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What is a special journal?

what is a special journal

Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching. After almost a decade of experience in public accounting, he created MyAccountingCourse.com to help people learn accounting & finance, pass the CPA exam, and start their career. Take self-paced courses to master the fundamentals of finance and connect with like-minded individuals. Someone on our team will connect you with a financial professional in our network holding the correct designation and expertise.

We may earn a commission when you click on a link or make a purchase through the links on our site. All of our content is based on objective analysis, and the opinions are our own. If a particular transaction does not fit into one of the above groups, it is recorded in the general journal. My Accounting Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers.

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.

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.

Each day, individual sales journal entries are posted to the accounts receivable subsidiary ledger accounts so that customer balances remain current. Customer account numbers (or check marks if customer accounts are simply kept in alphabetical order) are placed in the sales journal’s reference column to indicate that the entries have been posted. At the end of the accounting period, the column total is posted to the accounts receivable and sales accounts in the general ledger. Account numbers are placed in parentheses below the column to indicate that the total has been posted. Each day, individual entries are posted to the accounts payable subsidiary ledger accounts. Creditor account numbers (or check marks if the creditor accounts are not numbered) are placed in the purchases journal’s reference column to indicate that the entries have been posted.

  1. There are three types of special journals – the sales journal, the purchases journal and the cash receipts journal.
  2. Companies that frequently make credit purchases of items other than merchandise use a multi‐column purchases journal.
  3. The number of the ledger account to which the journal entry was posted is recorded in the folio number column of the journal.
  4. Purchases Journals record transactions that involve purchases purely on credit.[2] Source documents are invoices.
  5. Special journals handle specific transactions such as cash receipts or sales.

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.

What Does Special Journal Mean?

The cash receipts journal contains credit transactions while it is debited with debit transactions. The accounts receivable ledger account is credited with these amounts. These journals are mostly used to accumulate data relating to transactions that are repetitive in nature.

what is a special journal

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, whats the difference between a sales order and an invoice 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.

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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.

what is a special journal

Discount allowed is an expense as the discount allowed is the cost to the seller of obtaining an inflow of cash from a debtor weeks earlier than would be the case. Choose credit sales journal if this stock is then on-sold to customers who will pay later. Collectively, all these accounts that are to be paid to us by our customers are known as assets. In addition to four columns used in above format of general journal, sometime a posting reference column is also used to record the page number particular account in ledger. This column is helpful to locate a particular account from the ledger book. In a computerized accounting system, this column is used to enter account number in the company’s general ledger.

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.

Special journals

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.

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.bookkeeping-reviews.com/you-need-millennials-heres-how-to-attract-hire-and/ 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.

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.

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.

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