What is Special Journal in Accounting?
Special Journals are all accounting journals in an organization except the general journal where all the transactions of the similar transactions are recorded at a place in an organized form that helps the accountants and the bookkeepers of the company to keep the track of all the different business activities in a proper manner.
Top 6 Types
There are different types, where some of the commonly used in accounting include the following:
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For eg:
Source: Special Journal (wallstreetmojo.com)
#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 back to the supplier, which were purchased on credit or allowances received from the supplier.
#3 – Sales Journal
Sales Journal 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 that were sold on credit and allowances given to the customers.
#5 – Cash Receipt Journal
Cash Receipt Journal records all the transactions in which there receipt of cash by the company like transactions involving the sale of goods for cash, sale of the assets of the company for cash, 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. To keep the records in an organized and better form, it maintains the record in the special journals. One of them is the sales journal, which is used by the company 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, then there will be a debit to the account receivable account and the credit to the sales account. So, this transaction will be recorded in the sales journal by debiting the accounts receivable accountAccounts Receivable AccountAccounts receivables refer to the amount due on the customers for the credit sales of the products or services made by the company to them. It appears as a current asset in the corporate balance sheet.read more. When the company receives the payment in the future against accounts receivable, then 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 related to a similar nature will be recorded in that particular special journal. As they record all the transactions of related transactions at a place in an organized form, this will help the accountants and the bookkeepers to 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 the errors in the bookkeeping.
- Companies, where such journals are maintained internal control, is better. By 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:
- In case of error occurs while maintaining and recording the transactions in the special journal by the person responsible for the same, then it can show the wrong balances of that journal.
- In case the company does not use the special journals, then all the transactions would be recorded by it 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. At the later stage, it would become difficult to look at the specific types and nature of transactions.
- 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 the transactions of a similar nature under one journal and does not include the general journal.
- It helps in monitoring all the transactions during a period in an organized form. It ensures that the company is taking necessary actions for all of those transactions.
- The companies where small numbers of transactions are involved generally do not maintain the special journal. Instead, they record the entire transaction taking place in the business in the general journal only and then post them to related accounts in the general ledgerGeneral LedgerA general ledger is a book of accounts that records the everyday business transactions in separate ledger accounts. The entries made in a ledger can be verified by getting a NIL balance on summing up all the ledger account amounts in the trial balance.read more.
- Generally, the companies maintain this type of journal only for those types of transactions that frequently occur in the business or which are repetitive.
Conclusion
They record the specific transaction of the company by categorizing them into the different types or groups. This system helps the company in maintaining the accuracy of the transactions and in the organized form. It can also be reviewed by the company later. In case the company does not use this journal, then all the transactions would be recorded by it in the General journal only, and at the later stage, it would become difficult to look at the specific types and nature of transactions.
Recommended Articles
This article has been a guide to what is a special journal and its definition. Here we discuss the top 6 types of special journal in accounting along with examples, advantages & disadvantages. You can learn more about accounting & bookkeeping from the following articles –
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