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Accounting Journals | What are Journal Entries in Accounting?

Accounting Journals

To keep accounts, it is necessary to set up accounting journals, with necessarily a general journal which constitutes the legal support of the accounts.

Most companies use for practical reasons several accounting journals (called auxiliary journals) which are then centralized in the general journal (called centralizing journal): purchases journal, sales journal, bank journal, cash journal…

Composition of accounting journals

Accounting journals must include the following information:

Accounting journals: debit and credit

The columns provided for the entry of amounts are two in number:
the flow rate column,
and the credits column.

Two separate articles discuss these concepts:
Debit in accounting
Credit in accounting

The transactions recorded in the accounting journals must be balanced: DEBIT = CREDIT

The main accounting journals

Typically, a business uses the following accounting journals: purchasing journal, sales journal, cash journal, and miscellaneous transaction journal.

1. The purchasing journal

The purchasing journal contains all the entries for the purchase of goods or raw materials and the company’s general expenses (rent, advertising, maintenance, leasing, fees, telephone, etc.).

Sometimes overheads are even posted to a specific journal (e.g. overhead journal).

The accounting entry in a purchasing journal usually looks like this:

2. The sales journal

All sales invoices issued by the company are entered in this journal.

The accounts used in these logs are mainly:

3. Cash journals

Cash journals are used to record all transactions related to the bank (s) and possibly to the cash (s) owned by the company.

The accounts used in these journals are essentially balance sheet accounts: payment of debts and collection of receivables, with the cash account in return:

4. The various operations log

The various operations journal, called the OD journal for short, is used to record all the transactions that do not fit into the 3 previous types of journals (purchases, sales and cash). Thus, in particular:
payroll, VAT, amortization of fixed assets, provisions, balance sheet entries…

It is also possible to divide the various transactions into several journals: VAT journal, payroll journal, depreciation expense journal, etc.

Examples Accounting Journals

Example 1 – Borrowing money journal entry

ABC Company borrowed $300,000 from the bank

Therefore, the journal entry would look like this:

DR Cash                      300,000

CR Bank Loan Payable          300,000

Example 2 – Purchasing equipment journal entry

Purchased equipment for $650,000 in cash.

DR Equipment            650,000

CR Cash                      650,000

Example 3 – Purchasing inventory journal entry

Purchased inventory costing $90,000 for $10,000 in cash and the remaining $80,000 on the account.

DR Inventory              90,000

CR Cash                                  10,000

CR Accounts Payable             80,000

Example 4 – Acquiring land journal entry

Purchased land costing $50,000 and buildings costing $400,000. Paid $100,000 in cash and signed a note payable for the balance.

DR Land                     50,000

DR Buildings              400,000

CR Cash                      100,000

CR Note payable         350,000

Types of special journals

The types of Special Journals that a business uses are determined by the nature of the business. Special journals are designed as a simple way to record the most frequently occurring transactions. There are four types of Special Journals that are frequently used by merchandising businesses: Sales journals, Cash receipts journals, Purchases journals, and Cash payments journals.

Special journals (in the field of accounting) are specialized lists of financial transaction records which accountants call journal entries. In contrast to a general journal, each special journal records transactions of a specific type, such as sales or purchases. For example, when a company purchases merchandise from a vendor, and then in turn sells the merchandise to a customer, the purchase is recorded in one journal and the sale is recorded in another.

Sales journal

Sales journals record transactions that involve sales purely on credit. Source documents here would probably be invoices. Provides a chronological record of all credit sales made in the life of a business. Credit sales are transactions where the goods are sold and payment is received at a later date. The source documents for the Sales journal are copies of all invoices given to the debtors.

Double entry Accounting is achieved by:

Choose credit sales journal if this stock is then on-sold to customers who will pay later. The people/organizations here are known as debtors. Collectively, all these accounts that are to be paid to us by our customers are known as assets.

date details folio # invoice # amount
date sale was made who did you sell it to sequential – #order

Cash receipts journal

A cash receipts journal (CRJ) records transactions that involve payments received with cash. Source documents would probably be receipts and cheque butts. The CRJ records the cash inflow of a business. Discount allowed is an expense as the discount allowed is the cost to the seller of obtaining an inflow of cash from a debtor weeks earlier than would be the case.

date details receipt # discount allowed sales debtors Other BANK
date sale was made who you received payment from people who are also in sales journal other types of income description amount into bank

Expense journals

Purchases journal

Purchases Journals record transactions that involve purchases purely on credit. Source documents are invoices. For instance, the purchase of inventory on credit is recorded in the purchases journal.

date details folio #33 invoice # amount
date sale was made name of supplier not sequential

Cash payments journal

Cash Payments Journals record transactions that involve expenditures paid with cash and involves the cash Source documents are likely receipts and cheque butts. The CPJ records the cash outflow of a business. If the owner of a business withdraws cash from the business an entry is made in the CPJ. Discount received is the cash discount received by a purchaser, it is an income item for the purchaser.

date details cheque # discount received purchases creditors Other BANK
date payment was made who you paid people who are also in purchases journal other types of expenses description amount out of bank
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