Subsidiary Ledgers and Special Journals

1. What are the advantages of the four different special journals? By using the different special journals there are more repetitive entries according to the type of transaction that they were such as sales, cash receipt, cash disbursement, and purchases. By separating the journals it helps to track the entries easier. The advantage of the different journals is it reduces the detailed recording; meaning one entry for purchase, and one entry for sales rather than 100 different entries for the month. Also it helps to distribute the labor meaning each journal can be given to a different person to be in charge of and by doing this it will also allow internal audit of the department and knowing who is handling what journal so conflicting entries will not happen.

When should you use each type? A person would use each type whenever they find themselves using repetitive transactions. Then at the end of the month enter into the general journal one grand total from each of the special journals to make one separate entry rather than 100 different ones.

2. What is a subsidiary ledger and what purpose does it serve?

The subsidiary ledger gives all the detailed information to support the general ledger account. This information is regarding the customer’s purchases, returns, remittance address, and any discounts they may get. By having this it controls the financial information access that the manager may give to the sales or other staff. She/he could choose to give limited information to different departments and keep this information only for the accounting staff.

3. What is a control account and what purpose does it serve?

The control account is basically a summary of the general ledger. Its purpose is to keep the general ledger as uncluttered as possible and without any details of the customers but still keep the correct balance for the financial statements.

4. Which two general ledger accounts may act as control accounts for a subsidiary ledger?

The two...