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 of Special Journals in Accounting
There are various different types, where some of the commonly used special journals in accounting include the following:
#1 – Purchases Journal
Purchase Journal 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.
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#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 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.
Example of Special Journal
Let’s discuss an example of a special journal.
There is a company A ltd which has a large scale business. in order 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 by the company to its customer 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 account. When the company will receive the payment in future against accounts receivable then the same will be recorded in the cash receipt journal and 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 transactions related to a similar nature will be recorded in that particular special journal. As they record all the transactions of similar transactions at a place in an organized form, this will help the accountants and the bookkeepers to keep the track of all the different business activities in a proper manner.
- 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.
- In the companies where such journals are maintained, there is better internal control because by such division of the work, the conflict of the employees with respect to their responsibilities decreases and thus the quality of work by employees 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 general journal only and at the later stage, it would become difficult to look at the specific types and nature of transactions.
- As each of the special journals may be handled by separate persons, the company needs to appoint various different employees thereby increasing the employee cost of the company.
Important Points
The different important 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 made by the company during the period in an organized form and ensuring 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 and rather 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 ledger.
- Generally, the companies maintain the special journals only for those types of transactions which occur frequently in the business or which are of repetitive nature.
Conclusion
They record the specific transaction of the company by categorizing them into the different types or groups. This system of maintaining the records in the special journal helps the company in maintaining the accuracy of the transactions and in the organized form, so the same can be reviewed by the company later. In case the company does not use the special journals then all the transactions would be recorded by it in general journal only and at the later stage, it would become difficult to look at the specific types and nature of transactions.
Recommended Articles
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