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When companies use special journals: a. they record all purchase transactions in the purchases journal. b. they record all cash received, except from cash sales, in the cash receipts journal. c. they record all cash disbursements in the cash payments journal. d. a general journal is not necessary.

Short Answer

Expert verified
Options a and c are correct. Special journals simplify routine transaction logging but do not replace the general journal.

Step by step solution

01

Understanding Special Journals

Special journals are used by businesses to streamline the recording of repetitive transactions. Each type of special journal deals with a specific category of transactions such as sales, purchases, cash receipts, and cash payments.
02

Analyze Option a

Option a states that all purchase transactions are recorded in the purchases journal. Special journals are designed to handle specific types of transactions, and the purchases journal is indeed used to record all purchase transactions, typically those on account.
03

Analyze Option b

Option b states that all cash received, except from cash sales, is recorded in the cash receipts journal. However, the cash receipts journal is generally used to record all cash received, including cash sales, not excluding them.
04

Analyze Option c

Option c suggests recording all cash disbursements in the cash payments journal. This statement is true, as the cash payments journal is used to record all outflows of cash, such as payments to suppliers and other expenses.
05

Analyze Option d

Option d claims that a general journal is not necessary when using special journals. Despite the use of special journals, a general journal is still necessary for recording non-routine transactions that do not fit into the special journals.

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Key Concepts

These are the key concepts you need to understand to accurately answer the question.

Purchases Journal
In the realm of accounting, a purchases journal is a specialized tool used to manage transactions related to purchases. Typically, businesses record their purchase transactions here, specifically those that involve buying on credit.
This journal helps accountants record multiple transactions more efficiently without overwhelming the general ledger.
  • Used primarily for credit purchases.
  • Streamlines recording repetitive transactions.
  • Reduces posting time to the general ledger.
Despite its focused nature, the journal captures essential details such as the date of purchase, vendor name, and the amount. This ensures that all necessary information is easily accessible for financial analysis and auditing purposes.
Cash Receipts Journal
The cash receipts journal is essential for documenting all inflows of cash into a business. This includes every instance where people or entities pay the company money, covering not just cash sales but also other sources such as investments, interest, or debt collection.
The primary function of this journal is to maintain a clear record of where cash is coming from and ensure it matches what is deposited in the bank.
  • Records all cash inflows, including sales and other receipts.
  • Improves tracking of cash sources.
  • Helps reconcile receipts with bank deposits.
By consolidating all cash transactions, businesses can better manage their cash flow, ensuring they always know their financial position.
Cash Payments Journal
A cash payments journal is an essential component of a well-managed accounting system, providing an organized method for recording all cash outflows. From supplier payments to other business expenses, any cash spent by the company is documented here. The main advantage of this journal is its ability to keep a clear, systematic record of expenditure.
  • Records all cash outflows.
  • Aids in expense management.
  • Facilitates reconciliation of payments and bank transactions.
It helps to maintain financial discipline and ensures transparency in cash handling, making it easier to handle audits and financial reporting.
General Journal
Despite the presence of special journals, the general journal remains an integral part of any accounting system. It is here that accountants record transactions that don't fit into the specific categories covered by special journals. This includes adjustments, corrections, and unique entries that need special consideration.
The general journal serves as a comprehensive tool handling transactions like depreciation, accruals, and error corrections.
  • Handles non-routine transactions.
  • Essential for adjustments and corrections.
  • Completes the accounting records with detailed entries.
This flexibility makes it indispensable, ensuring businesses maintain accurate and comprehensive financial records.
Accounting Transactions
At the heart of accounting are accounting transactions, which are events that affect the financial position of a business and are recorded in financial statements. These can be internal, like adjusting entries, or external, involving third parties.
The documentation of these transactions is crucial as it provides a complete picture of a company's financial activities.
  • Affects financial position and reports.
  • Can be internal or external events.
  • Form the basis of all financial reporting.
Properly recording these transactions ensures that financial statements reflect true and fair views of the company's financial state, aiding stakeholders in making informed decisions.

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Most popular questions from this chapter

Which of the following is incorrect concerning subsidiary ledgers? a. The purchases ledger is a common subsidiary ledger for creditor accounts. b. The accounts receivable ledger is a subsidiary ledger. c. A subsidiary ledger is a group of accounts with a common characteristic. d. An advantage of the subsidiary ledger is that it permits a division of labor in posting.

At the beginning of the month, the accounts receivable subsidiary ledger showed balances for Apple Company \(\$ 5,000\) and Berry Company \(\$ 7,000\). During the month, credit sales were made to Apple \(\$ 6,000\), Berry \(\$ 4,500\), and Cantaloupe \(\$ 8,500\). Cash was collected on account from Berry \(\$ 11,500\) and Cantaloupe \(\$ 3,000\). At the end of the month, the control account Accounts Receivable in the general ledger should have a balance of: a. \(\$ 11,000\). c. \(\$ 16,500\). b. \(\$ 12,000\). d. \(\$ 31,000\).

Which of the following is incorrect concerning the posting of the cash receipts journal? a. The total of the Other Accounts column is not posted. b. All column totals except the total for the Other Accounts column are posted once at the end of the month to the account title(s) specified in the column heading. c. The totals of all columns are posted daily to the accounts specified in the column heading. d. The individual amounts in a column posted in total to a control account are posted daily to the subsidiary ledger account specified in the Account Credited column.

Dotel Company's cash receipts journal includes an Accounts Receivable column and an Other Accounts column. At the end of the month, these columns are posted to the general ledger as: a. a column total a column total b. individual amounts a column total c. individual amounts individual amounts d. a column total individual amounts

Two common subsidiary ledgers are: a. accounts receivable and cash receipts. b. accounts payable and cash payments. c. accounts receivable and accounts payable. d. sales and cost of goods sold.

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