Principle of AccountingChapter 5

Special Journals – Cash transactions

BA. in International BusinessForeign Trade University

OutlineThe need for special journalsThe role of special journalsCash receipts journalCash payments journalCash discounts for debtors and creditors

The need for special journalsThe need for a permanent record of

references to source documents.The need to summarise transactions.Journals are used to record the daily details

of transactions.

The role of special journalsGroup transactions of a similar nature

to ease the posting entries to ledger accounts.

Post summarised data to ledger accounts.

Special journalsCash receipts journal: records all types

of cash receipts by a business.Receipts include cash sales, amounts collected from

debtors, cash contributed by owner, interest on investments.

Source documents: receipts

Cash payments journal: records all payments of cashPayments include expenses paid, assets bought for

cash, cash purchases of goods, payments of amt owing to creditors, withdrawal of cash by the owner.

Source documents: cheque butt

Special journal (Cont’d)Credit sales journal: is used when the

business provides goods on credit. Source documents: invoices

Credit purchases journal: is used when the business buys its stock on credit. Source documents: invoices General journal: records all transactions that are

not included in the special journals (unusual type of events)

Eg: Purchase of fixed assets

Cash receipts journal (simple version)

Date Account credited Rec no

Post ref

Cost of sales

Amt received

Amt banked

Jan 2 Cash sales 651 101 30 60 60

5 Debtor – D. Barr 652 402 80 80

6 Capital 653 801 5,000 5,000

12 Cash sales 654 101 30 60 60

14 Cash sales 655 101 70 120 120

17 Debtor- R. Ashworth 656 403 200 200

20 Cash sales 657 101 80 140 140

21 Interest on investments - 103 140 140

28 Debtor – D. Barr 658 402 100 100

31 Total receipts (401) 210 5,900

Cash receipts journal(multi-column version)

Date A/c credited Rec No

Cash sales

Equipment Clothing

Other receipts

Amt banked

CP SP CP SP

Jan 2 Cash sales 651 30 60 60

5 Debtor-D.Barr 652 80 80

6 Capital 653 5,000 5,000

12 Cash sales 654 30 60 60

14 Cash sales 655 70 120 120

17 Debtor-Ashworth 656 200 200

20 Cash sales 657 80 140 140

21 Int on investment - 140 140

28 Debtor-D. Barr 658 100 100

31 Total receipts 110 200 100 180 5,520 5,900

Cash payments journal (simple version)

Date Account debited Chq No Post ref Amt paid

Jan 3 Stock control 901 403 500

4 Drawings 902 802 100

6 Wages 903 202 200

9 Advertising 904 203 80

11 Insurance 905 204 500

12 Creditor – Top Sports 906 601 140

16 Stock control 907 403 400

19 Drawings 908 802 150

20 Wages 909 202 200

24 Advertising 910 203 80

27 Wages 911 202 200

Total payments 401 2,550

Cash payments journal (multi-column version)

Date A/c debited Chq No

Stock Wages Adver-tising

Drawi-ngs

Sundry pmts

Amt paid

Jan 3 Stock control 901 500 500

4 Drawings 902 100 100

6 Wages 903 200 200

9 Advertising 904 80 80

11 Insurance 905 500 500

12 Creditor 906 140 140

16 Stock control 907 400 400

19 Drawings 908 150 150

20 Wages 909 200 200

24 Advertising 910 80 80

27 Wages 911 200 200

Total payments 900 600 160 250 640 2,550

Cash discounts for debtors and creditors

Credit customers are offered a cash discount because:Reduce the likelihood of bad debtsEarly cash received can be used for other

paymentsReduce time taken to settle debts by

debtors, thus improve liquidity Eg: Credit terms: “2/7: n/30” The customer

will receive 2% discount if he pays his debt within 7 days. If he does not make early payment within 7 days, the amount owed will be due within 30 days.

Discount allowed Cash receipts journal

Date A/c credited Rec Disc. Debtors Cash sales Sundry Amt

No allowed CP SP banked

Oct 1 Cash sales CRS 100 200 200

2 M. Hardinge 435 5 200 195

3 S.Clarke 436 10 400 390

4 Cash sale CRS 340 690 690

5 S. Malachowski 437 15 600 585

7 Cash sales CRS 230 470

7 Interest - 100 570

30 1,200 670 1,360 100 2,630

Discount receivedCash payments journal

Date A/c debited Chq No

Disc received

Creditors Stock control

Sundry pmts

Amt paid

Oct 1 Stock control 101 800 800

2 Loan repayment 102 500 500

3 SKC Pty Ltd 103 20 400 380

4 Callum Industries 104 10 400 390

5 Stock control 105 900 900

6 Drawings 106 800 800

7 J.B. & Sons 107 10 200 190

40 1,000 1,700 1,300 3,960

Practice questionsExercise 5.1Exercise 5.3Exercise 5.5

HomeworkExercise 5.2Exercise 5.4