THE SUBDIVISION OF THE JOURNAL
=Inadequacy of the Old Journal.=—As explained in the previous chapter,
every business transaction was formerly entered in the journal. This
necessitated the making of a formal debit and credit entry for every
item, many of which were of the same kind. As the object of every
business is to sell something, during any business day a large number
of sales, in consequence, had to be analyzed, classified, and entered
separately. The entry in each case was a credit to Sales, and either
a debit to the customer if the sale was “on time,” or a debit to Cash
if the sale was for cash. It was soon perceived that instead of making
a separate entry for each sale, one entry could be used for bringing
into the books all the sales for a given day. This was accomplished by
carrying a memorandum of the individual transactions until the close
of the day when a formal summary or compound entry was made in the
journal. Such a summary or compound journal entry is illustrated below:
A. Jackson 175.00
D. Hayes 25.00
J. M. Marshall 132.50
T. P. Pollard 79.40
I. M. Cranston 93.20
M. V. Johnson 17.15
Sales 522.25
To record the day’s sales.
The memorandum of each sale was made in a blotter to record the
quantities and kind of goods sold but such entry formed no part of the
double-entry record, being merely the source of information for the
formal summary entry.
=The Special Journal a Labor-Saving Device.=—This use of the journal
can also be made in connection with other transactions, with similar
great saving of labor. Throughout the day in every business there is
a large number of cash transactions—receipts and disbursements—which
require a debit and credit record. Also purchases of merchandise,
although not numerous for any particular day, comprise a large number
of entries during the course of a month or year. To save the labor
of so many entries, the original journal is divided into separate
books known as special journals, each containing the original entries
for a particular group of similar transactions, the number of
books corresponding to the number of groups into which the various
transactions are divided.
For instance, where the policy of the business is to encourage the
settlement of outstanding customers’ accounts by notes, the use of a
notes receivable book or journal effects a very appreciable saving of
labor. Through the use of such a book, limited to a record of nothing
but notes receivable, it is unnecessary to write each time a note is
received, a complete journal entry as follows:
Notes Receivable 1,500.00
James Jackson 1,500.00
Instead, the entry of Jackson’s name in the notes receivable journal
is in itself evidence of a debit to Notes Receivable account. Thus
only the credit side of the entry need be shown, with appropriate
explanation and detail, the formal debit being suppressed. When,
however, the books are closed at the end of each regular period, the
total of all these entries in the notes receivable journal is formally
labeled “Notes Receivable, Dr.” and posted to the debit of the Notes
Receivable account. This procedure brings on the ledger one debit entry
for the transactions of the entire month. The corresponding credits
have been posted in detail day by day from their journal record.
So also, when it is the practice of the business to issue many of its
own notes either in payment of purchases or for discount purposes,
a “Notes Payable Journal” may be used. The method of handling this
book is similar to that of handling the notes receivable journal as
described above. A similar procedure is followed in the case of sales,
purchase, and cash transactions referred to above. The method of
handling these four groups of transactions will be explained in detail
in the chapters which follow.
=Basis of Subdivisions.=—The basis for dividing the one general journal
into special journals is the relative frequency with which transactions
of a similar nature occur. It would evidently be of no utility to
create a special journal if the number of transactions to be recorded
in it was small, as the saving in the labor of making the entries would
be more than offset by the trouble of using an extra book.
=Customary Subdivisions.=—The special journals most frequently met
with are those for purchases, sales, and cash. The Purchase Journal
contains the original entry of purchases, the Sales Journal the
original entry of sales, and the Cash Journals the original entry of
cash transactions. All _other_ original entries are made in the general
journal. For the sake of brevity, the general journal is usually
designated by the single term “Journal.”
It should be thoroughly understood that no matter how many special
divisions of the journal may be in use, such books combined with the
general journal comprise the _journal_ record of transactions. None
of them is merely a memorandum record to be summarized and to be
formally recorded later. The record made in each is formal, although
abbreviated, and each must be posted completely, both debit and
credit, in order to secure in the ledger a full record of all business
transactions.
A brief explanation will be given in following chapters of the more
simple forms of special journals.