MIDTERMS REVIEWER FOR FAR - Revenue, expenses, drawing accounts

have zero balances

Chapter 6: Completion of the Accounting Cycle
E. Post-Closing Trial Balance
A. Worksheet – working paper where after - Purpose is to make sure that the ledger
preparation of trial balance, accountants gather and accounts are in the balance at the beginning
compile data that need to be adjusted at the end of the of the next period
accounting period - Provides a final check on the adjusting
- May contain as many columns as its use entries and closing process
may require
- Facilitates the preparation of the financial F. Reversing Entries
statements, recording of adjusting entries - Journal entries made at the beginning of the
and recording of closing entries new accounting period to reverse the
adjusting entries made at the end of the
 Income statement, credit column exceeds preceding period
debit column = profit - Not all adjusting entries are reverse
 Income statement, debit column exceeds
credit column = loss Accounts Reversed:
 Balance sheet, debit column exceeds credit  Accrued revenues and accrued expenses
column = profit  Deferred revenues or income (unearned
 Balance sheet, credit column exceeds debit revenue)- income method
column = loss  Prepaid expenses – expense method

B. Preparing the Financial Statements

 Income statement and statement of changes
in owner’s equity and the statement of
financial position

C. Recording the Adjusting Entries

Adjusting entries - could have been recorded at the
time data for adjustments were compile
- Can simply be copied from the work
sheet to the general journal and then
posted to the general ledger

D. Recording of Closing Entries

Closing Entries – journal entries made at the end of
an accounting period to clear or eliminate the
balances of temporary accounts

Income Summary – used for summarizing the data

for the revenue and expense accounts and only
opened and then close at the end of the accounting
period
- Other terms revenue and expense
summary or profit and loss summary

Steps in Journalizing and Posting of Closing

Entries

1. Revenue Accounts
- debit: credit balances under Income Statement
- credit: income summary

2. Expense Accounts
- debit: income summary
- credit: debit balances under Income Statement
3. Income summary credit > debit = profit
 Income summary debited, owner’s equity
accounts credited
Income summary debit > credit = loss
 Owner’s equity accounts debited, income
summary credited

4. Drawing account – used to show reduction of

owner’s equity by withdrawals of cash and other
assets made by the owner during the period
- Debit: Owner’s capital or equity
- Credit: Owner’s drawing

 Closing entries are then posted to the ledger in the

usual manner
Chapter 7: Accounting for Merchandising ACTIVITIES OF MERCHANDISING
Business BUSINESS
 Business may be buyer or seller
Merchandising/Trading Concern – business
organization that purchase and resell goods in either 1. Buying – known as purchasing
raw or finished form to customer a profit  Merchandise may be bought either in cash or
- Trading and retailing – terms associated on credit basis
- Earns revenue by selling goods or  When we buy goods or commodities,
commodities on wholesale or retail basis purchase price includes tax

Wholesalers – purchase a large volume of Input tax – tax on purchase, which may be billed
merchandise directly from the manufacturers or separately or not billed separately on the invoice
distributors and sell these products usually to retailers
2. Handling – cost of transporting and storing the
Retailers – sell products directly to consumers goods before it is sold – added to the cost of good
purchased
Service Business vs Merchandising Business - Freight, express, drayage, and cartage

Service business Merchandising 3. Returning of goods purchased – some of the

business good purchased and received may have some defects
Income from fees on Income from the sale of or does not conform with the purchase orders
performance of services goods they had - If the goods are not returned, certain
previously purchased deduction is charged from the original
Output are services or Output are merchandise purchase price
ideas which are inventories or items for 4. Selling – major source of revenue of a
intangible in nature sale which are tangible merchandising firm
in nature  Merchandise may be sold to customers
either in cash or on credit term
 Both use the same accounting principles in  Selling price of goods – cost of
recording of transactions and in the merchandise and amount of profit of
preparation of financial statements goods
 Merchandising uses additional accounts on
the recording for COGS Output Tax – tax on sales, when we sell the goods
purchased, we are liable for EVAT of 12% on such
Basic difference of financial statements: sales
 Merchandise enterprise include the cost of
merchandise sold section of the income 5. Returning of goods sold – some of the goods sold
statement and the inclusion of merchandise may be returned by customers due to some defects or
inventory on the balance sheet as current goods delivered does not conform with buyer’s
asset orders
- If these goods are not returned, then the
Pro Forma Income Statement of Service Business customers are granted reduction on the sales
and Merchandising Business price, otherwise a refund may be given

Service Business 6. Maintaining adequate stock on hand – stock of

Revenue from services. P xxx goods or merchandise on hand should be maintained
Operating Expenses (xxx) in order to satisfy customer orders at all times
Profit (loss) for the period xxx
OPERATING CYCLE OF MERCHANDISING
Merchandise Business BUSINESS
Net sales revenue P xxx  Merchandising firm purchases inventories and
Cost of goods sold (xxx) sells inventories at a profit
Gross Profit P xxx
Operating Expenses (xxx) (Cash basis) Operating cycle of a merchandising
Profit (loss) for the period P xxx business
Net Sales Revenue – represents the gross proceeds
from cash sales and credit sales of merchandise less
sales returns and allowances and sales discounts

Cost of Goods Sold – original cost or purchase price

of the merchandise that had been sold during a given
period

Gross Profit = Revenues from sale – COGS

= unit selling price – unit cost of merchandise

Operating Expense – expenses incurred by a (On credit) Operating cycle of a merchandising

merchandising business other than the cost of goods business
sold
- Composed of selling expense and
administration expenses

Profit or Loss = gross profit – operating expenses

 2. Sales Return – goods sold and delivered to a
customer may be returned to the seller for various
reasons
- cancellation of sale, which can be debited directly to
the Sales Returns and Allowances
- contra revenue account to sales

3. Sales Allowances – deductions from the original

sales invoice price
- directly debited to Sales Returns and Allowances
BUSINESS DOCUMENTS OF
- contra revenue account or a deduction from Sales
MERCHANDISING BUSINESS
4. Sales Discounts – contra account to sales and
1. Sales Invoice – prepared by the seller of goods and
shown as a deduction from gross sales in the income
sent to the buyer
statement
- contains name and address of the buyer, the date of
- decreases recorded revenue to the amount actually
sale and the information about the goods sold
realized from sales
2. Bill of Lading/Delivery Receipt/Waybill –
5. Freight Out – operating expense of the business
document issued by the carrier, trucking, shipping or
- represents the transportation expense incurred by
airline that specifies contractual conditions and terms
the seller in delivering the goods to the buyer
of delivery
6. Purchases – temporary or nominal account and
3. Statement of the Account – formal notice to the
used only for merchandise purchased for resale
debtor detailing the amount already due
- purpose: accumulate the total cost of merchandise
purchased during an accounting period
4. Official Receipt – document issued by the seller to
- debited when merchandise or goods are bought and
the buyer
credited to either cash or accounts payable
- evidence of cash received from the latter
7. Purchase Returns and Allowances – deduction
5. Deposit Slip – bank printed form with depositor’s
from purchases
name, account number and spaces for, details of the
- credited when defective merchandise is returned to
deposit
supplier
6. Check – written order to the bank by a depositor,
8. Purchase Discount – credited when the supplier
to pay the specified amount as indicated in the check,
granted the buyer an amount of discount
from the checking account of the person named in the
- incentives of the company for buyers to pay early
check
9. Freight in – debited if the buyer pays the
7. Receiving Receipt – document containing
expenses of transporting the goods from the place of
information about goods received from a vendor or
the seller to the place of the buyer
supplier
TERMS OF TRANSACTIONS
8. Credit Memorandum – form used by the seller to
notify the buyer that his account is being reduced or
Credit period – when goods are sold on
credited due to errors or other factors requiring
credit/account during a period of time
adjustments
Trade Discounts – deductions from the list price of
Debit Memorandum – form used by the buyer to
goods purchased to arrive at the selling price
notify the seller that his account is debited or reduced
due to errors or other factors requiring adjustments
Assume a credit invoice of P5000 Terms 20, n/30:
List Price P5000
9. Payroll – a list of company’s employees and the
Trade Discount 20% (1000)
amount of money they are to be paid
Invoice price P4000
10. Other documents:
Assume credit invoice of P5000 Terms 20 and 10,
a. Purchase requisition – written request made by an
n/30:
employee or a user department to the purchaser of an
List Price P5000
entity that goods be purchased
1st Trade Discount 20% (1000)
P4000
b. Purchase invoice – an authorization made by the
2nd Trade Discount 10% 400
buyer to the seller to deliver the goods or
Invoice Price P3600
merchandise
Cash Discounts – strong way of inducing a buyer to
RECORDING OF TRANSACTIONS OF A
pay their bill within the discount period
MERCHANDISING BUSINESS
- Given to customers for their early payment
1. Sales – major source of revenue of a made and improves seller’s cash position by
merchandising business collecting receivables before the due date
- transfer of legal ownership of goods (passage of
title) from one party to another Ex.: Assume an invoice of P20000 dated Jan 1, 2018.
- credited, debited with either cash or accounts Terms 10, 2/10, n/30
receivable
Buyer’s Book
Purchases 18000
 Accounts Payable 18000 recorded in the
books
payment made within the discount period
Accounts Payable 18000
Cash 17640
Purchase Discounts 360
payment not made within the discount period
Accounts Payable 18000
Cash 18000

Seller’s book
Accounts Receivable 18000
Sales 18000

payment made within the discount period

Cash 17640
Sales Discount 360
Accounts Receivable 18000

payment not made within the discount period

Cash 18000
Accounts Receivable 18000

INVENTORY METHODS

1. Periodic Inventory System – calls for the

physical counting of goods on hand at the end of the
accounting period to determine quantities
- gives actual or physical inventories

2. Perpetual Inventory System – requires the

maintenance of records called stock cards that
usually offer a running summary of the inventory
inflow and outflow
- continuously updated
- system of keeping an up-to-date record of the cost
of inventory on hand and cost of goods sold
- shows how much inventory is on hand without
counting the inventory

Methods Periodic Perpetual

When commonly When individual When individual
used by business inventory items inventory items
have small peso represent a
amount relatively large
peso amount

When advance FREIGHT ON MERCHANDISE

computer software (TRANSPORTATION COST)
is used
Account used to Purchases Inventory
record purchases FOB Shipping Point – means free on board at
Accounts used Purchases Merchandise shipping point
related to Purchase returns Inventory - Buyer incurs all transportation costs after
purchases and and allowances Cost of Sales
sales Purchase discounts the merchandise is loaded at the point of
Freight in shipment
Merchandise
Inventory FOB Destination – seller incurs all transportation
Income Summary
Adjustment to No adjustment to Cost of inventory charges to the destination of the shipment
inventory account inventory account sold is transferred
when sale is made to COGS account  Freight payments may either be paid in cash or
COGS computed incurred on account
in the income - May be carried in the books as freight
statement
Adjustment to Adjustment Adjust inventory
out or freight in
inventory account inventory account account balance to
at year end to agree with the agree with Freight Prepaid – payment was made before the
physical count and physical count and goods are transported or shipped to the buyer’s place
merchandise merchandise value
value. Set up when necessary - seller paid freight
ending
merchandise Freight Collect – payment is made upon the delivery
inventory of the goods
Cost of goods sold Requires physical COGS and EI may
and ending counting of goods be determined - buyer paid freight
inventory balance from the Example: Valle Company sold merchandise to Smart
determination accounting records Co. of Manila. The invoice showed the following:
Need of physical To determine To confirm the
count ending inventory presence of the
ending inventory a Price Merchandise P10000
Freight Cost to Manila 1000
P11000

FOB Shipping Point, Freight Prepaid

- payment will be shouldered by the buyer but
it will be the seller that pays so buyer has
payable to seller

Buyer’s book
Purchases 10000
Freight in 1000
Accounts Payable 11000 SAMPLE PROBLEM 1
May 11 – Hope Enterprises, sold merchandise to
Seller’s book Peace Trading, P12000
Accounts Receivable 11000 Terms: 2/10, 1/30, n/60
Sales 10000 11 – Paid the freight on merchandise sold to
Cash 1000 Peace Trading, P600 cash
15 – Issued a credit memo to Peace Trading for
FOB Shipping Point, Freight Collect defective merchandise returned to us worth, P2000
- payment will be shouldered by the buyer and June 5 – Received a check from Peace Trading in full
the buyer will pay so no extra payable to the settlement of their account
seller
Buyer’s book (Peace Trading)
Buyer’s book May 11
Purchases 10000 Purchases 12000
Freight in 1000 Accounts Payable 12000
Accounts Payable 10000
Cash 1000 May 15
Accounts Payable 2000
Seller’s book Purchases Allowances 2000
Accounts Receivable 10000 and Returns
Sales 10000
June 5
FOB Destination, Freight Prepaid Accounts Payable10000
- payment will be shouldered by the seller and Cash 9900
the seller will pay so not receivable from Purchase Discounts 100
buyer
Seller’s book (Hope Enterprise)
Buyer’s book
Purchases 10000 May 11
Accounts Payable 10000 Accounts Receivable 12000
Sales 12000
Seller’s book
Accounts Receivable 10000 Freight Out 2000
Freight Out 1000 Cash 2000
Sales 10000
Cash 1000
May 15
Sales Returns and Allowances 2000
FOB Destination, Freight Collect Accounts Receivable 2000
- payment will be shouldered by the seller but
the buyer will be the one that pays so the June 5
buyer’s payable will be reduced Cash 9900
Sales Discount 100
Buyer’s book Sales 10000
Purchases 10000
Accounts Payable 9000
Cash 1000

Seller’s book
Accounts Receivable 9000
Freight Out 1000
Sales 10000
 Ex.: The selected ledger account balances as of June
30 covering six-month period showed the following:

Merchandise Inventory Jan 1 328,400

Purchases 665,300
Purchase Returns and Allowances 23,670
Purchase Discounts 19,250
SAMPLE PROBLEM 2 Freight In 85,110
June 10 – Hope Enterprise sold merchandise to Praise A physical count of the unsold merchandise as of
Trading, P30000, subject to trade discount of 10, June 30 amounted to 410,500
terms 2/10, n/30
15 – Received a check in full payment of Solution
account Beginning Inventory 328,400
21 – Sold merchandise Praise Trading, P20000 Purchases 665,300
subject to trade discount of 10 and 5, balance, 2/10, Freight In 85110
n/30 (Purchase Returns and Allowances) (23,670)
25 – Issued a credit memo to Praise Trading for (Purchase Discounts) (19,250)
defective merchandise returned, P2100 Net Purchases 1,035,890
July 8 – Received a check from Praise Trading in full
settlement of their account Total Goods Available for Sale 1,035,890
(Ending Inventory) (410,500)
Buyer’s Book (Praise Trading) Cost of Goods Sold 625,390

June 10 COMPUTATION OF PROFIT OR LOSS FOR

Purchases 27000 THE PERIOD
Accounts Payable 27000
Sales 1,925,000
June 15 (Sales Returns & Allowances) (33,320)
Accounts Payable 27000 (Sales Discounts) (12,550)
Cash 26460 Net Sales 1,879,130
Purchase Discounts 540
Net Sales 1,879,130
June 21 (Cost of Goods Sold) (625,390)
Purchases 17100 Gross Profit 1,253,740
Accounts Payable 17100 Operating Expenses (864,160)
Net Income/Loss 389,580
June 25
Accounts Payable 2100
Purchase Returns and 2100
Allowances

July 8
Accounts Payable15000
Cash 15000

Seller’s book (Hope Enterprise)

June 10
Accounts Receivable 27000
Sales 27000

June 15
Cash 26460
Sales Discounts 540
Accounts Receivable 27000

June 21
Accounts Receivable 17100
Sales 17100

June 25
Sales Returns and Allowances 2100
Accounts Receivable 2100

July 8
Cash 15000
Accounts Receivable 15000

COST OF GOODS SOLD

- the largest single expense of the
merchandising business
- cost of inventory that the entity has sold to
customers
INVENTORY VALUATION
 Inventories are recorded originally at cost
 Inventories are measured at the lower of cost and net realizable value (LCNRV)

PAS 2 paragraph 21: provides that the cost of inventories that are not ordinarily interchangeable and inventories
that are segregated for specific projects shall be determined by using specific identification

First In, First Out (FIFO)

- Assumes that those inventories that were first purchased are first sold or first come, first sold
- Inventory cost flow assumption would result in the highest income in the period of rising prices (inflation)

The following are the data on purchase and sale of inventories of KRISP Co.

Date Transactions Units Unit Cost Total Cost Sales in Units

June 1 Beginning balance 1,000 20 P20,000
5 Sale 700
10 Purchase 200 21 4,200
15 Purchase 250 22 5,500
29 Sale 400
30 Purchase 100 22.50 2,250
Total 1,550 1,100

Ending Inventory = 1,550 – 1,100 = 450 units

FIFO Periodic
Cost of Goods Sold
Date Units Unit Cost Total Cost Beginning Inventory 20,000
June 10 100 21 2,100 Purchases 11,950
15 250 22 5,500 Total Goods Available for Sale 31,950
30 100 22.50 2,250 (Ending Inventory) (9850)
Total 450 9,850 Cost of Goods Sold 22,100

FIFO Perpetual – usage of stockcards

Date Purchases Sales Balance

Units Unit Total Units Unit Total Units Unit Total
Cost Cost Cost Cost Cost Cost
June 1 1,000 20 20,000
5 700 20 14,000 300 20 6,000
10 200 21 4,200 300 20 6,000
200 21 4,200
15 250 22 5,500 300 20 6,000
250 22 5,500
29 300 20 6,000
100 21 2,100 100 21 2,100
250 22 5,500
30 100 22.50 2,250 100 22.50 2,250
250 22 5,500
100 22.50 2,250
22,100 9,850
Weighted Average
- Computed by multiplying the units on hand with the weighted average unit cost

Formula: weighted average cost of inventory = units on hand x weighted average cost of inventory

cost of beginning inventory +total cost of purchases during the period

total number of units at the beginning+total number of units purchased

Date Units Unit Cost Total Cost

June 1 Beg. balance 1,000 20 20,000
10 Purchase 200 21 4,200
15 Purchase 250 22 5,500
30 Purchase 100 22.50 2,250
Total 1,550 31,950

Weighted average unit cost = 31,950/1,550 = P20.61/unit

Inventory cost = 20.61 x 450 = P9,274.50

Cost of Goods Sold:

Beginning Inventory 20,000
Purchases 11,950
Total Goods Available for Sale 31,950
Ending Inventory (9,274.50)
Cost of Goods Sold 22,675.50

Weighted Average – Perpetual or Moving Average Method

Date Transactions Unit Unit Cost Total Cost

June 1 Beg. balance 1,000 20 20,000
5 Sale (700) 20 (14,000)
Balance 300 20 6,000
10 Purchase 200 21 4,200
Balance 500 20.4 10,200
15 Purchase 250 22 5,500
Balance 750 20.93 15,700
29 Sale (400) 20.93 (8,372)
Balance 350 20.93 7,328
30 Purchase 100 22.50 2,250
Balance 450 21.28 9,578

Cost of Goods Sold:

Beginning Inventory 20,000
Purchases 11,950
Total Goods Available for Sale 31,950
Ending Inventory (9,578)
Cost of Goods Sold 22,372

Specific Identification
 The cost of ending inventory and the cost of goods sold are determined by the identified inventories left and
sold

If the 1,100 items sold came from beginning inventories (1,000 units) and the June 30 purchase (100 units)
then the cost of goods sold will be P22,250

Date Transactions Unit Unit Cost Total Cost

June 1 Sale 1,000 20 20,000
June 30 Sale 100 22.50 2,250
Total 1,100 22,250

Cost of Goods Sold:

Beginning Inventory 20,000
Purchases 11,950
Total Goods Available for Sale 31,950
Ending Inventory (9,700)
Cost of Goods Sold 22,250

Net Realizable Value – estimated selling price in the ordinary course of business – the estimated cost of completion
and the estimated cost of disposal
 Inventories are written down to net realizable value on
Selling Price xxx
an item by item or individual basis and not by class of
Less: Estimated cost of completion (xxx)
inventory
Estimated cost of disposal (xxx)
Net Realizable Value xxx
 If the cost is lower than net realizable value, the
inventory is stated a cost
 If the cost is higher than net realizable value, the
inventory is measured at net realizable value
Chapter 8: Imprest Cash System  Unreplenished expenses will be recorded to
adjust the account to the correct fund balance
 Safeguarding cash is very important in every
organization so a quality internal control must Ex.: At the end of the accounting period, the petty
be implemented cash fund of Jude Enterprises is composed of the
following
Imprest System
- All cash collections must be deposited intact Cash 2,950.00
- All disbursements or payments are made Expenses paid for replenishment:
thru checks PCV #51 Transportation 375.00
- Maintenance of a petty cash fund 52 Postage 100.00
53 Repairs and maintenance 500.00
Two methods used in handling petty cash fund: 54 Transportation 350.00
imprest method and fluctuating method 55 Office supplies 475.00
56 Office supplies 250.00
Establishment of petty cash fund 2,050.00
 When petty cash fund is establishes, a voucher Total 5,000.00
or check are prepared payable to the petty cash
fund custodian or cashier Entry to record the adjustment of petty cash fund:
Dec 31 Transportation expense 725.00
Ex. Jude Enterprises established a petty cash fund for Postage 100.00
P5,000 on January 2, 2021. The fund will be used for Repairs and maintenance 500.00
expenses amounting to P500 and below. The entry to Office Supplies 725.00
record the establishment of petty cash fund is: Petty Cash Fund 2,050.00
To adjust petty cash fund
Jan 2 Petty Cash Fund 5,000
Cash in Bank 5,000
Reversing Entry:
 Once the petty cash fund is almost exhausted,
the fund must be replenished Jan 1 Petty Cash Fund 2,050.00
 There is no entry upon payment of expenses Transportation expense 725.00
using the petty cash fund Postage 100.00
Repairs and maintenance 500.00
Ex.: The petty cash custodian of Jude Enterprises Office Supplies 725.00
paid expenses from the petty cash fund from January To reverse the adjusting entry made on
2 to 15, 2021. The fund shows the following: Dec. 31, 2021

Cash 1,689.30 Increasing and Decreasing Petty Cash Fund

Expenses paid for replenishment:
PCV #1 Office supplies 395.50 Journal entry to increase the petty cash:
2 Water 380.00 Petty Cash Fund xxx
3 Advances to employees 500.00 Cash in Bank xxx
4 Repairs and maintenance 475.00
5 Office supplies 375.20 Journal entry to decrease the petty cash:
6 Transportation 360.00 Cash xxx
7 Repairs and maintenance 475.00 Petty Cash Fund xxx
8 Transportation 350.00
3,310.70
Total 5,000.00

Entry to record the replenishment of petty cash

fund:

Jan 15 Office Supplies 770.70

Water 380.00
Advances to employees 500.00
Repairs and maintenance 950.00
Transportation 710.00
Cash in Bank 3,310.70

To record the replenishment of petty cash

fund per PCV #1 to 8 dated Jan 2 to 15, 2021

 Petty Cash Fund is not credited upon

replenishment
- Only credited if the fund is decreased or
discontinued, and at the end of the
accounting period where adjustment
should be made to recognize all expenses
incurred during the period

Adjusting the petty cash fund:

Chapter 9: Recording Transactions In Special General Journal
Journals - Transactions that cannot be in the four
preceding special journals
 Transactions are analyzed based on source - Classified as current transactions (sales returns
documents as the basis in recording to the and allowances, purchases returns and
respective journals allowances, correcting journal entries,
adjusting, closing and reversing journal
General Journals entries)
- Book of original entry wherein all kinds of
business transactions are recorded Posting of Entries from the Journals to the
- Chronological record General Ledger and Subsidiary Ledgers

 If the company uses special journals, the general General Ledger -> controlling account
journal should only be used for transactions that - Balances should be supported with schedules or
could not be recorded in the special journals subsidiary ledgers

Disadvantages of not using special journals: Subsidiary ledgers – specific customer’s ledger
1. Only one person can use the books at a time  Sum of all balances in the subsidiary ledgers of
2. There are numerous postings from the journal to receivable and payable will be equal to the
the general ledgers of similar transactions balance of the accounts receivable and
3. Information needed is difficult to obtain accounts payable
immediately
4. More works to be done compared with the use of Controlling account – general ledger account which
special journals shows the summary of the same information shown
in detail in the subsidiary ledger
Special Journals
- Book of original entry that records only one Subsidiary ledger – group of accounts showing in
kind of transaction detail the same information shown in summary by the
- Repetitive or occurs several times during the controlling accounts
course of business operations
Trial Balance
Advantages of using the Special Journals:  After posting entries from journals to the
1. Permits division of labor general and subsidiary ledgers, the account
2. Reduces recording time balance will be computed and summarized
3. Posting of entries from the journal to the ledger is -Proves the equality of debits and credits but
minimal does not guarantee the correctness of the
4. Information needed, can easily be obtained accounts
5. More economical sine the time spent is reduced
6. Tracing of transactions is faster and easier
7. Easy to analyze

Types of Special Journals

1. Sales Journal – special journal designed to record

sales on account
- sales invoice is issued to the customer as evidence
of the transaction

2. Cash Receipts Journal – special journal wherein

all collections including cash sales are recorded
- official receipts (OR)
- collection of receivables from customers due to
sales on accounts, cash sales, investment of the
owner, proceeds of loans from lending institutions or
banks, collections

3. Cash Payments Journal – designed to record all

types of cash disbursements
- source document used cash voucher or check
voucher
- expenses, cash purchases, payment to creditors, and
withdrawal of cash

Cash voucher – pre-numbered form in which a

cash disbursement transaction is described and
analyzed

4. Purchases Journal – purchases on account are

recorded
- merchandise, supplies, equipment, furniture and
fixtures and others
- evidence by purchase order, charge invoice,
delivery receipt, bill of lading and other documents