as well as what can be adjusted within them. What we're gonna do with the purchase of journal is record these transactions during the month into the journal rather than making a separate journal entry for each transaction. That making the process quicker, then we will some these up at the end of the of the month. In our case, the month it could be for different time, period. Could be for a day. Could be for a week. It could be for a month. Will be working with a month summing this up at the end of the month, then recording that to the journal entry. A normal general journal. So let's see that process here. We're gonna have the purchases journal. We're gonna enter our data into the purchases journal throughout the time period. In our case, the month at the end of that time period. Then we are going to create a journal entry that will be used to post to the General Journal. Note that we will also as we do this need to be creating the accounts payable subsidiary Ledger. This is gonna be a key component because the purchases journal will be dealing with vendors . So we're gonna be dealing with accounts payable, making meaning That means that account means that we owe people money or companies money. We need to list out not just the dollar amount then or not just the the date that the dollar amounts happened. But who we owe the money to and that will be done with the accounts payable some city re ledger. We will then, of course, use that to generate the trial balance. So let's go through some transactions here. We're gonna have a purchases journal. Our first transaction were going to say is for the vendor, L, H and G. So we had a vendor L, H and G on 75 that had 1500 purchased from them. The other side is going to go to other in this case because it's not going to go into our normal accounts in this case being the landscaping account. So we know that every time we have the purchase of journal because we are dealing with purchases, it's always gonna go into accounts payable, meaning we're always gonna credit accounts payable. We're gonna make another list of accounts for those accounts that we are going to be debuting most often to and hopefully the purchase of Journal will be most effective when they're going to be one or two accounts that we that we use of quite often to make purchases such as like landscaping supplies. But if that's not the case, I mean there's gonna be a lot of times where we could be making purchases on account kind like a credit card where we didn't buy the normal for items and therefore then we would have to make our other column and decide how Maney comes we want to use and then how to utilize the other column. The other column will have to break out at the end of the time period. Once we record all of our transactions. We're also gonna record this to the accounts payable subsidiary. Ledger as we go note, were not recording Teoh, the General Ledger or making a journal entry. This is going to be the subsidiary Ledger, and we're gonna record who we owe money to. As we go in this case, L h and M, we're going to say that we owe them 1500 bringing the balance up to 1500. We will continue to track this. Who we owe money to as me. Go Note, This is the kind of a special thing we need to dio special journals for the accounts payable account. And a similar one would be done for accounts receivable. Next, we're going to say that on 76 we have a company made a purchase. We up made a purchase. In other words, on account accounts payable of 1 85 The other side, this time going to the landscaping supply. So we purchased landscaping supplies, increased the in accounts payable by the 1 85 As will always be the case when using the purchases, journal the other side, then go into what would typically be our most normal account for this type of company. Landscaping supplies. We're then gonna record that once again to the accounts payable subsidiary Ledger. And so here we have a company. We got the 1 85 bringing the balance up to 1 85 Note. Once again, this isn't the General Ledger. This is the subsidiary Ledger by account for accounts payable only next, we're gonna have on 78 We have B company. We had another payable that what's gonna be for 3 15? The other side, once again, going to other others gonna be the other side for this item here. So we don't know exactly what we made the payment for, but it's not landscaping supplies, and therefore we're gonna put it into other category breaking that out at the end of the time period. When we record this information into the general journal, we are going to record it now into the subsidiary Ledger. So within this subsidiary Ledger, we're gonna put a credit to the B company. This is not the General Ledger. It is the subsidiary Ledger increasing the balance to that 3 15 Next, we're gonna have purchases Journal on 7 18 l h and Jean. We've got 140 into accounts payable. The other side is this case is going to go to our normal account landscaping supplies. So there's landscaping supplies. If we then total this up, we're going to say that we have a total of the 1500 plus the 1 85 plus two three 15 plus the +14 He gives us 1 2040 The 1 85 plus the 1 40 gets us 3 25 1500 plus two three 15 gets us to 1008. 15. We also want to see that last 1 40 here on the L, H and G. So there's the 1 40 oh to accounts payable. Here it is in L H and G bringing the bounce up from 1500 by 1 40 to 1006. 40. Now, we're gonna use this information in order to make our journal entry. So our journal entry. So we'll use this information in order to make the journal entry. So no to what we have here. We've got accounts payable. I's gonna be a credit. We've got the landscaping supplies that will be one of the debits and then the other side. We're gonna have to break this out. The 1503 15 to the relevant accounts probably should be adding a no tear so that we can put what those relevant accounts will be. Ah, as well. So notes that it would be useful. Have another column here giving us a note, an explanation as to where the other column will go. In addition to the vendors, sometimes the vendors will tell us what that will be, of course, because we will have the same vendors multiple times. So if we look at the transaction, we're gonna say landscaping is the 3 25 that were pulling over. We're going to say that the lawn equipment, that's what that 1500 was. So the 1500 in the other accounts is going to loan equipment. Then we've got advertising expense. That was in the other category. So on account, we bought on account advertising expense now putting that into the expense account. And then finally the accounts payable for the total going up in the credit direction 1 2050 So then the 3 25 plus the 1500 plus 3 15 then would add up to the 2140. We're then going to record this information and post it to the general Ledger. So here we have the general ledger down here, we're gonna say that landscaping supplies is going to go from zero up by this 3 25 23 25. Then we've got the loan equipment going from zero up by the 1500 to 1500. Then we've got the advertising. Here's advertising. We're gonna take this posting up here. So we got it going from zero up by the 3 15 to the 3 15 And then finally, accounts payable, posting out accounts payable it, going from zero up by the 1 2040 to the 1 2040 No, we're only looking at the General Ledger accounts for those items that we're dealing with here. We can then use that to generate the trial balance. So if we look at the trial about the ending balance is in for the landscaping supplies. 3 25 here. Landscaping supplies 3 25 There. We got the advertising expense. 3 15 here. Advertising expense. 3 15 There. We've got the loan equipment. 1500. Here. We've got the lawn equipment. 1500. There. We've got the accounts payable. 1 2040 here, and 1 2040 there. Next, we want to just compare and be able to see that within this account where we're focusing here on. We have 1 2040 That represents money that we owe to vendors. We want to break that out by who we owe it to. The General Ledger doesn't break that out. It only gives us the dates as to win. They came about and here we even have to go back to that subsidiary or the the purchases journal in order to see the actual dates. Because we just recorded one number at the end of the time period. This case, the end of the month. We also want to see that By who? We owe the money too. So in this case, L H and G, A company B company 6 1041 185 and 3 15 is what is owed, respectively. If we add those up, then they add up to the 1 2040 which, of course, matches the General Ledger and the trial balance 8. 33 Purchase Journal Merchandising Co: In this presentation, we will take a look at the purchases journal for a merchandising company. Purchases Journal will be used when we make purchases for a type of system that will typically more be more of a manual system as opposed to an automated system. However, it is useful to know this in order to have an automated system, because the automated system will generate reports that will be similar to a purchase journal and because it's good to know how different system works to know what are similar, what's different so that we better understand whatever system we are using. The purchases Journal may better be described as the Purchase Journal on account, so that's going to be the major point, meaning if we make purchases for something that in cash, if we spent cash to make the purchase, then it will not go in the purchases journal even though we made a purchase, because it will go in the cash payment journal. So this is really kind of a short name. Theatre counts Payable Journal might be a better name for it or the purchases journal on account but purchases journalist. Typically the term that will be used. Now we're gonna make a purchase journal for a merchandising company and limit this to a very specific type of purchase, which really is when this system would work best. Because if we purchase a lot of different things on account, like we pay expenses and utility bills and you know the gasoline bill and whatnot on expense on account and we put into accounts payable, then it gets a little bit messy because we don't have the separate columns that, uh, we we could break out. We end up putting a lot into other, and this system doesn't work quite as well. However, if all of our purchases are for something like in the case of a merchandising company inventory, then this system works great, because we can just record this one line item for the entire time period. Whether that be the day, the week or the month in our case, it will be for the month and then some that up at the end of the time period and post it with one journal entry rather than recording multiple journal entries. So we're gonna go through just a couple of these. This will look a little bit repetitive, repetitive here because we will be dealing with the same type of transaction, assuming that under the merchandising company, we will be debuting inventory and crediting the payable for each transaction for the purchase journal. Then at the end of the month, we're gonna make the journal of in general journal entry, which will be the debit to inventory and credit to accounts payable, but not for each transaction for the entire month. Then we're gonna post that to the General Ledger. This is just an example of some accounts within the General Ledger. And then we will have the trial balance that will be generated. We'll see what the effective on trial balance at the end of the month. Note that our numbers will not quite to be right until the end of the month because we won't be recording them to the General Ledger. We won't be generating the financial statements in this system until the end of the time period. In our case, the end of the month. First purchase 75 We're going to say L, H and G, we made a purchase, and that's for 1500. So we're going to say in this case, we're going to say its inventory that we're purchasing were always purchasing inventory. Were using the accounts payable account to purchase inventory. So the journal entry is a debit to inventory credit to payable because we have not yet paid it. And it's nice and easy here. We just got one number that can represent those two items. Ah, and this type of set up works great when this is the system being used. So then we're gonna post this not to the General Ledger yet we will post it to the General Ledger. But not to tell the end of a time period. Our case, the end of the month, we will post here instead as we go to the accounts payable subsidiary Ledger, the subsidiary Ledger being broken out by who we owe by vendor. Uh, and so we might as well record that as we go because we're gonna have to record it time by time, line by line. So we will record this in the LH and Jean Credit side and increased 1500 to the subsidiary ledger. So we're just recording that over. We're gonna do this once again we got a company. This is another vendor we purchase from. And we purchased 900 worth of inventory. This represents a debit to inventory and a credit to accounts payable for $900. We're gonna post that not to the general Ledger, but to the subsidiary Ledger for accounts payable. So here it is, in the subsidiary Ledger Credit Side. We bring that over 900 in the Subsidiary Ledger. Next, we're going to this again. We're gonna say B company on. We purchased $700 worth from B company, and it is going to be posted this. That means we're debit accounts receivable. I mean to have it. Inventory and credit accounts payable. We're gonna post that not to the general Ledger, but to the subsidiary Ledger for the company that's being Avenger. So this 700 we're gonna bring down here be company we now owe be company 700. So that's gonna be a repetitive type of process. We're gonna have one more here l h and G. Once again, we purchased another 300 that's debit Teoh inventory credit payable represented here by the 300. Just that one line item that being posted, then to the subsidiary Ledger, not to the General Ledger. We will be posting to the General Ledger shortly, changing the balance from 1500 up by 300 to 1800 that we owe to L H and G. We can then total this up. So they 1005 plus the 900 plus a 700 plus 300 gives us a total of 3400. So 3400 is the total. Now it's the end of the month and we can use that total then to record the general Journal . So note the saving of time here, only one journal entry instead of in our case, four. And depending on the process, if we're buying inventory constantly throughout the month, this could save a lot of time in a manual system. So now we're gonna record it just like it says up here. But not for each transaction did instead, for the total of the transactions. So we're gonna debit inventory. Um, remember, inventory is a debit balance account. We're gonna make it to go up by doing the same thing to it, which is a dip it because we're buying inventory and then we're gonna credit accounts payable accounts, payables and liability liabilities are credit balance accounts. We need to make it go up. The bad things going up, we owe more money. Therefore, we do the same thing to it in this case, another credit. Then we're gonna post this to the general Ledger. So the general Ledger inventory is gonna go up. Uh, I'm sorry. Yeah, inventory is gonna go up. So it was at a credit of 5 1093 Now it was that a credit Because we recorded the sales journal before the purchases journal. So it shouldn't be the case that it's not the case. That inventory should ever be negative if it is something wrong, because inventory is an asset account and it shouldn't go negative. But as we record these transactions as we go, when we might end up recording the sale journal before the purchase journal and therefore we have a credit and then we'll debit it out. 3400 flipping the sign. So 5 1093 plus 3400 this negative plus nous positive gives us a debit balance of 1008 +07 Then on the accounts payable side, we got the accounts payable here being posted there to the accounts payable General Ledger taking the balance from zero up by 3400 to 3400. Once we have all the General Ledger, we're just gonna show those two ledger accounts that will be affected through this process . We then make the trial balance, and we'll see these ending balances on the trial balance. So here's the 1008 07 in inventory General Ledger here, the 1008 07 in inventory trial balance. Here's the 3400 accounts payable General Ledger. Here's the 3400 accounts payable trial balance. Then we want to just make a comparison of the trial balance. General Ledger and accounts payable Subsidiary Ledger Note that we're working here when dealing with the purchases. Journal accounts payable. That being a primary account we are dealing with when we are using the purchases journal. This number here represents the fact that we owe vendors 3400 but it doesn't tell us who we Oh, we don't know who to write the checks to. Therefore, this account down here in the General Ledger gives us typically more detail. But in this case, of course, this only represents the number from the end of the month because we didn't record the detail in The General Ledger. It has been recorded in the accounts payable journal, so I mean the purchases journal. So here's the detail if you want to see it by date, but it's not gonna give us an easy break out by who owes us the money. We don't want to see it listed by date. We want to see it listed by vendor. So here's the same information by venture the accounts with state payable subsidiary Ledger . In other words, so L, h and G oes this are We owe them 1800 a company. We owe them 900 b company. We owe them 700. If we add those up, that adds up to 3400 which of course, is matching what is on the accounts payable General Ledger as well as the trial balance 9. 40 Cash Receipts Journal: In this presentation, we will talk about the cash receipts journal that cash Receipts Journal will be used when we have cash receipts. When using a more of a manual system or a data input system that we will be doing by hand as opposed to an automated system. It's still useful to know the cash receipts journal if using an automated system for a few different reasons. One is that we might want to generate reports from an automated system similar to what we would be creating in a manual system for a cash receipts journal and to it's just a good idea. Have different types of systems in mind so we can see what's the same and what is different between different accounting systems. The cash Receipts Journal will be used for every time we have a cash receipts. So the thing that transaction triggering a cash receipt will be when cash is being used, and we're gonna have a little bit more complex complexity in a cash receipts journal than something like a sale journal, because we may be receiving cash for multiple different things. Note that the main thing we will be receiving cash for most of the time is gonna be something like sales. If we make sales consistently the four cash rather than on account, then that would be of great use of the Cash receipts journal, because we can have just to line items and record those Teoh record those two out here and then some them up at the end of the month or the other common transaction would be to receive cash on account the other side, then being accounts payable. But there are other types of things that we can be dealing with with cash. And those things were typically gonna put into the other category when dealing with those items, breaking them out. Then, at the end of the month, when we do the adjusted over the journal entry at the end of the month, and we'll total these up in order to then record the journal entry at the end of the month . Note that the Cash Receipts journal is most effective when we have many transactions that are much the same, and we would record all those transactions for the time period, whether that be the day, the week or the month. In our case, it will be the month and then some them up and record the one journal entry for them at the end of the time period. So we're gonna have the cash receipts journal once it done with the cash receipts journal. We will then do the the General Journal, a general journal entry, which may seem like more work because we're doing a cash receipts journal and a journal entry. But we are only doing one journal entry rather than a bunch of different journal entries here throughout the time period. Just one journal entry, one debit and credit or it's gonna be more than a debit and credit for this transaction. But one journal entry, as opposed to many in order to record the entire periods worth of data in our case, the months worth of data. Then we would post that to the General Ledger, and then the General Ledger will be used to create the trial balance. So it's goes through. Some transactions were going to say on 71 we've got the owner deposited money into the business bank account $3000. So 71 we're going to say the owner is going to be the account credited. And then we're gonna have the explanation. Is gonna be the owner investment that will give us some explanation if there is a vendor involved or in this case, a customer involved. Well, typically have the customer here. The cash then we're going to say is 3000. We will always have this column here being a debit because it's the cash receipts journal. Anything where we got cash will have a debit in the cash receipts journal to cash the other side. Then we're gonna put into other credit. It's gonna be in other credit because it's not gonna be a normal type of thing that we will have an owner. Investment probably is not gonna happen many times throughout the time period throughout the month. Hopefully not that many times that the owner has to put morning in to the business. They want to be taken the money out, and therefore we will put it into the other, breaking that out at the end, using this account category here to do so Next item we're gonna say, borrowed from the bank. That happened on 71 We're just going to say the bank for the accounts credited and then we're gonna have the explanation. It's gonna be a bank loan. Once again, we will have a credit, Teoh cash because we were always going. I mean, I'm debit to cash because we're always gonna be increasing cash here because it's the cash receipts journal the other side, then it's going to go to other again because once again, we don't think we're gonna have too many bank loans. Hopefully, that's not the reason we're getting cash most of the time and hopefully most of time are making sales or getting money on account for sales made in the past. So we're gonna put that into other, breaking it out at the point in time that we make the journal entry at the end of the time period. In this case, the end of the month. Next transaction on 79 received cash for work that will be done in the future. So we're going to say unearned revenue is gonna be the account that we will be dealing with because I remember our journal entries here. We'd have to kind of nowhere journal entries to figure this one out. You know, we got cash and then we can't credit we debit cash and we can't create the revenue account . We're gonna have to credit something else. Reason We can't credit revenues because we have not yet earned it and therefore can't recorded until we earn it under the revenue recognition principle. Therefore, that credit will then go to the under in revenue a liability. It's gonna be an advanced payment. So the customer paid us in advanced. In other words, it will be an increase to the cash, as always, the 360. If this were a normal sale, it would then go to the sales column, which we would break out into a normal comb. But because it's not a normal sale for us, we got paid before we're gonna put it into other, breaking it out at the end of time period to unearned revenue. Now, if we were a type of company that always had unearned revenue. In other words, if we did something like newspaper subscriptions and we always got paid before we did the work delivering the newspapers in that case, then we would have another column of unearned revenue, and that would be our normal transaction. But for most companies. We do the work before we get paid or at the same time. And therefore, this transaction would be somewhat unusual. Next transaction, 7 20 Completed job for his company received 250 will receive at a later date. 300. So we did work and we got some money. But not all the money. This is gonna be a confusing transaction, because, uh, even if we just said we did work and got cash, even if wasn't broken out between these two, it's often something that that we will get wrong in terms of what journalist will go into, because clearly, we made a sale. We completed a job we basically made made a sale in that case and you would think would go in the sales journal. But the sales journal is only there when we have something on account, and in this case, we got cash. So any time you get cash, even if it's for a sale, it's going to go into the cash receipts journal rather than the sales journal. So we're going to say the s company is gonna be the company. We we want to list out the company here, so that we can know what the subsidiary account will be. And we don't need to have the account credited here because the account will be in the sales column for this case. What we do want to dio is break out who were selling to so that the accounts receivable component will be their explanation will be sales. And then we're gonna say the amount going up is the to 50. So when we got to 50 out of a total 5 50 that we did work form the other side then is going to go, Well, then we're gonna have sales going up by 550 that being a 300 plus 2 to 50 That's what we did the work for. But we only got 2 50 cash, therefore 5 50 minus 2 50 is the 300 the 300 going over here into the other debit, And that's gonna be a bit confusing because you might say, Hey, we got in accounts receivable right here when we recorded to the accounts receivable because that's what this is gonna be representing. That's what we are owed from. We sold 550 only got 2 50 Therefore, accounts receivable is going up by 300. But this column represents a credit to accounts receivable the normal transaction we would expect when we are dealing with the cash receipts journal. Because if we got cash related to accounts receivable, it's because it counts. A stable is then going down. Someone pays off. Therefore, not owing us money any longer. So this is gonna be in a Countess Evil. But it's gonna be a debit increasing accounts receivable, not very normal for a cash receipts journal. Therefore, we're gonna put it into the other's category here. Next transaction were going to say that completed a job for Evel. Company invoice 700 received 200 account to be received in the future. Should be amount is 500. So now we're going to say that this is going to get the same type of transaction, probably wanting more difficult types of transaction. Although we made a sale, it's not gonna go in the sale journal because we got cash and should be recording the cash received. So we're gonna put it into l company here, and that's gonna be so that we can record this to the subsidiary Ledger. Then we're gonna be having the sales is gonna be the explanation of what happened. We got cash of 200. We sold something worth 700 or services were 700. Got 200 of it. Then we're gonna say that sales went up by that 700. The difference. 700 sales minus the 200 Is the increase in accounts receivable once again not going into accounts receivable here because this is gonna be the credit to accounts receivable. It's going into account Siebel here into an other account because it's kind of an unusual type of transaction. Note that the transactions that have more than one account, of course, are going to be more complex type of accounts here as well as any time or recording A transactions with more than two accounts. Then we have on 7 27 received cash from in company for work done in the past. So 7 27 we're gonna label this M company. Okay? We received work for we received cash for work done in the past. We're gonna call that received cash on account. So we got money basically on account, meaning we did work in the past, and we're gonna get paid. Now, add, we're going to say that the cash is gonna go up by the 150 to the deputy to the cash. The other side is now going to go to the accounts receivable, as we would normally expect accounts receivable to behave when looking at a cash receipts journal. So the accounts receivable it would go down if someone paid us and then the cash side would go up next transaction. We're going to receive cash from P company for work done in the past. So same type of idea we're gonna say in 7 30 We've got p company is paying us. We want to label that so we can record it in the subsidiary Ledger. We're gonna receive on account, received cash on account, received cash for work done in the past. And then cos loneliness for that work done in the past, we're gonna say it's going to go up to cash of 4 25 The amount received always debuting the cash in the cash receipts journal the other side, then go into the accounts receivable, decreasing the accounts receivable. This being a really normal transaction. So if we're in a type of industry where we make sales on account and then we collect on those accounts, this cash receipts journal would probably be filled with pretty much mostly these transactions all the way down. If, on the other hand, we make sales on account, then the cash receipts journal would be filled with mostly this column here and these other Collins Air once we really want to practice because those are the confusing ones in tests and in practice, but ones that are more rare or not the norm or not, the transactions made 90% of the time. Then we're gonna total this stuff up, so we're gonna total everything up in the cash side. We got the 3000 cash to 8000 the 3 62 to 50 the 200 plus the 1 50 plus. The forced 25 Given is a total of 3 12,085 counters, able 1 50 plus 4 25 cases. A total of 5 75 in the sales 550 plus 700 gives us a total of 1250 the other credit 3000 plus 8000 plus 360 gives us a total of 11,360 other debit 300 plus 2 500 gives us the 800. We're gonna use these totals then to post one time instead of 1234567 separate journal entries Teoh, the general journal, and then use that to create the general ledger. So here's our information of top. Here's our totals. We're gonna create our general journal just one time this time instead of multiple times. That's what's saving us time. So we're going to say First, we've got to be checking account. So here's the cash and the checking account. We will be debuting the checking account. It's going up. Cash is a debit balance. We're going to the same thing to it, which is an increase or a debit. The other side's gonna go to the accounts receivable. Here's the 5 75 going to account receivable accounts receivable, being an asset and then having a debit balance, we're gonna make it to go down, doing the opposite thing to it. A credit. Then we've got the sales or here is gonna be the sales item. We're gonna call it revenue here. Sales is terp typically used for a merchandising company and revenue or or fees earned or something for a service company. We will use the sales term here because it's often used in the journals. When we have a sale journal, we typically call the sales journal rather than a revenue journal. So we'll keep that term and we will look briefly at a merchandising company as well. Then we're gonna have the other which we have to break out. No, we can't just use this 3 11,060 because we don't know which account it goes to. That's the point of putting it into other. We don't know where it goes, so we're going to look over here and say, OK, this went to the owner owner investment. That means it's gonna be the capital capital is got to be increasing. That's what represents the owner investing money in a sole proprietor. Therefore, we're gonna increase Capital Capital has a credit balance. We're gonna in Crete, increase it as it says here where they credit. So we increased the capital, then we have the bank so they bank loan another other transaction. In the credit note, we debited. Of course, for these, both of these The debit is already included here in the 3 12,085 Already got that? We just need the credit side related to this amount. So the total is already there. We need the credit side. So in this case, it's gonna be a bank loan. So that's gonna be a something like a notes payable that will record this too. That's a liability account. We need to make it go up so we'll do the same thing to it. Another credit, as is indicated here. Then we have the unearned revenue. So under in revenue here again, the debit. The cash is already included in this 3 12,085 right there. Now we need to include the other side in this case, going to under and revenue a liability account. Liabilities having a credit balance, we're gonna increase it, doing the same thing to it. Another credit. Then we've got the others being the 305 100 adding up to 800 that's going to go into the accounts receivable and note. We can sum this up because these two weeks that we could see they're doing the same thing. But it's gonna be the sales and it went to s company. Therefore, it's going to go into accounts receivable, and we can just put that into the council one time and increase the accounts receivable here. Then we're gonna take this information, this journal entry, and post that to the general journal. So we'll just list out the General Journal Are General Ledger and General Ledger accounts that we have. So the cash is going to be here. It started at zero were increasing at 12,003. 85 to 12,003. 85 by this amount of the entry. Then we've got this 5 75 to the accounts receivable, bringing the 2070 balance down by 5 75 to the 4 1095 Then we've got the revenue here going from zero up by 3000 to 3000 and then we've got the notes payable going from zero up by 1000 to 8000. Then we've got the under in revenue, going from zero up by 360 to 360 finally, once again the accounts receivable being here 4 1095 and then we've got the debit of 800 bringing it up to 2000 to 95. These ending balance is then can be found and used to generate the trial balance. Note. Of course, this isn't all the accounts of the General Ledger. It's just the ones that were considering here. So here's the 3 12,085 3 12,085 accounts receivable 2000 to 95. This year, 2000 to 95. We've got the notes payable 8000. Here's the notes payable in the liability count. 8000 there. We've got the under revenue on the general ledger here. It's going to be on the trial balance there, and finally the capital account here on the General Journal or the General Ledger. And here it is, on the trial balance, and then the revenue account looks like I'm not sure if I skipped the revenue account, but here's the 1 1050 so it's going from 2070 up by 1001 52 3 3020 That, too here is on the tribe balance and of course. Try bounces, inbounds debits, sequin the credits. Net income now is including just this revenue. Ah, that we recorded in net income. Finally, we're gonna take a look at the accounts receivable subsidiary ledger, because you'll note that these items here are dealing with customers and we want to break out more than just this. Adam here. We know how much people owe us, but we need to know who owes us money so that we can collect on that money more easily. To do that, we do the accounts receivable Subsidiary Ledger. So we're basically taken our cash receipts journal looking at these items here to break out this number so that this number that we recorded that's our Indian accounts receivable. Here's the activity that we did in summary during the time period. And now we're gonna have to break out that activity by customers. So first we've got the 300 here. That's where the accounts receivable for this transaction for s company. So as company made a sale and we have it, we didn't collect 300 of it, and therefore s company owes US 300 bringing the balance from 4 25 up by 300 to 7 25 Same thing for l company. They still always 500 for a transaction. Bring the bounce up from zero by 500 to 500. And then we have the accounts receivable here, going down for em. Company. We got paid and therefore are dink decreasing the accounts receivable. So here we've got the the 5500 going down by 1 52 3 50 And then the 4 25 Same concept. We got the 1 1045 going down by the for 25 to 37 1007 120. So then if we add up all the accounts receivable, we should tie out, then to the accounts receivable in the General Ledger. Breaking that out by who owes us the money? 10. 50 Cash Payments Journal Service Company: In this presentation, we will take a look at a cash payments journal for a service company. The cash payment journal will be dealing with transactions where we have cash payments. That's gonna be the factor that will be the same for all transactions with cash payments. Min in this column here, cash payments will always be affected. Wished the cath Cash Payments Journal Cash Payments Journal will be used when using more oven manual system rather than an automated system. However, it's good to know what the cash payments journal is, even if using an automated system, because it's possible that we or is very likely, that we would need to run reports that will be similar in format to a cash payments journal . And it's useful to see this formats or how different types of accounting structures can be built. Different types of systems can be run because that will give us an idea of how some things will be the same and different, and therefore how any system works. The cash payment journal will work best when we have transactions that will be really the same throughout the time period, meaning we know that there's gonna be a lot of things that we can spend the cash on, and we'll take a look at a lot of different factors that we spend cash on. But if we have transactions where we typically have the same thing that we spend cash on in the case of a service company, it might be something like purchasing supplies. Then this type of journal will be very effective because we can have a similar transaction that we will record all the time throughout the that process. If we were always paying off something on account, then accounts payable is another typical type of transaction. We're gonna look at a lot of different transactions because obviously cash can be involved in many different areas within the cash pit. When we record transactions and the ones that aren't a normal, the ones that are not normal are the ones that are typically more difficult in test taking situations and in practice. So we'll take a look at an example of items where we don't have the column laid out, and we got to put it into other over here and they will be dealing with that at the end of the process and how to break that out? Win recording it to our accounting system. So here's gonna be our cash payment journal. Once we're done with all this, will do this for the entire month and at the end of the month, then will make one transaction. That's what's going to simplify the process within our general journal, as opposed to having every transaction that we will enter into the payment journal be its own general journal. That would then be posted out during or through the time period. In our case, the month No. It is possible to do this for different types of time periods for a month, a week, a day. But the same process will be the same. We're going into the transactions into our journal and then record the totals into the general journal making, then the General Ledger recording the general journal to the General Ledger and then creating the trial balance from that. So here's gonna be our transactions will go through the transactions for the cash payment journal, starting with the purchased A truck for cash of 5000. So we'll just list this through here. We're going to say the date is gonna be 75 We're going to say the purchase truck. We're gonna give some kind of explanation here. Ah, and it might if we had a name of something that we purchase like a vendor, then that would be relevant. There it We're always gonna have something in the cash column because we're dealing with the cash payments journal and cash is going down. Therefore, we're just gonna label it a credit. So rather than have any debit and credit column, we're just going to say it's gonna be a one line item and then we'll have the credit here. The other side of it's gonna be going to other in this case, and what we're gonna do is show all the types of transactions where cash goes out instead of just the normal transactions, which would be typically buying something like landscaping supplies. If we were a landscaper by an inventory, possibly if we're merchandiser or paying something off on account of the cash payment journal because there's a lot of different things we pay with cash is one of the more confusing journals and therefore we have more columns. We could have more columns, depending on how relevant a transaction is if a transaction happens a lot, then we might add another column related to that specific transaction to deal with it there . And if it's not, then if it's a rare transaction, one that we don't have happening all the time, we're just gonna list it into the other category, this other category. Then once we do the journal entry, we will have to break out into its component pieces. Next transaction, we're gonna say, paid cash for gas and oil, $80 where it's gonna list that off. It deals with cash. So therefore it belongs in this journal. Anything that's a paid cash will be in the cash payment journal. So 78 we're going to say gas and oil cash is always going down. We will always be crediting this column in the cash payment journal because cash will always be decreasing. The other side, once again, is going to go to the other over here because we're going to say that the cash payment for gas and oil possibly is not the most common type of transaction. If it is, we would break out another column. Ford. If not, we'll put it over here again. The cash payment general is most effective when we have a lot of similar transactions such as purchasing, landscaping or supplies or inventory or paying off the accounts payable are going to be the typical to that. The cash transactions going out would be for next. We're going to say in 7 15 paid cash to rent equipment needed for a job. So we paid cash on 7 15 were going to say rent equipment in the descriptions. And once again, cash will be going down by the 75. And we're looking for that other side of it, and we will be putting it into the other category, this being another type of expense and we can't really break out all the different types of expenses. Otherwise, we would have way too many columns in the cash payment journal. So we're gonna list out those expenses over here and just put those really relevant ones the ones that happen all the time as their own journal entry. Then we're gonna have on 7 16 paid for a year's worth of general liability insurance. 1000. That's gonna be on 7 16 We're going to say insurance for the explanation. That's gonna be $1000. The cash is going down, as always in the cash payment journal. Other side, once again go into other. So we'll be putting it to other. It's gonna be going to this capes, prepaid insurance. And those were listening out basically the other account here, in essence. So when we said it's going into other for a truck payment if it's a truck payment, the other is probably gonna be something auto expense or something like that. In the explanation. Gas and oil is probably or truck. If it's a purchase of a truck, it's gonna go into an auto, not expense, but auto as a fixed property, plant and equipment. If its oil and gas, that's probably going to go into something like on auto expense or something like that. Rent of equipment, probably a rental expense insurance will probably go into prepaid insurance because we paid for it before we used the insurance. So this description will help us to basically find the accounts that we want to post this to, and in some cases it just depends on how you want to record this. You could put the actual just account here and just label it's account and put the account for the other items here. Description covers everything that will cover whether we have an account there or whether it's in one of these accounts that are one of the columns. And we could just put a description next. 17 22 paid L, H and G for purchases in the past on account of 701 $175. Cash will, of course, be going down by the 1 75 and the other side is going to go to the accounts payable. And that's one of the transactions you would think would be more common in that the accounts payable is going down. That would be an account that if we have a type of business where we purchase something on account and then make payments to accounts payable, we would have a lot of this type of transactions cash going down, the other side being to accounts payable next transaction paid for fuel and oil. On 7 24 we're gonna say fuel and oil probably the same as gas and oil up here, and we're going to say that it's for $40. And once again, we're not gonna list out all the expenses. We will just put it into the other category for the expenses breaking those out when we make the journal entry at the end. Then on 7 30 Owner draws out money for personal use. $500. We're gonna call that owner draws its gonna bring down the cash once again, as always, Will always have something crediting the cash in the cash payment journal the other side. Then go into other this again being something that doesn't happen all the time. We expect that the draws will happen a few times once a month, possibly for the owner withdraws once we have everything there, then weaken total everything up. So the total they're just gonna total everything up. So on the cash side, cash is going down 500 plus 80 plus 75 plus 1000 plus 1 75 close 40 plus 500 or 6870. The 1 75 is gonna be brought down. Nothing's in the landscaping supplies because we typically purchased those on account. But I want a list that here because for something like a ah, landscaper. They may not purchase everything on account, and this may be there, you know, the biggest column that would be going to for that type of industry and then the other there, 5000 plus 80 plus 75 plus the 1000 plus the 40 plus the 500 is 6 6095 Once we have that information, we can then record that to the general journal. So rather than record in each of these as a debit and credit Teoh the general journal and then posting it, we're just gonna wait till the end of the month and break this out. Now, this is gonna be a more complex type of journal entry this way, because the cash payment journal involves different types of accounts and we're gonna have to combine them all together. We'll start off with the cash going down. We're gonna start off then with a credit, which is unusual. But it's helpful to see when doing a manual system, because that's the first account on our cash payment journal. So, for formatting purposes, this wouldn't be the best way to do it. But for formatting in terms of understanding the process, then maybe we would want to do it this way so we could go back and easily see how the form Harper's Journal entry was created. Then the next component will be the accounts payable. So here's the accounts payable. It's gonna be debited. So remember this transaction means that we paid cash that's included with the cash credit here. And then we're debuting accounts payable, making it go down accounts payable. Being a credit balance accounts, us bringing it down, and then we're gonna have to break this out. Now, we can't just doing debit this number because all of these accounts will be different. We're gonna pull this from the description. So we're gonna say the explanation here says it's purchased of a truck. So we're gonna put that into the fixed asset of auto and record the 5000 will be a debit increasing the truck. Next, we've got the 80 and we're combining here the 80 here and the 40 because those will be the same amounts of the 18. 40 is the 1 20 that is gonna be recorded here is that we're checking this off. It's going to go into auto expense. Next, we have the equipment rental. So equipment rental from this description for this 75 against the cash is going down. And that's included in this credit the debit side, then going to equipment rental. Then we have the prepaid insurance. Once again, this is 1000 going down included in this number. And then the other side of it will be two prepaid insurance, not insurance expense, because we have not yet consumed the insurance in order to help us generate revenue, therefore putting it into prepaid insurance. Lastly, we have the draws, so there's gonna be the draws and we're gonna put that into the account of draws. If we add this up the 1 75 plus 2 5000 plus the 1 20 plus 75 plus these 1000 plus T 500 that will add up to the credits of 6008. 70. Therefore, being in balance, we were then record this to the General ledger. So we were record this item to the General Ledger, bringing the cash account from 3 12,085 in this case down by 6008. 72. 5005. 15 we've got the accounts payable here that is bringing the balance that it was at 1 2040 down by 1 75 to 1009. 65. Then we have the auto. So here's the auto. It went from zero up by this 500 debit to 500. Then we have the auto expense, the expense side for the gas and oil. So here's the 1 20 bringing it from zero up by 1 22 1 20 Then we have equipment rental. So here the equipment rental going from zero up by 75 to 75 and then we have the prepaid insurance. Prepaid insurance is an asset account going from zero up by 2 2000 And finally, the drawings here that's gonna be an equity account going from zero up in the debit direction to 500. Once we post this, just like we would for most normal transactions, we would then take this and use it to generate the trial balance so we can see these same numbers here in the trial balance being used to generate the tribe bounce. There's the cash. Here's the prepaid insurance. Here's the auto. It's gonna be an asset notices there on the assets section. And then we've got the liability account for the accounts payable the drawings, the auto expense. So the auto expense and the equipment rental expense. And so there is the process. 11. Discussion Question 1 Subsidiary Ledgers: In this discussion, we will discuss the discussion question of describe transactions that would use a cash purchases journal. If we see a discussion question like this or an essay type questions like this, we may want to approaches by first looking at the cash purchases journal and what it is. If we look at a cash purchases journal, we have to assume that we are going to be using some type of system that is using special journals in order to record transactions. So the first thing we want to note here is that the purchases journal will typically be used when using a system that are using some kind of special journals. In other words, we're not gonna record every transaction with a journal entry in the General Journal or having forms to drive the accounting process, but instead putting that information into a special journal and adding it up for the month and then recording its monthly into the General Journal than making the posting to the General Ledger. And then, finally, that trial balance and the financial statements. The Purchases Journal is then a particular journal within this type of process within these special journals, so the purchase journal is going to deal with a specific type of transaction. The idea then of these special journals would be to group transactions that are going to be similar in nature. And if they are similar in nature, then we can group the information into its columns That will take up less time and less work than recording the entire journal entry in a General Journal type transaction that Purchases Journal is gonna be obviously transactions that are involving purchases. But that's gonna be a little bit too simplified. We can't really stop there because that's really not the best name for the purchases journal. Because although we are purchasing stuff with the purchases Journal, it is possible to purchase stuff and not have a transaction that would be long in the purchases journal. It might better be called the purchases on account or the purchases and accounts payable journal, because that's what's really going on here. We're talking about purchases when we purchase something on credit on account, meaning we have purchased something and we owe something in the future, and that transaction is gonna be fairly standard, and therefore the purchase journal works well. However, it works really well if the purchase that we're making is always the same. For example, if we always are buying inventory on account and the transaction for a General Ledger type of transaction, then would be to debit the inventory and credit accounts payable, that would be if we have a lot of transactions that do what accounts payable. And in other words, we deal with accounts payable almost exclusively for the purchase of inventory. And then we can basically have just one line item, one column on the purchases journal and that one number for each transaction could represent both the debit and credit, the debit to inventory and credit Teoh the accounts payable that we can, then some up through in the entire month. That would be the ideal situation where we have ah, very similar transaction Now. It is possible, of course, to use the purchases journal for other things that are dealing with accounts payable anything that we're buying on account. So if we are using accounts payable for something like expenses, then we may still put that in the purchases journal for buying, you know, even auto expense or if we have supplies that were purchasing. We may still use the purchases journal, increasing the accounts payable with a credit and then possibly adding another column for the other side of things and or using another type column that will then have to break out at the end of the time period. Now the purchases journal will add things up through the time period, whether that be the day, the month or the year, typically, if it's gonna be a month or day or week or month. Typically, we're talking about a month worth of information, and at once the month is over. We would sum up that information in the purchases journal and then record that information to the general Journal instead of recording old transactions that we were gonna record one by one in the general journal just one transaction for that time period for that month that we then post to the General Ledger. And we can then make the trial balance and the financial statements from that General ledger. So the key point here on the Purchases Journal is that it's a special journal Number one. It's going to be used for purchases. However, it's only gonna be used for purchases on account. It's really an accounts payable journal. That means that if purchases are made, for example, Cash, then it would not go on the purchases journal. It would go into the cash receipts Journal The purpose of the purchases journalist. It's simplified transactions lower the amount of data input that we need to do it throughout the month by Onley recording them into the journal on a simplified way, summing that entire information up and then just recording one journal entry into the general journal at the end of the time period. 12. Discussion Question 2 Subsidiary Ledgers: in this discussion, we will discuss the discussion question of discussed the hosting process of special journals. We see something like this in a discussion, question or essay question. We may want to start off with special journals what they are and when they would be used. Note that if we see a term of special journals, we're typically talking about a system that possibly be will be more of a manual system or vote ah, system. We do by hand, rather than an automated system with software and using journals. Then, in order to simplify that process, rather than posting every transaction to a general journal or using just forms in order to process the transaction, we can use special journals, which will simplify the process. Now, the special journals are gonna be something that we're gonna be able to post transactions to that will be of a similar nature. So if we have transactions that are gonna be similar in nature, we may be able to save time by grouping them all into some type of special journal. And then we're gonna, uh, add those information up at the end of the time period, whether that be the day, the week or the month and then post that information to the general Journal. So that's really where the difference is gonna be. When we talk about posting, process up the special journals. We have kind of an an extra step than we might first learn in accounting three classes because we first think about everything being done with general Journal entries, and then we can we can modify that system. In this case, we're still using the same debit and credit thought process. But trying Teoh simplify the process less in the data input time by using special journals in this format so we could go through and kind of list out the types of special journals for some more detail here. Thes special generals typically would be something like a sales journal, And those are gonna be things that we make sales on account. So it's really kind of a sales in accounts receivable journal, meaning if we make a sale and we would increase accounts receivable and increased sales or revenue, that's the one that would go there. Not if we got cash for a sale. Then it would go into another journal, which would be a cash receipts journal and the cash receipts journal would group all similar transactions, all transactions dealing with the receipt of cash that be the cash receipts journal. And then we could have the cash payments journal. That's gonna be everything that is group. Similarly, when we pay cash and weaken group those transactions in a similar fashion in a cash payment journal and then a Purchases Journal is another typical type of special journal we can use when we make purchases on account. And it may be better called kind of I am accounts payable type journal, and the goal here is to group transactions into these journals, which will be faster than recording a debit and credit for every transaction and then posting that debit and credit each time to the General Ledger and then creating the financial statements from that. It would be faster for us to just list this information that are similar transactions into these special journals rather than post them to the General journal and not to post them to the controlling accounts that General Ledger accounts. Um, but just some them up throughout the time period, with the goal and the intention of then making one journal entry as the end of the time period to the general Journal, representing all of the activity that had happened during the time period, the day, the month or the week and thereby shortening the process up quite a bit. Now it's important to note that we we do. If we're talking about something like accounts receivable and accounts payable, we may still be recording this information as we go to accounts that will be by account subsidiary ledgers for accounting Siebel and Accounts payable, recording those transactions both in the Special Journal, Sales Journal and Purchases Journal and to the accounts receivable and accounts payable subsidiary ledgers, which are grouped by customer and by vendor, respectively. But we won't be posting this information as we go through the special journal to the General Journal that controlling account until the end of the time period, end of the day, week month at the end of the month, then will sum up all the special journals, and we'll make one journal entry for each special journalist and Special Channel one journal entry for the sales journal debuting accounts receivable, crediting sales for all the sales that are made. And if it was inventory debuting cost of goods sold and crediting inventory will make one journal entry for all the cash receipts, meaning debuting the cash and crediting all the things that we purchased during that time here it could be a longer journal entry for the cash Receipts Journal to the General Journal will make one journal entry for the cash payment journal, which would be a credit to cash and debit to all the things that we paid cash for the cash receipts Journal would be obviously a debit to cash and a credit to all the things we got cash from, which probably would be like accounts payable. We got paid on account or possibly we made sales for cash. And then and then any other receipts, we would have to cash payment journal eyes gonna be a credit to cash. And then it's gonna be all the other things that we spent cash on. And that could be a long list of stuff so that one might be a longer journal. So those two cash journals are probably more complex journals, and then they purchases. Journal will make one journal entry for the entire day, week or month to the General Journal for purchases, which would typically be awfully inventory that we would purchase deputy inventory and a credit to the accounts payable for the entire times worth of transactions. Once we have those into the general journal for the entire month, we would then post those Teoh the General Ledger. So note what happens here than the General Ledger. The controlling accounts then don't show all the detail for the month. It only it's only going to show the if we're doing this monthly, it's only gonna show the information one number representing what happened for the entire month. If we want to see the detail, we would have to then go to the special journals to see more detail of what's going on during the month once posted to the General Ledger that General Ledger should then match the total in the subsidiary ledgers wouldn't. We're talking about account receivable and accounts payable, and we can then use the General Ledger to create the trial balance and to create, of course, the financial statements 13. Discussion Question 3 Subsidiary Ledgers: In this discussion, we will discuss the discussion question of list types of special journals and how they are used. If we see a discussion question like this, we may 1st want to approach this by defining what special journals are and when they would be used and then discuss how they would be used. That would be leading into the discussion of how they would be. Luke used when we're thinking about special journals were typically thinking about journals that would be used in more of a manual system rather than an automated system. The goal of the special journals being Teoh. Lessen the data input process throughout the time period in order to do things faster, more efficiently. The way we are going to be able to do that is to be able to, rather than record a general journal for each, in every transaction, having a debit and credit at least one for each at transaction and post each one to the controlling General Ledger account. We could list similar accounts in these special type journal grouping similar accounts counts that are gonna be similar in nature, and by doing so, we can have columns representing the information needed. Ah, and lessen the amount of data then that would be needed to input into the special journals . We can restrict ourselves from posting each each transaction to the General Journal or the General Ledger until the end of the time period, at which time we can add up the special journals and record one transaction for the entire time period that month, The week or, uh, the day if we whatever. We're doing this over, typically, we'll be talking about it for the month and then record just one journal entry, and that will hopefully save time for the data input process. Now, the types of special generals were gonna have are gonna be grouped by by similarities in transactions. So if we think about the types of transactions that we're gonna have, we can have a sale on accounts that if that's gonna be a typical transaction, will have. We're gonna put that in something we owe the sales journal if we have a purchase on account , meaning we purchase something like inventory on accounts. But we're gonna put that into something we'll call the purchases journal. If we are expending cash for giving cash, you are buying something with cash. We could group all those transactions into something like a cash payment journal. And in time we receive cash weaken group all those transactions into something like a cash receipts journal. So there's gonna be some of the most common type of journals will have might want to get into some more detail in terms of when we would use those, because the names could be a little bit deceiving for them, the cash receipts and cash payments are pretty straightforward, but they can still be a little complicated just in the types of transactions we have for them. So if we thought if we talk about the sales journal, for example, you would think that anything dealing with sales would go in the sales journal. But sales four cash would not going to cash in the sale journal because we would be receiving cash at that point time. And therefore it would go into the cash receipts journal. So it's gonna be one of the moment, you know, the main kind of ah confusions when talking about these types of journals that sales journalists really kind of like accounts receivable, journal, meaning we made a sale on account. Now, if it's a service company, we're talking about more of the company's on a periodic system. We are just going to record. One column is all we need to record a debit to the, uh to the accounts receivable, and it credit to sales or revenue. If we're in a perpetual inventory system and we're a merchandising company, will also need a column for the cost of goods sold, debit and related decrease in the inventory. When we talk about the purchases journal once again, it is for purchases. However, if we were to purchase something for cash, then it would go into cash payment journal. If we're purchasing something on account, then it goes in the purchases journal also, So really, it's more of accounts payable journal. So if we buy inventory, for example, then that would be our normal transaction. Weaken record all those in the same journal and debits inventory and credit the accounts payable. However, if we use accounts payable for other transactions like paying expenses, we may have those transactions as well in the purchases journal because it's really kind of an accounts payable journal. Then the Cash Receipts Journal it's gonna be any time we get cash now. Hopefully, ah, TB most effective within these journal type processes, we get cash from Avery fairly standard type thing. For example, if we make sales for cash than the cash receipts journal would be very useful, and we would record all those similar transactions with one column. But if we have a lot of different things that happened, we get cash, um, from from sales and we have sales on account. So we get, we get cash from accounts receivable and possibly there are investments in cash from the owner. Anytime you know, Cash is is being received. It could go into this journal. So there are transactions that could be a little more confusing in the cash receipts journal. And then the cash disbursements journal, of course, is when cash is being dispersed. And this is probably the one that has the most types of things that could be in it, because we pay for many different types of things when running the business, whereas when we receive cash, we have a fairly limited things types of things, at least that we're receiving cash for. So the cash payment journal is best used when there's gonna be very similar transactions that were buying stuff like we're buying supplies or buying inventory or, you know, on it's all pretty much the same or were buying something in the past on account. We're paying it off at this time, but there could be a lot of different things we pay cash for, So this could be one of the larger journals and more confusing types of journals. Now, once we have all the journal set up at the end of the time period, what we will do is we'll add up the totals and all the journals and will make a journal entry at the end of the time period the day of the week or the month typically the month for us. And that one journal entry for each of those journals will represent the activity for that entire time period that we just have to record one transaction in the general journal rather than a transaction for each each occurrence each financial transaction. Ah, and then we will take that entry into the General Journal posted to the General Ledger. The controlling accounts will also enter this information into the subsidiary accounts, for example, accounts receivable and accounts payable accounts listing out the activity by customer or vendor, respectively. And then once we have everything posted to the controlling general counting those subsidiary accounts, we will typically then create the trial balance and the financial statements from them. So the goal of this, of course, is to save time. So we're gonna be putting it in the special journals. In order, Teoh record less transactions, typically, if using more of a manual system and then only needing to record one journal entry at the end of the time period. Representing all of the activity happened during the time period. 14. Multiple Choice Question 1 Special Journals: In this presentation, we will take a look at some multiple choice questions related to special journals. First question. The sales journal records A. Purchases on account be sales on account. See cash sales, de cash purchases or E cash receipts. Well, read it one more time than think. See if we can go through it and use the process of elimination to narrow down the options. So we got thesis Ailes Journal records A. And we might want to think about it first and try to answer. It's just the stem of the question as we go the sales journal. Remember, if we think about the journals we're looking at, these special journals needs are gonna be journals we would use if we're using more of a manual system in order to save time. And the sales don't work trying to group transactions that will be similar in nature. So sales journal, you would think just by the title would have something to do with sales so we could start there and say, OK, can we narrow some of this down for talking about sales? We first have purchases on account, and my take home purchases is not really sales, so maybe that would not move up right across that out. 2nd 1 says sales on account. Well, their sales. So that seems reasonable. Let's read through the rest of them and see what else we have. Third one's Cat C says cash sales, and it says sales again. So there's two that has sale, so I'm going to keep that one for now and we'll come back to it. Next one. D says cash purchases, No sales involved in that one, so probably we can eliminate it. He says. Cash receipts. Once again, no sale happened. This is for a sale that happened in the past. We got receipts for possibly, but it doesn't have a sale here, so I think we're narrow it down to B and C. So we read it one more time. Ah, the sales journal records be says sales on account and see says cash sales. So which of those two do we think it should be? And the answer is going to be actually be. And this is gonna you can't really tell just from the name of the journal, and we do have to just kind of know that the sales Journal does not represent all sales. So clearly these air two types of things were two different types of sales transactions are happening. The sales journal really means sales for accounts receivable, meaning it's really kind of like the Accounts Receivable Journal might be more appropriately named or the sales on account journal of the Sales on Credit Journal. But that's it's gonna be be. It has to be that if we received cash and made a sailing, got money for it at the same point in time, then it would go into the Cash Receipts Journal. So the answer, then would be the sales journal records be sales on account. Next question. Term for Accounting Information system report. Useful understanding, timely and pertinent information for effective decision making is a control principle be compared? I compatibility principle. See cost benefit, Principle Day flexibility, principle or e relevance principle. So once again, let's read through this term and go through them again. So it's gonna be a term for an accounting accounting information system report. Useful, understandable, timely and pertinent information for effective decision making. Is that the control principle? It doesn't really. The control principle doesn't sound for we want to be useful, understandable and timely. I think that's gonna be kind of a more overarching principle than the internal controls or controls principle. Someone across that out the 2nd 1 b says compatibility principle. And once again it's kind of ah, more of a broad term than you would think. Compatibility, useful, understanding, timely. Those air really are major, overarching kind of principles that we want to have from the accounting information system . So I think that's a bit narrow. Sea is gonna be a cost benefit principle. And, ah, that is something we want to take into consideration with just about everything that we do it to see if the added steps we're taking are worth making from a cost benefit analysis. But it's not really our overarching principle. This looks like our overarching principle of what we want from an information system. Useful, understandable, timely. We do, as we consider each of those aspects want to consider the cost benefit, but doesn't sound like it d flexibility principle. Ah, not really sure exactly what that is, you know, But so I'm gonna keep that for now and then he says, relevance principle and, um, relevance seems to seems to cover a lot of this stuff, right? Relevance, useful, understandable and timely. So if we break it down to D and E, let's read throat one more time. Term for accounting information system report. Youthful, understandable, timely and pertinent information for effective decision making. Is it D flexibility principle or e relevance principle? And I think the better answer here is gonna be easy because, ah, that's what makes it relevant to our decision makers. And that's what, of course, the information system is designed to be is relevant in terms of it being useful, understandable and timely, meaning the information is being generated in such a way that it's it's, ah, relevance to the decision makers. And that means it has to be somewhat timely so that we could still make decisions with it without it being too old. Eso that's gonna be it so once him final answer term for an accounting information system reports useful, understandable, timely and pertinent information for effective decision making is e. The relevance principle. Next question. The purchases Journal records A purchases on account be sales on account, see cash sales, de cash purchases and e cash receipts. Let's read it one more time. Go through the information, see if we can cross anything out using process of elimination. The purchases Journal records A purchases on account. Now, before we do this actually know, Obviously we're talking about the purchases journal and this is once again a special journal. It's gonna be recording transactions that have a similar nature to them in this case, being purchases. So you would think that we would be grouping transactions together that have purchases within them. Keeping that in mind, Let's go through these one more time or again? Maybe not life. So a purchases on accounts well, that have purchases in it. So that would be a contender being sales on account. Well, that's the opposite of a purchase, so I'm gonna cross that out. But I'm not gonna be the sales on account. See cash sales again. That's a sales type thing. And we're on the purchases type things. So I don't think it's that in. D says cash purchases Miller's purchases again so that let's keep that as a contender. E says cash receipts also doesn't sound. We're not gonna get cash when we make a purchase of stuff. We're gonna be spending cash, most likely. So I'm gonna say it's gonna be down to A and D. Let's read it one more time. The purchases Journal records, a purchases on account or D cash purchases. And over the two, it's actually gonna be a purchases on account. Reason being is that although it's called the purchases, journal purchases is not the thing that's driving this process. It's really the fact that we're purchasing things on account, meaning it may be better cold. The accounts payable journal were buying things on account, and so therefore, it has to be. If we if we purchase stuff for cash, then it would go on the cash payments journal rather than the purchases Journal. 15. Multiple Choice Question 2 Special Journals: In this presentation, we will take a look at multiple choice questions related to the accounting information system and special journals. First question. Which is not true of accounting information systems A. The collect and process data from financial events be they organized data in youthful ways . See, they're not subject to internal controls. D They are useful for decision making and e they help communicate information. So we're gonna go through this one more time going across off things as we go, our selections or possible answers as we go using the process of elimination, which is not true of accounting information systems. A. So, of course, we're looking for the things that are true in order to cross them off for the process of elimination, they collect and process data from financial events. So an accounting information system collecting and processing data That sounds pretty much what an account information does. So I'm gonna say that it can't be that one, cause that sounds very true. Be they organized data in useful ways. Ah, accounting information systems hopefully do organize data usefully and in a way that's useful. So I don't think it's that I think that's true. see, they're not subject to internal controls. So the accounting information system is not subject to internal controls. Yeah. Doesn't sound quite right to me. I'm gonna keep that there. DE. They are not useful for decision making. They are useful for decision making. So accounting information systems are useful for decision making. Um, I would think that they would help in the process of making a decision. So I think that sounds country to me. E ah. They help communicate information, accounting information systems. It's the process of accounting. Accounting is kind of a language of business. So I'm gonna say that yeah, they probably do help to communicate the information. So by process a process of elimination, I think see, Sounds like the most relevant choice here of what would not be I included. They're not subject to internal controls. So we're talking about the whole information. It's, ah, the accounting information system itself. But of course, within that system, we would have and want to implement internal controls in order. And those internal controls, of course, were there to try toe safeguard that we don't make errors. And so it will have those internal controls in place for those reasons for the safeguard of the system. So I think that is going to be the answer. If we read through that, we're going to say one more time, which is not true of accounting informations systems. See, they're not subject to internal controls. Next question Journal used to record similar transactions. A All all journals journal be just the sales journal. See Special Journal, de General Journal E Just the purchases journal One more time will read through it and see if we can cross some out with the process of elimination journal. Used to record similar transactions. A All Journals journal. Uh, that sound. I mean, I'm not sure there is an old external, so I didn't sound right to me. I'll keep it for now because I'm not too sure if that's a term B says just the sales journal. So just the sales journal noticed here that we have this term, just which really kind of qualifies it a bit. I'll keep it here for now, and we'll go back to it. Sees this. Ah, special Journal Special journal Sounds like a term familiar to this type of transact for using special journals. There's gotta be a special journals for them, so I'm gonna keep that for now. D says general journal now a general journal. That's like our General Ledger Journal. Uh, so that's that's gonna not really record similar transactions if they're controlling accounts for each transaction. So we'll say d I'm gonna eliminate D and E says just the purchases journal. So again, we have one of these that says just in it. So if we look at the B and E, they both say just and then they say the sales journal and they purchases journal. So both of those air recording similar transactions The sales journal of being similar in that they're all sales, they purchase journal and that they're all purchases. But they can't both be correct. So I don't think that's gonna be the broader category. So I think we can basically use those to eliminate e and be and be left with just A and C. Let's read it one more time. Journal used to record similar transaction is a All Journals journal or see the special journal. And again, I just don't think this old journal journal is really a thing, So I'm going to cross that out and be left with C than the special journals. So the special journals are gonna be those those journals that we're going to use the mortar manual system as opposed to an automated system in order to simplify the process by recording transactions of a similar nature to that journal summing them up at the end of the period, making one transaction in the general journal before that summary one more time. That question and answer is journal Used record. Similar transactions is See Special Journal Next question, which is not a special journal, a sales journal be purchases Journal See Cash Receipts, Journal De Cash, Disbursements Journal or E General Journal One more time we'll read through the question. See if we can eliminate some of the answers through the process of elimination. So which is not a special journal, So we want me. We might wanna start by trying to attempt to redefine special journal within our heads and then go through this and say, OK, which one doesn't qualify? So a special general, remember, is going to be something that we're going to be using if we are using more than automated manual system as opposed to an automated system to save time by recording transactions of a similar nature into a group special journal summing them up at the end of the time period, typically the end of the month, and then recording one general journal for the entire special journal. So which is not gonna be one of these special journals that we're only gonna use when we're using this type of system? One. The sales journal that sounds like a special journal because it's grouping things by sales . So I would think that that sounds like a good group in Journal Be, says the purchases Journal. Once again, that sounds like a journal That's really purchase, you know, grouping transactions by the activity off the transaction, this case being the purchase. So that seems like it's gonna be one of the special journals, Si says Cash Receipts journal. And again, it's kind of grouping things by one particular type of thing, a cash receipt. So I think that's one and D, says Cash dispersement journal that also seems to be grouping things by a particular things . I think that's one. So by process of elimination, I think it's gonna be e and that's gonna be the general journal. Now, the general journal does. You know, it is kind of grouping things in a special way by account. But it's not what that is is gonna be the general journal where we make the normal journal entries. So the special journals here, these 1st 4 will be used in order for us not to have to enter a general journal for each transaction. If we can't fit a transaction into one of these special journals, we would have to then put it into kind of a general journal under a system such as this, which would be kind of an overarching journal Teoh to be there in case of ah, a problem kind of one that just doesn't fit in all these other types of journals. So one more time. Final answer, which is not a special journal e The General Journal 16. Multiple Choice Question 3 Special Journals: In this presentation, we will take a look at multiple choice questions related to special journals. First question. Which is not true of special journals, which is not true of special journals. A. They are tools to help journal eyes transactions be they allow posting of amounts as column totals. See, they could differ with different accounting system needs. D they eliminate the need for general journal E They produce an efficient division of labor . So one skin I'm gonna read through this. We'll see if we can cross these out with the process of elimination, which is not true of special journals. We may 1st want to try to define what are special journals in order to try to eliminate this. Special journals are types of journals we're gonna use when using a system typically more of a manual system as opposed to an automated system. The special journals allowing us to group similar transactions into the special journals rather than posting each transaction and toothy general journal saving the time of posting the debit and credit and then posting or recording the debit and credit for each transaction and recording it to the General Ledger each time instead putting each transaction into the special journals, summing them up at the end of the time period, then making one recording at that time period to the General Journal and posting to the General Ledger. Okay, so let's read through it through these, which is not true of special journals. A. They are tools to help journal eyes transactions. It seems like, you know, they are kind of tools that are gonna help us toe journal eyes that transactions in a different way. But I think that sounds true. So I'm gonna cross it out, be they allow posting of amounts as column totals, and that's pretty much what we're gonna do. We're going to sum everything up at the end of the month, and then we're gonna post things out or journal eyes them in terms of the column totals. So I don't think that's it. I think that's true. See, they could differ with different accounting systems. The tanks of special journals that we use in the format of those special journals may differ depending on different companies, So I think that's that's true, de. They eliminate the need for a general journal. Now they do kind of reduced the general Journal need because we're gonna record a lot less into the general journal. But at the end of the time period and for any type of system that doesn't fit into a special journal, we will still use the general journal. So I think that I think that's wrong. E that's let's keep that For now, he says, they produce a produce, an efficient division of labor. Now, I'm not totally sure about that either. I mean, they dio, they dio record different types of transactions differently group grouping the types of transactions differently. So let's read through this one more time and then try to select this. We're going to say which is not true of special journals. Other dear E. D says they eliminate the need for a general journal, and again, I think they kind of reduced the need or the reduced the activity in the general journal. But I think we still would need one for the end of the time period when we record all the information and for any transaction that doesn't fit. So I would think the would be good. And then he says they produce an efficient division of labor. Ah, and again, I'm not. I'm not totally convinced on that, but I'm pretty sure that D is right. And I think the fact that they do record special different transactions would allow us to more easily have a have a different division of labor dealing with their own kind of journal and recording, For example, sales, transactions, purchases, transactions, cash receipts and payment transactions. So you could be true. I'm gonna I'm gonna keep that. I'm gonna go with D being the correct answer once again. Final answer being Which is not true of special journals d they eliminate the need for a general journal. Next question record containing information on specific accounts that have common characteristics is once again record containing information on specific accounts that have common characteristics. Is a subsidiary leisure bee In general Ledger speed. See Special ledger de all Purpose Ledger and E. The column Balanced ledger. So once again, we'll read through this. See if we can cross anything out with the process of elimination. So record record containing information on specific accounts that have common characteristics is a subsidiary letter. The subsidiary lenders, they're going to be things like that or give us more detail on on stuff like the accounts receivable accounts payable. So their specific. So I'm gonna keep that for now. The general ledger. Um um, Now, the general ledger we used for every account, every account have the controlling account has a general ledger accounts. So I don't think that's gonna be just for specific accounts. And then we've got the special ledger. No special ledger, you know, seems kind of special, so that it kind of fits the term here. So I'm gonna keep that for now. De says all purpose Ledger, um doesn't seem like it's gonna be specific if it's if it's all purpose. So I'm thinking that's not gonna be it. And he says column, balanced ledger. And you know, that might be a special journals have a column balance, you know, item. But I'm not sure that's a thing. So I don't think that I'm going to say that's not a thing. I'm gonna cross that out so we're left with A and C. Let's read through it one more time. Record record containing information on specific accounts that record common characteristics is a subsidiary ledger or a special ledger, and of the two. I'm gonna go with the special ledger. See the subsidiary Ledger being more of, ah, of a specific item that's gonna be added to usually what the special kind of ledgers will be and that that's going to be things that are gonna break things out. Typically, accounts receivable accounts payable by, um, by customer and by vendor. So once again, final answer record containing information on specific accounts that have common characteristics is see Special Ledger. Next question Subsidiary Ledger A includes transactions, not in special journals. B is a listing of all business accounts. See are often used for accounts payable and accounts receivable. De is also called the General Letter B is also called the special Journal. So I'm gonna read through this one more time and then we'll see if we can cross, um, items out with the process of elimination. Subsidiary Ledger A. Includes transactions that not in special journals. So we might want to try to list this out first and try to describe what is a subsidiary ledger a little bit and see if we can cross anything out. Now they have subsidiary Ledger typically gonna give added information over the top what the General Ledger will have. It's not really the special journal because the special journal is gonna be used to record the data for the transactions. And then it's gonna be posted, typically to the general Ledger. Ah, and then the, uh, we will also need some type of subsidiary ledger for specific accounts. Typically accounts receivable, accounts payable, recording data by who we owe money to and who owes us money. So let's read through here. We're gonna say includes transactions, not in the special journal. The subsidiary Ledger is actually going to the same transaction, will be in the special journal. Ah, and we'll be in the subsidiary ledgers. Eso So that's not gonna be a We'll have to record because we're gonna The special journals were kind of like the journal entry that will be recording them will post the data to the General Journal and the Subsidiary Ledger. So so be is a listing of all business accounts. That's not that's just gonna be a chart of a counter chart of accounts, so that's not it. See are often used for accounts payable and accounts receivable. And when we think about subsidiary ledgers, those air, probably the first to that. We want toe apply to it. So see, looks pretty good. Let's read the rest. Though D is also called the General Ledger, and we want to keep those separate. They are separate. The subsidiary Ledger is when we need more detail over and above what is given on the on the general ledger that being, uh, in detail by date, ordered by date. So it's gonna be not that an e also called Special Journal. And ah, it's gonna be something different than the special journal here. So it's not It's not that. Of course, Special generals are going to be the four journals that were four main journals that we use in order to record transactions. The more of a manual system. So we're left with C here. C is gonna be the answer subsidiary. Ledgers see are often used for accounts payable and accounts receivable because the accounts payable accounts receivable are gonna we want to know one who we owe money to for accounts payable and two who owes us money for accounts receivable. With that information not given to us by the typical controlling account, the General Ledger that only given us information in order of date 17. 700 CPA Exam Part 1 Subsidiary ledgers %26 special journals CPA exam %26 other accounting test pre: So when this lecture, we're gonna works in smaller test type problems that could fit into a multiple choice format. So we have company purchased merchandise from a supplier on credit terms to, I mean 1 10 in slash 34 11,300. So what's that mean? 1% discount if paid within 10 days? Otherwise it do within 30 days. So three days later, the company returned 1200 of the merchandise. When recording the return transaction, the company would do what now, Oftentimes it's It's good for us to think about what the first transaction is and then think about the returns the company purchased merchandise. We purchase merchandise on account. We would say that we're going to debit the inventory. Merchandise inventory would go up as an asset of 11 3 and we would say we didn't credit cash. Cash isn't going down. Eight. He is gonna go down just abbreviate that I'm gonna represent my credits with Negative. There's the debit. There's the credit. There's a journal entry. If you want to indent that, we go to the home tab alignment and in dense. So there's the journal entry. Now, if we returned it. Then. Of course, we have the reverse of this meaning the inventory that we just put on the books is now going away. And it's an asset with a debit balance that we're gonna make it go down by doing the opposite thing to it. We're gonna credit inventory for the amount we returned of 2100 and then we are going to debit something, and if we had paid cash for it, you would think we'd get cash back. But we didn't pay cash yet. We are reducing the payable. So we have a payable of 11,000. We're gonna debit it, reducing the papal we no longer. Oh, the payable. At this time. Next woman says company had revenues of 2049 2049 million operating income of 9 93 million and average assets of 1003 03 million. The return on assets is what So, of course, to catch like this, we have a ratio that return on assets that we need to calculate. And how are we going to calculate the return on assets? It's gonna be the operating income over the average assets total acid, this acid. So that's basically what we need to do then. And I'm gonna go ahead and emerge these and all center that and, uh, underline it. So that's what we need. Those are the numbers we're gonna need. And then, of course, we plug the numbers into that formula. We have the 9 90 million of operating income. Some would say this is going to be 993 ult enter over the average assets and they gave us the average, which is one, three or three, and we could just divide that out. Now, I just want to point out that the average asset if you look at financial statements you're not really gonna have an average asset on they're not gonna find average assets anywhere. What the average means is basically trying to find what the assets were at, basically kind of any point in time throughout that period, meaning that, and we can try to get the average by taking the beginning acid amounts divide and plus the Indian average asked about divided by two. That's basically the the average. Where you gonna get the beginning number? It's the Indian of the last financial statement last year. So if they didn't give us the average asset, it's the ending balanced of the prior year, which is the beginning bounce of this year, plus the ending balance of this year. Which is, of course, the amount on the balance sheet divided by two. So if we divide this out, we get 993 divided by 1303 and that gives us one. But if we go to the home tab numbers and we add some decimals, it's, uh, 0.76 to 1. And, of course, we make it a percent. Move the decimal over 62. If we add decimals again. 62%. 62 I mean 76.21%. Next one says company sold inventory to a customer on credit 4 $4000 terms to 10 in 30 million 2% if you give us the money within 10 days. Otherwise it's doing 30 days, and the cost of the inventory was 3100. Win. Recording the sails transaction in the sales journal. What's gonna be the sails transaction? All right, so what we're gonna have here is the sale. And generally I would break this out into thinking about it as if you're selling something without inventory, like a service, and then think about the inventory. So to separate journal entries, although it happens at the same point in time. So if we did that, if we think about the sales half of it, I don't think it's cash affected. We know we didn't get cash. We sold it on these credit terms. Therefore, what we got is an IOU accounts receivable just going abbreviated accounts receivable. 4000. And what's the credit related to accounts receivable? Well, if it's a service company, if we didn't have any inventory, it would be income revenue. In the case of of this is revenue accounts called usually sales sales is the revenue or income account. We could end in that home alignment. Indians. Now, sometimes people have problems with that because they don't feel like they earned the revenue, as they do feel often times when we do a service company. We, of course, record revenue. When we earned it when we did work. But the idea of us given the inventory way, that's when we earned it. That's when we earn revenue. Now let's think about the inventory, half of it, as if it's another journal entry even know what happens at the same point in time. The inventory is going down in the toys and asset, so it's going to go down with a credit of 3100 cause that's accept debit balances. And we had to the opposite to it to make it go down. And then we're going to debit something, and that debit will then be the expense of cost of goods sold, cost of goods sold. So what's the net effect of his journal entry? Then it would be credits going up. Income minus expenses. 900 would be that the net income effect of this? And I do want to point out that often times people will report this if we went by the strict rule of debits, go on top and credits go on the bottom and we recognize the fact this is one journal entry notice. It could be written something like this. The two credits going on the bottom and it all being one transaction at one point in time again. In my opinion, if you want to see something and it helps you to see it better than you're better off writing it in the way that it helps you to see it better. Rather than fall in the convention of having the debits on top in the credits on the bottom , it's best to have a better audit trail than to follow arbitrary rule like that. So many books are now doing this, setting it up this way rather than this way. But you might see it this way. Also note that we could record this in Terms Off Journal. So specific journals that we would put this into this is usually done. If we were recording things by hand, where we could court the items into a journal and then transpose all those into the General Ledger at one point in time now I would still put the journal entry out before thinking about the journal that it would go into. And the journal that we would talk about would be the sales journal, which would they gave us here the type of journal that it would go into it. It's the sales journal because we're affecting sales, but it's almost more appropriate to think about it of as the sales and accounts receivable journal because if we made itself four cash, it would not go into sales. So just be careful that, of course, we're gonna put it into the sales journal. And then you can just kind of read off what the debits and credits will be. When, when you look at the types of journals, it'll tell you Well, the sale journal is gonna get a debit account stable on credit sales, and it's going to debit, cost get sold and credit inventory. If you just do the journal entry, you'll be able to figure that out. The tricky part about journals is to know the fact that a sale journal means sale on account does not mean sale for cash. Next one says companies sold inventory to a retailer for 4 1060 receiving cash on the time of sale. The cost of inventory was 9 70 When recording the collection from customers in its cash receipts journal Company would do what So again, we're kind of thing. We're thinking about this in terms of a journal that types of journal, which we would put together if we're basically using a system that is by hand, like in certain journals that we report and then put those into the general ledger at the end. I would still think about the journal entry to do these, of course. And so a company sold inventory. If we sold inventory, what would happen is cash affected. In this case, it is. Cash is going up. We got cash. We did not sell it on account. The relevant point here is that no, we're not talking about May actually gave it to us. We're not talking about the sales journal in this case, even though we made a sale because it's not sales on account. So keep that in my anytime caches affected, it's going to go into some kind of cash journal even if it was a cash related to a sale at the same point in time. So we got the journal entry would be 14 60 the credit would be I remember I would think about it as if we don't have any inventory. First as if it was a service company. It would be to revenue or income or, in this case, sales that revenue type account. I'm gonna indent at home to have alignment indent and then record the half related to the inventory. And so the inventory would go down inventories of dead. But it's gonna go down with credit. They gave us the inventory mouth. Being this 1970 we're gonna debit something for 9 70 as well. I'm gonna invent this home tab alignment indent, and the debit will go to cost of goods sold. So there's the transaction. So when you think about the cash journal, you'll have to list these out when we record this in the In the Journal. So if it's a receipts journal, obviously cash is going to go up and in the other accounts that will be affected, sales is gonna be credited. We've got cost of goods, sold, debit and inventory credit. So when we listed out in the Journal will have to wreck record that in some way in the the Cash Receipts Journal format. Next Woman says that a company purchased merchandise from supplier on credit terms 1 10 n 34 16,006 win recording the purchase transaction in the purchases journal. The company would enter wet. So again, we're talking about the journals and they gave us the Journal, but we're going to use. So if we purchase something, remember, the purchase journal doesn't mean purchase for cash, because that would go in the cash journal. It means purchase something on account. Meaning, purchasing it on credit, meaning purchase it with accounts payable. So I would once again think about the journal entry related to this. And that will tell you what account will be debited and credited in the purchase journal. And therefore So if we purchased something we purchased inventory merchandise inventory in matures and acid, it's gonna go up with a debit. 16. 600. We're going to credit something. That credit will be what? Not cash. We didn't pay cash. We bought it on terms 1 10 in, 30 1% discount. If we pay within 10 days and then other way, if you pay within 30 days and therefore it's gonna go into accounts payable a liability liabilities have credit balances. We're gonna increase the credit balance with another credit. I'm gonna go to the home tab Alignments. Indented that. So the purchase journal. This will basically be the line item on the purchase. General, The purchase general will say that what we can put one entry which will save debit inventory, correct its accounts payable because that's typically the transaction that's always going to go in the purchase journal. Next Woman says Company sold inventory to a customer on credit for 2900 terms 3 10 and 30 3% is kind of a pay within 10 days. Otherwise it's due within 30 days. And the cost of the inventory was 2000 win. Recording the collection from customers made within the discount period in its cash receipt journal company would enter what? So again, we're talking about the journals that gave us the journalist that will be affected because we're talking about the receipt of the cash, the second transaction not the sales, but the receipts. And we got it within the time period. And of course, cash has affected. Therefore, we're gonna put it in the cash journal. What? The accounts, they're gonna be debited and credited. Well, let's think about the journal entries. So the company sold inventory to the customers. Therefore, what's the journal entry there were going to? I'm gonna take about this in two different journal entries. We're gonna have the sales price which is going to be not cash received, but a are is what we got. 2900 They always that money. We're recording that before the discount because we're assuming they're gonna pay us after 10 days. That's our normal assumption. And then the credit is going to be to sales revenue income. It's going to be sales if we sell stuff generally. So we're gonna sell that. Then we're gonna think about the inventory. Half of it. The inventory half of it is that inventory and asset. We've sold some of it. Therefore, it's going down for 2000 and we're gonna credit inventory because it's a debit balance in the opposite would make it go down. And then we're gonna debit something that Deb, it's going to be the cost of goods sold. So there's our transaction now. They paid us, but they paid us within the discount periods of a couple different ways. We can figure that out. We know that cash is affected. We could say, Alright, we'll cash. We know we got cash, but we didn't get what we expected to get being the 2009 because they paid within the discount period a couple ways we can calculate how much cash we got. We could say. Alright, well, they showed us the sale amounts WAAS 2009. But then we gave him a discount percent, and that discount percent was 3% or points 03 So I'm gonna go ahead and go home, Tab and ah, increase the decimals. Numbers increase 0.3 or percent. 3%. And if I'm gonna go ahead, underline that if I most like about we get a discount of 2009. So this times 3% 87 we could see if there's any decimals. Home tab Desolate. Any decimals there? No, it's uneven number. So we can keep it there. All right. And that's the discount them that we're gonna give him. So how much cash did we get after the discount? Well, it would be the 29 minus 2 87 Another handy way to calculate the same cash amount here would be to just say OK, well, the sales amount is 29 If we gave them a 3% discount than if I make this a percentage of the sale and I say this equals 100% minus the 3%. We got 97%. It doesn't work that way. So I'm gonna put this back over here. We could do this way. This equals 100 minus 0.33%. And then if I go over here home, home and I put the decimals, that's 97% wise, 97%. It's handy to think about it that way. If you go into a store and you're saying what's the sales? What am I gonna pay after after the discount after a sales price, the sales amount? Well, if there's a 3% of discounts, you're going to pay the 100% minus 3%. And then just say, OK, it's thesis Ailes Price times 97%. That's how much we're gonna pay. So the actual cash paid that we're gonna get in this case is going to be that to 813 and then we're gonna credit the a r. The amount that is owed the and note we cannot credit for the 212813 even though that's what we got. We got credit for the full amount to nine because that's what we're actually going to get, and we should probably actually put this down one. But then we're going to have the difference being the discount. So then we have the discount. And that, of course, is going to be this number minus missed. Ember, because we need another debit here. Eso is gonna be the some of these, and we probably should call that sales discount so negative some of these that's the sales discount. Or we can calculate it to be equal to the sales price once again, Times 0.3 and then check that the debits to nine equal the credits to nine. And then, of course, to be proper, we should have the two debutant top. So in any case, when we when we list out the accounts, that will be debit and credit and we got the cash will be debit in the Cash Receipts journal. And so we're sales discount in some way, and then accounts receivable will have to be credited in that journal