Accounting: The Language of Business (Part 26)

If you want an accounting of your worth, count your friends.

Mary Browne

Accounting Systems and Internal Controls

(Part G)

by

 Charles Lamson

Adapting Manual Accounting Systems

The preceding posts illustrate subsidiary ledgers and special journals that are common for a medium-sized business. Many businesses use subsidiary ledgers for other accounts, in addition to Accounts Receivable and Accounts Payable. Also, special journals are often adapted or modified in practice to meet the specific needs of a business. In the following paragraphs, other subsidiary ledgers and modified special journals are described.

Additional Subsidiary Ledgers

In general, subsidiary ledgers are used for accounts that consist of a larger number of individual items, each of which has unique characteristics. For example, businesses may use a subsidiary equipment ledger to keep track of each item of equipment purchased, it's cost, location, and other data. Such ledgers are similar to the accounts receivable and accounts payable subsidiary ledgers that were illustrated in the preceding posts.

Modified Special Journals

A business may modify its special journals by adding one or more columns for recording transactions that occur frequently. For example, a business may collect sales taxes that must be remitted periodically to the taxing authorities. Thus, the business may add a special column for sales taxes payable in its revenue journal, as shown below.

Some other examples of how special journals may be modified for a variety of different types of businesses are:

• Farm---The purchases journal may be modified to include columns for various types of seeds (corn, wheat), livestock (cows, hogs, sheep), fertilizer, and fuel.

•  Automobile Repair Shop---The revenue journal may be modified to include columns for each major type of repair service. In addition, columns for warranty repairs, credit card charges, and sales taxes may be added.

• Hospital---The cash receipts journal may be modified to include columns for receipts from patients on account, from Blue Cross/Blue Shield or other major insurance reimbursers, and Medicare.

•  Movie Theater---The cash receipts journal may be modified to include columns for revenues from admissions, gift certificates, and concession sales.

•  Restaurant---The purchases journal may be modified to include columns for food, linen, silverware and glassware, and kitchen supplies.

Regardless of how a special journal is modified, the basic principles and procedures discussed in the preceding posts apply. For example, the columns in special journals are normally totaled at periodic intervals. The totals of the debit and credit columns are then compared to verify their equality before the totals are posted to the general ledger accounts. 

*WARREN, REEVE, & FESS, 2005, ACCOUNTING, 21ST ED., PP. 200-201*

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