What is Special Journal in Accounting?

Top 6 Types

There are different types, where some of the commonly used in accounting include the following:

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#1 – Purchases Journal

Purchase JournalPurchase JournalPurchase Journals, also known as Purchase Book or Purchase Daybook, are special journals which a Company uses to keep track of all the credit purchases. While Purchase Journal records credit transactions, a General Journal records cash purchases. read more records all the transactions related to the purchase of the goods on credit from the suppliers.

#2 – Purchases Returns & Allowances Journal

It records all the transactions related to the return of goods to the supplier, purchased on credit, or allowances received from the supplier.

#3 – Sales Journal

Sales JournalSales JournalA sales journal is a type of journal that is used to keep track of a company’s credit sale transactions and to maintain and manage the account receivable and inventory account.read more records all the transactions related to the sales of goods by the company to its customer on credit.

#4 – Sales Returns & Allowances Journal

It records all the transactions related to the return of goods back by the customers sold on credit and allowances given to the customers.

#5 – Cash Receipt Journal

Cash Receipt JournalCash Receipt JournalThe cash receipts journal is that type of accounting journal which is only used to record all receipts of cash during an accounting period and works on the golden rule of accounting – debit what comes in and credits what goes out.read more records all the transactions in which the company receives cash, like transactions involving the sale of goods for cash, sale of the company’s assets for cash, and capital investment by the owner of the company in the form of cash, etc.

#6 – Cash Payment Journal

It records all the transactions involving the outflow of the cash from the company and includes the transactions such as cash paid to suppliers, cash paid for the expenses, etc.

Examples

There is a company A ltd which has a large scale business. It maintains the record in the special journals to keep the records organized and in better form. One of them is the sales journal, which the company uses to record all the transactions related to the sales of goods on a credit basis.

When the company sells the goods to its customer on a credit basis, there will be a debit to the account receivable account and a credit to the sales account. So, this transaction will be recorded in the sales journal by debiting the accounts receivable accountAccounts Receivable AccountAccounts receivables is the money owed to a business by clients for which the business has given services or delivered a product but has not yet collected payment. They are categorized as current assets on the balance sheet as the payments expected within a year. read more. When the company receives the payment against accounts receivable, the same will be recorded in the cash receipt journal. If there is any return from the customer, then the same will be recorded in the sales returns and the allowances journal.

Advantages

Some of the advantages are as follows:

  • All the accounting transactionsAccounting TransactionsAccounting Transactions are business activities which have a direct monetary effect on the finances of a Company. For example, Apple representing nearly $200 billion in cash & cash equivalents in its balance sheet is an accounting transaction. read more of a similar nature will be recorded in that particular special journal. As they record all the related transactions in an organized form, this will help the accountants and the bookkeepers keep track of all the different business activities properly.Generally, in large companies, each of the special journals is handled by separate persons, which makes the person specialized in that area, thereby increasing its efficiency of working and reducing the chances of errors in the bookkeeping.Companies, where such journals are maintained internal controlInternal ControlInternal control in accounting refers to the process by which a company implements various rules, policies, or procedures to ensure the accuracy of accounting and finance information, safeguard the various assets of the business, promote accountability in the business, and prevent the occurrence of frauds in the company.read more, are better. With such division of the work, the employee’s conflict concerning their responsibilities decreases, and the quality of work increases.

Disadvantages

Some of the disadvantages are as follows:

  • If an error occurs while maintaining and recording the transactions in the special journal by the person responsible for the same, it can show the wrong balances of that journal.If the company does not use the special journals, then all the transactions would be recorded in the general journalGeneral JournalThe General Journal is a book of entry that holds the initial record of every transaction before being posted to the concerned accounts like Sales Journal, Purchase Journal, & Cash Journal etc. read more only. It would become difficult to look at the specific types and nature of transactions at the later stage.As separate persons may handle each of these journals, the company needs to appoint various employees, thereby increasing the employee cost of the company.

Important Points

The different vital points are as follows:

  • They record transactions of a similar nature under one journal and do not include the general journal.It helps monitor all the transactions during a period in an organized form. It ensures that the company takes the necessary actions for those transactions.The companies where small numbers of transactions are involved generally do not maintain a special journal. Instead, they record the entire transaction in the business in the general journal only and then post them to related accounts in the general ledgerGeneral LedgerA general ledger is an accounting record that compiles every financial transaction of a firm to provide accurate entries for financial statements. The double-entry bookkeeping requires the balance sheet to ensure that the sum of its debit side is equal to the credit side total. A general ledger helps to achieve this goal by compiling journal entries and allowing accounting calculations.
  • read more.Generally, the companies maintain this type of journal only for those types of transactions that frequently occur in the business or are repetitive.

Conclusion

They record the specific transaction of the company by categorizing them into different types or groups. This system helps the company maintain the accuracy of the transactions in an organized form. It can also be reviewed by the company later. In case the company does not use this journal. All the transactions would be recorded in the General journal only, and at the later stage, it would become difficult to look at the specific types and nature of transactions.

This article has been a guide to what is a special journal and its definition. Here we discuss the top 6 types of special journals in accounting, examples, advantages, & disadvantages. You can learn more about accounting & bookkeeping from the following articles –

  • Format of Journal EntryUnearned Revenue Journal EntriesAccrued Revenue Journal EntriesDeferred Revenue Journal Entry