Cash sales may also be handled without the use of a separate column in the sales journal. Two methods are used for this. Under the one, cash sales are included in the Accounts Receivable debit total of the sales journal, although the individual items are not posted to the subsidiary ledger, and they are also included in the Accounts Receivable credit total of the cash receipts journal. The inflated debit in the general ledger controlling account is thus offset by an equally inflated credit, the balance therefore being the correct amount to control the sales ledger.

Under the other method the postings to the general ledger controlling account are the same as in the first method. The two methods differ, however, in that under the second method an account is opened in the subsidiary ledger entitled “Cash Customers” or “Cash Sales,” to the debit of which are posted in detail the cash sales items from the sales journal and to the credit of which are posted in detail the cash sales items from the cash receipts journal. The account is thus only a “wash” or clearing account. This method, however, prevents the inflated debits and credits in the controlling account.

The methods last described for handling proprietors’ withdrawals and cash sales are the ones most frequently used in large businesses where simplicity of routine for current entry must be secured.

The Problem of the Purchase Journal Summary.—The practice of recording extraneous transactions in the purchase journal brings about at summary time a situation similar to that of the sales journal, when a controlling Accounts Payable account is maintained. The purchase journal is, and should be, the place of record for purchases made for the business. If the proprietor (or other person), for his personal account and use, purchases through the business merchandise which never goes into stock, accurate accounting requires such transactions to be charged direct to the proprietor and not to the Purchases account of the business. Inasmuch as the liability is assumed by the business and the creditor’s account will appear in the purchase ledger, the use of the purchase journal total for credit to the Accounts Payable controlling account gives the correct figure. The trouble comes in because this same figure cannot be used as the debit to Purchases. Subtraction of these extraneous items must be made to determine the proper amount chargeable to the Purchases account, thus necessitating an analysis at summary time.

Accounts Both Receivable and Payable.—It frequently happens that purchases from, and sales to, the same party are made, i.e., goods are sometimes bought from and sold to a customer. If the account of this debtor-creditor is normally a purchase account, it is set up in the purchase ledger. If a sale is made to this debtor-creditor and charged to his purchase ledger account, such transaction should not be included in the Accounts Receivable controlling figure from the sales journal unless an adjusting entry is made through the general journal. Such entry would affect only the controlling accounts and would be:

Or the item might be omitted from the sales journal controlling figure and stated separately in the summary entry for the sales journal.

A more satisfactory method is to set up two accounts with such parties—one as a creditor, the other as a customer. Then no adjustment need be made at the time of summarizing the journals, because the two accounts are treated as entirely independent of each other. The settlement of these two accounts may be handled separately or by a payment of the balance between the two. If settled by balance, an adjusting journal entry should be made to show on the books the two separate elements involved. This would of course affect both the controlling accounts and the two individual accounts.

The Problem of the Note Journals Summaries.—Of notes receivable the large majority are usually received from customers. The summary entry for such is: