what is a special journal

The widespread use of microcomputers has enabled even small firms to automate their accounting systems. A single journal is satisfactory for small business enterprises where the transaction volume is usually small. A financial professional will offer guidance based on the information provided and offer a no-obligation https://www.quick-bookkeeping.net/do-insurance-payouts-have-to-be-counted-as-income/ call to better understand your situation. Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs. Finance Strategists has an advertising relationship with some of the companies included on this website.

what is a special journal

For example, a merchandise purchase is recorded on a single line that registers credit to the supplier’s account, the supplier’s name, the date and the amount, and any other desired information. This journal should record non-routine transactions, and many of these transactions should be approved by the head of the accounting department or by someone with similar authority. Furthermore, it can prove impossible for one bookkeeper/accountant to journalize all the transactions of a large business in one journal. In large businesses, where transactions of various categories occur hundreds or thousands of times each month, it is inconvenient to record them in the general journal. One journal records similar transactions, which simplifies future references to any of them. For example, if a firm has 2,000 purchases on account during the month, the purchases account will be debited once, not 2,000 times.

Special journals

In special journal all the transactions are accumulated and then the total is periodically posted to the ledgers whereas in general journal the transactions are not accumulated and are posted individually to the ledgers. All the transactions in general journal are posted in general ledger whereas in special journals all the transactions are posted in general as well as in personal ledgers. On the other hand, routine transactions are recorded in special journals and do not require authorization.

  1. Sales return journal which is also called sales return day book is used to record the credit sales returned from debtors.
  2. If special journals weren’t used to organize transactions, everything would be recorded in the general journal and there would be no way to look at specific types of transaction.
  3. Discount received is the cash discount received by a purchaser, it is an income item for the purchaser.
  4. On the other hand, routine transactions are recorded in special journals and do not require authorization.

The benefits of using a special journal instead of the general journal for the repetitive transactions have been eliminated with today’s inexpensive yet powerful accounting software. For example, when a sales invoice is prepared by using accounting software, both the general ledger and subsidiary accounts will be updated instantly and accurately. The purchase from Gus Grass would be recorded in the accounts payable subsidiary ledger and the total would be recorded at the end on the period by posting directly to merchandise inventory and accounts payable. The nature of each company’s transactions determines which columns this journal includes. For example, companies sometimes choose to include separate debit columns for regularly used accounts such as salaries expense, sales commissions expense, or other specific accounts affected by cash disbursements.

What Does Special Journal Mean?

Examples of special journals are the cash receipts journal, cash disbursements journal, payroll journal, purchases journal, and sales journal. This special journal is used to record purchases made on credit with vendors. By only recording credit purchases in this journal, accountants and bookkeepers can use this as a record of all the credit purchases during a period. Sales journals record transactions that involve sales purely on credit.[1] Source documents here would probably be invoices.

Transactions that increase cash are recorded in a multi‐column cash receipts journal. If sales discounts are offered to customers, the journal includes a separate debit column for sales discounts. Credit columns for accounts receivable and for sales are normally present, but companies that frequently receive cash from other, specific sources use additional columns to record those types of cash receipts. In addition, the cash receipts journal includes a column named Other, which is used to record various types of cash receipts that occur infrequently and therefore do not warrant a separate column. For example, cash receipts from capital investments, bank loans, and interest revenues are generally recorded in the Other column. However, a company that provides consumer loans and receives interest payments from many customers would probably include a separate column for interest revenue.

Cash Disbursement Journal

The subsidiary (customer) ledgers would be updated daily but at the end of the period, the TOTALS only would be recorded in posted directly into the accounts listed with no journal entry necessary. General journal is suitable for small businesses where only a few transactions occur on daily basis. The small businesses may not need to maintain a special journal for different nature of transactions how to build a flexible budget variance analysis in excel because only general journal may be sufficient to work as the book of original entry. Companies use different types of books to record different types of business transactions in which they engage during the course of various business activities. These books are commonly named as books of prime or original entry and can be broadly divided into two types – special journals and general journal.

It normally includes entries for adjustments like accruals and prepayments, correction of errors, bad and doubtful debts, depreciation, writing down of inventory and sale and purchase of non-current assets. All the transactions in general journal are recorded in form of double entry. General journal also acts as authorization because all the entries in the journal will be prepared or reviewed by the financial accountant. General journals record all transactions, whether routine or non-routine. Each general journal is made up of daily entries which are summarized at the end of the month to post them in special journals. The ledger accounts where these postings are recorded differ for various types of special journals.

One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales journal will have only one column in which to enter the amount of each sales invoice. At the end of the month the total of the column is debited to Accounts Receivable and credited to Sales. Throughout the month, the individual sales invoices will be posted to each customer’s record found in the company’s subsidiary ledger for Accounts Receivable. Entries in the sales journal typically include the date, invoice number, customer name, and amount.

The cash disbursements journal to the right has one debit column for accounts payable and another debit column for all other types of cash payment transactions. Since each entry debits a control account (accounts payable) or an account listed in the column named Other, the specific account being debited must be identified on every line. There are three types of special journals – the sales journal, the purchases journal and the cash receipts journal. The sales journal usually contains credit transactions while it is debited for credit purchases. The purchases journal usually contains debit transactions while it is credited for debit purchases.

In special journals all the transactions related to credit sales, credit sales return, credit purchases and credit purchases return are recorded. In general journal all other transactions are recorded which include adjustments to accounts like sale and purchase of non-current assets, accruals and prepayments, bad debts and correction of errors etc. In special journals all the transactions are recorded in the form of single line entry whereas in general journal all the transactions are recorded in the form of two or more line entries. At the end of the accounting period, each column total is posted to the general ledger account listed at the top of the column, and the account number is placed in parentheses below the total.