What is a special journal?
A special journal is used to record and post transactions of the same type. Special journals accumulate debits and credits of similar transactions and post amounts as column totals instead of individual amounts.
Special journals are different for different types of businesses. A business creates special journals for its most common transactions, such as sales, cash receipts, purchases, and cash payments. Special journals are: -
- Sales Journal
- Cash Receipts Journal
- Purchases Journal
- Cash Payment Journal
Sales Journal: -
Sales journal is used to record sales of inventory on credit. Sales of Inventory for cash are recorded in cash receipts journal. Sales of non-inventory assets on credit are recorded in the general journal. This account keeps track of the debtor’s balances or customer balances who purchase the items from the company and the company keeps a check whether the dues are received or not.
Cash receipts Journal: -
The cash receipts journal is used to record all transactions that include a debit of cash. Cash receipts are separated into three types: -
- Cash from credit customers in payments of their accounts.
- Cash from cash sales.
- Cash received from other sources.
It records all the cash receipts which are done in the company in the financial year. It is a specialized transaction that records the sales of the items, which are done using cash and when it is received.
Purchase Journal: -
Purchase journal is used to record all credit purchases, including those for inventory. Purchases using cash are recorded in the cash payment journal. The purchase journal helps to record all the purchases which are made on credit in the financial year. It helps to keep a check on the orders placed.
Cash Payment Journal: -
Cash payment journal also known as cash disbursement journal is used to record cash payments. It is a special journal that records the cash payments made to the creditors by the company in the financial year.
Advantages of Special Journals: -
- The special journal is designed in such a way that it is very helpful for the company to post the entries in the books of accounts. The accountant can get detailed information about the ledgers. The changes of getting the posting wrong are minimal to a greater extent.
- The transactions of the company are recorded in the special journal and each transaction can be easily traced and checked because the entries are done on an individual basis. For example, the accountant will clearly mention the name of the debtors in the Account receivable A/C so that in case of the settlement, the accountant can inform the higher authority regarding the payment which is still due with the customers.
- As the name suggests a special journal helps to improve the accounting efficiency of the company. The transaction is recorded in such a way that the double-entry system is also followed, therefore the accountant will understand the dual effect of each of them.
- The biggest advantages of the special journal are that it provides better internal control. If the accountant of the company has posted all the entries correctly then it will be very easy for the management to understand their cash or credit transactions of the year and can take a wise decision by understanding the same.
- A continued checking process is always there when it comes to posting the entries. When a posting is done it affects two ledgers and thus it is always checked before and after posting the transactions. For that reason, chances of fraud and mistakes are reduced in the company.
Disadvantages of Special Journal: -
- The special journals are very useful techniques when it comes to recording transactions, but it can be difficult for the accountant who has limited knowledge regarding the posting. The accounting entries in special cases can be very tedious for those who are not able to understand the accounting concepts and its double entries effect.
- The company may have to hire some account experts to do the task for them. Consequently, they would have to pay extra salary to the experts, and this will increase the cost to the company.
- The special journal entries are very beneficial, but it is also very time-consuming. Many small companies may not be willing to adopt this kind of practice.
- One of the disadvantages of the special journal is that it effects two ledgers. When any errors have occurred at that time it may be very difficult for the accountant to trace the erroneous transaction. The accounting treatment will be in both the ledgers; thus, it can be a challenging task for the accountant to track the error. Therefore, all the entries should be taken care of while posting.
The special journal is a specialized journal for special transactions. It gives detailed information about each and every transaction. In spite of having many advantages, the special journal has a few disadvantages which should be taken care of otherwise the utility of this accounting technique will go in vain.
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Thanks for reading.
The author, Sapna Agnihotri, is an Accounting and Human Resources Intern at Thaddeus Resource Center. Prior to Joining Thaddeus Resource Center, she worked as a teacher. A graduate in Family Finance and Consumer Science, she studied Accounting from Waukesha Technical College, and certified in QuickBooks online advance certification.