What are special journals?

The special journal means a journal or book in which transactions relating to a certain group are recorded as they occur in the business.

Business transactions are first recorded in a journal and then transferred to the ledger at appropriate regular intervals of time. Small organizations with a limited number of transactions can use only a single journal known as the general journal or journal proper. In large organizations where hundreds or even thousands of transactions occur each month, the use of a single journal is not adequate. Such organizations usually maintain many other journals in addition to a general journal. These journals are collectively known as special journals. Other names used for these journals are books of original entry and subdivisions of journal.

Special journals are maintained to record those business transactions that are frequent or repetitive in nature. When transaction volume in a business organization rises and a single journal becomes inadequate, it is advantageous to maintain a separate journal for all frequent or repetitive transactions such as purchases, purchases returns, sales, sales returns, cash receipts, cash payments, etc.

Types of special journals

The number of special journals used by a commercial organization depends on the nature and size of its business activities. The following special journals are commonly used in merchandising companies:

1. Purchases journal: Whenever goods are purchased on credit, they are recorded in purchases journal. So, this is a special book to keep record of only credit purchases. Other names used for this book are purchases day book, inward invoice book, or only invoice book. Read more.
2. Purchases returns and allowances journal: The goods returned by a business to their supplier for some solid reasons are recorded in this journal. Since the goods go out of the business’s possession, this book is also called the returns outward book. Read more.
3. Sales journal: Whenever goods are sold to the customers on credit, they are recorded in the sales journal. So, this is a special book to keep record of only credit sales. Other names used for this book are sales day book, outward invoice book, or only invoice book. Read more.
4. Sales returns and allowances journal: The goods returned by customers for some solid reasons are recorded in this journal. This journal is also known as the returns inward journal. Read more.
5. Cash receipts journal: All transactions that result in an inflow of cash are recorded in the cash receipts journal. Read more.
6. Cash disbursements journal: All transactions that cause an outflow of cash are recorded in the cash disbursements journal. This journal is also known as the cash payments journal. Read more.
7. Bills receivable journal: This journal is used to record bills receivable i.e., the acceptances received from debtors. Read more.
8. Bills payable journal: This journal is used to record bills payable i.e., the acceptances given to creditors. Read more.

General journal

A general journal is used to record those transactions that do not fall within the scope of the above-mentioned journals. Examples of these transactions include the purchase of fixed assets on credit, depreciation on fixed assets, expenses payable, bad debts, etc. This journal is also known as the journal proper, modern journal, principle journal, or sometimes only journal. Read more about general journal.

The basic purpose of the above journals is to provide the necessary information to draw up the ledger accounts. All transactions are posted to the ledger accounts on the basis of the information available in these journals. Therefore, these journals are also often referred to as subsidiary books of the ledger.

The subdivision of journal is summarized below:

Importance of special journals:

The special journals help journalize and make the process of recording transactions easier in an accounting system. In the daily course of a large business organization, a great number of transactions occur in a single day, and it becomes difficult to record every single transaction in the related T-account and sub-ledger. Special journals are therefore used to record these transactions from the source documents on a daily basis as they occur, and then these transactions are transferred to the general ledger as if it were a single transaction in a day. In this way, special journals make the keeping and updating of accounting records easier and less complex.

Special journals also act as monitoring tools for business organizations. These journals reduce the chances of alterations in accounting records as the entries in them are made in a chronological order.

The importance of special journals has decreased for larger companies these days. Larger businesses often use computerized accounting systems that bifurcate transactions on their own and update all the sections of the accounting record with a single entry. However, accounting software programs are expensive, and most of the smaller and medium-sized organizations may not be able to buy and maintain them. Such small and medium-sized entities opt to use special journals to organize their business transactions.