Special Journals
Special Journals
In accounting, recording every single transaction in a General Journal can quickly become overwhelming. Imagine a busy retail store logging hundreds of cash sales every day, one by one. The General Journal would become massive, repetitive, and incredibly inefficient to manage.
To solve this problem, businesses use Special Journals. A Special Journal is a specific journal designed to record only one type of high-volume, repetitive transaction.
By grouping similar transactions together, special journals streamline the bookkeeping process, allow for a division of labor among accounting staff, and simplify the posting process to the general ledger.
The Big Four Special Journals and The General Journal
Most merchandising businesses use four primary special journals, alongside the standard General Journal. If a transaction does not fit into one of these four special categories, it is still recorded in the General Journal.
Sales Journal
- Purpose: Used to record all sales of merchandise made on credit (on account).
- Key Rule: Only credit sales of merchandise go here. Cash sales or the sale of an asset other than merchandise (like selling an old delivery truck) do not belong in this journal.
- Posting: Columns are totalled at the end of the month, and the total is posted as a single debit to Accounts Receivable and a credit to Sales.
Cash Receipts Journal
- Purpose: Used to record every transaction that involves receiving cash.
- Key Rule: If cash comes into the business for any reason—cash sales, collections on customer accounts, bank loans, or owner investments—it is recorded here.
- Columns: Typically features columns for Cash (Debit), Sales Discounts (Debit), Accounts Receivable (Credit), Sales (Credit), and an "Other Accounts" column for miscellaneous cash inflows.
Purchases Journal
- Purpose: Used to record all purchases of merchandise made on credit (on account).
- Key Rule: Only credit purchases of inventory belong here. If the business buys supplies or equipment on credit, it may go here if a multi-column purchases journal is used, or in the General Journal. Cash purchases never go here.
- Posting: Columns are totalled monthly, resulting in a debit to Purchases (or Inventory) and a credit to Accounts Payable.
Cash Payments Journal
- Purpose: Used to record every transaction that involves paying out cash.
- Key Rule: If cash leaves the business for any reason—paying suppliers, paying rent, purchasing equipment with cash, or owner withdrawals—it must be recorded here. Also known as the Cash Disbursements Journal.
- Columns: Typically includes columns for Cash (Credit), Purchases Discounts (Credit), Accounts Payable (Debit), and an "Other Accounts" column for miscellaneous expenses paid in cash.
The Role of the General Journal
Even with special journals, a business still needs a General Journal. It serves as a safety net for any transaction that does not fit the specific criteria of the special journals. Examples include:
- Adjusting entries (like depreciation or accrued expenses).
- Closing entries at the end of the fiscal period.
- Purchase returns and allowances on account.
- Sales returns and allowances on account.
How Special Journals Save Time: The Power of Columnar Totals
The primary advantage of a special journal is that you do not post every single transaction to the General Ledger immediately. Instead, you use specialized columns for frequently used accounts.
Throughout the month, individual amounts are posted daily to the Subsidiary Ledgers (Accounts Receivable Ledger and Accounts Payable Ledger) to keep track of what individual customers owe and what is owed to individual suppliers.
At the end of the month, the column totals of the special journals are calculated. This single total is then posted to the General Ledger. For example, if a business has 500 credit sales in a month, the accountant only makes one posting to the Accounts Receivable and Sales accounts in the General Ledger instead of 500 individual postings.
Bookkeeping Special Journals
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