2. Illustration of a special journal

Let’s look at a simple example to see how special journals are connected between each other as well as with subsidiary ledgers. Let’s assume Tryst Electron Company (a fictitious entity) is an electronics manufacturer. In May 20X3, the company made the following purchases from its main suppliers (all supplies are fictitious in our example):

• 10,000 connectors (May 1), 5,000 resistors (May 9), and 4,000 LED white lamp beads (May 28) from Hansberry Solutions;
• 1,500 LED high power lamps (May 6) and 3,000 LED corn bulb lamps (May 29) from Arbitol Systems;
• 2,000 transistors (May 13) and 3,000 connectors (May 16) from Panache Corner; and
• 2,500 DIP-8 timers (May 22) from Alluvion Parts.

All purchases were made on account, and as the result, the company has to record these transactions in the purchases journal (debit side) and accounts payable subsidiary ledger (credit side). When the company will pay off the obligations to its vendors, it will record the payments in the accounts payable subsidiary ledger (debit side) and cash disbursements journal (credit side).

Important to note, credit and debit sides do not literally mean debit (left) or credit (right) side. For example, cash disbursements journal will have only one column representing all cash payments: that is, it will show the credit “side” as the cash account decreases with each payment of cash. If the cash receipts and cash disbursements journals are contained within the same book – the cash book – then such journal will literally have a debit side (i.e., cash receipts) and credit side (i.e., cash payments).

Similarly, purchases journal will have only one column representing all purchases on account (credit). Cash purchases will be recorded in the cash disbursements journal. Sales journal will record all sales on account while cash sales would be recorded in the cash receipts journal.

To continue our example of Tryst Electron Company, let’s look how the aforementioned purchases made in May 20X3 would be recorded in the company’s purchases journal. Refer to the illustration below:

In a computerized accounting system, when each purchase is recorded, accounting software will automatically record an accounts payable in a corresponding subsidiary account. For instance, on May 1, 20X3, Tryst Electron Company will record a $10,000 purchase from Hansberry Solutions (Invoice 5408 and Account 200-01). When this purchase transaction is recorded, the software will credit the subsidiary (accounts payable) account 200-01 for Hansberry Solutions for $10,000. For an example how the accounts payable subsidiary ledger might look like for Tryst Electron Company, refer to the illustration below:

As cash is paid to vendors, the cash payment transactions are recorded in the cash disbursements journal (credit to Cash) as well as a corresponding accounts payable subsidiary ledger (debit to Accounts Payable).

At the end of a month, specialized journals and subsidiary ledger accounts are closed to the corresponding control general ledger accounts.

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