To speed up this process, companies use special journals to record repetitive transactions that affect the same set of accounts and have a consistent description. Then, instead of separately posting individual entries, each column’s total is posted at the end of the accounting period. Entries in the Other column are posted individually to the general ledger accounts affected, and the account numbers are placed in the cash receipts journal’s reference column. A capital X is placed below the Other column to indicate that the column total cannot be posted to a general ledger account. Examples of each special journal are as follows.The sales journal contains entries for credit purchases, whereas the credit purchases journal is debited with these transactions.
When a credit purchase is made, the company debits the goods purchased account and credits the accounts payable account in the purchases journal. When the accounts payable balance is paid off, the cash payment is recorded in the cash disbursements journal—not the purchases journal. Purchases return journal which is also called purchases return day book is sued to record credit purchases returned to suppliers. Sales return journal which is also called sales return day book is used to record the credit sales returned from debtors.
Anytime money comes into the company, the cash receipts journal should be used. Special journals allow the recoding of numerous repetitive transactions in one journal in one line. Pre-transaction authorization means that transactions for certain types of accounts are authorized before their recording.
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.
The special journals that we will illustrate are examples of those found in many manually kept books, but they are not the only types used. Many firms design their specialized journals to meet their particular needs. One special journal will record cash receipts, https://www.kelleysbookkeeping.com/taxpayer-identification-number-tin/ and another will record cash payments. General journal is used to record such transactions that are not repetitive in nature and for which no special journal is maintained. The cash receipts journal is used to record all receipts of cash for any reason.
What are differences between the general and the special journals?
Entries in the Other column are posted individually to the general ledger accounts affected, and the account numbers are placed in the cash disbursements journal’s reference column. A capital Xis placed below the Other column to indicate that the column total cannot be posted to a general ledger account. Entering transactions in the general journal and posting them to the correct general ledger accounts is time consuming. In the general journal, a simple transaction requires three lines—two to list the accounts and one to describe the transaction. If the transaction affects a control account, the posting must be done twice—once to the subsidiary ledger account and once to the controlling general ledger account.
- Cash Payments Journals record transactions that involve expenditures paid with cash and involves the cash[3] Source documents are likely receipts and cheque butts.
- In special journals, each transaction is recorded in a single line designed to provide all the necessary information.
- Credit Journals record purchases or sales on credit.If the transaction is of a credit nature, you will assume that the cash will be exchanged after the exchange of the good or service.
- Entries in the Other column are posted individually to the general ledger accounts affected, and the account numbers are placed in the cash disbursements journal’s reference column.
- 11 Financial may only transact business in those states in which it is registered, or qualifies for an exemption or exclusion from registration requirements.
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.
In special journals, each transaction is recorded in a single line designed to provide all the necessary information. Special journals are only required for frequent or repetitive transactions. For example, a business concern has many transactions in which cash is received and many in which cash is paid out. In small businesses, where transactions occur infrequently, is sales tax an expense or a liability each transaction is recorded in a general journal and then posted to the related accounts in the general ledger. At the end of the period, the TOTALS only would be recorded in posted directly into the accounts listed with no journal entry necessary. The name and page of the journal from which the ledger entry came is recorded in the folio number column.
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 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.
Purchase 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.
Modern accounting systems do this type of categorization automatically. When a purchase is entered into the system, the correct journal is updated and can be accessible for review. Likewise, at the end of the accounting cycle, the journal transactions are posted to the individual ledger accounts to close the accounting period.
Each special journal is handled by a particular person, who will become familiar with the work assigned to them. Examples of such entries are adjusting entries, closing entries, transferring entries, and correcting entries. We follow strict ethical journalism practices, which includes presenting unbiased information and citing reliable, attributed resources. Depending on the size and the complexity of the accounting department, a total separation of duties may not be possible. However, not all accounting personnel should have access to the general journal.
General journal
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Definition of a Special Journal
At the end of the period, we would post the totals of $7,650 credit to cash, the $7,500 debit to accounts payable, and the $150 credit to merchandise inventory. The DR (debit) Other column would be handled a little differently as you need to look to the account column to find out where these individual amounts should be posted. In this case, we would post a $200 debit to merchandise inventory and a $300 debit to utility expense.
Notice how these two different types of entries are recorded in different journals? This system helps keeps accurate and organized records of every type of transaction, so they can be reviewed later in the accounting period. 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. This entry would then be posted to the accounts payable and merchandise inventory accounts both for $2,500. Under the periodic inventory method, the credit would be to Purchase Returns and Allowances.
