It is much easier and simple to summarize all sales transactions during a week, for example, and transfer the total amount to general records. All journals, other than the general journal, in a company that is used to record all transactions of the similar types are known as Special Journals. It helps the accountant to record and manage all different business activities in an organized way. Let us return to the sales journal, shown in
Figure 7.17 that includes information about Baker Co. as well
as other companies with whom the company does business.

For a
refresher on perpetual versus periodic and related accounts such as
freight-in, please refer to
Merchandising Transactions. Examples of special journals are the cash receipts journal, cash disbursements journal, payroll journal, purchases journal, and sales journal. Entries in the sales journal typically include the date, invoice number, customer name, and amount. In its most basic form, a sales journal has only one column for recording transaction amounts. Each entry increases (debits) accounts receivable and increases (credits) sales.

Contents

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 journals in addition to general journal. Other names used for special journals are books of original entry and subdivision of journal. The ledger of Accounts receivables will be taken care of and all the payments, if not settled by the customers, will be settled on the given dates.

Accounts Receivable and accounts payable are examples of Subsidiary journals. 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. (Figure)Sandren & Co. purchased inventory on credit from Acto Supply Co. for $4,000. Pre-transaction authorization means that transactions for certain types of accounts are authorized before their recording. The name and page of the journal from which the ledger entry came is recorded in the folio number column. A general journal is where business transactions and events are first recorded and, for that reason, it is often called a “book of first entry”.

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The total amounts in these journals are periodically transferred to the general ledger in summary form. Transactions are recorded in special journals in chronological order, making it easier to research transactions. The importance of special journals has decreased for larger companies these days.

Our mission is to empower readers with the most factual and reliable financial information possible to help them make informed decisions for their individual needs. Our team of reviewers are established professionals with decades of experience in areas of personal finance and hold many advanced degrees and certifications. At Finance Strategists, we partner with financial experts to ensure the accuracy of our financial content. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years.

Importance of Special Journals:

One example of a special journal is the sales journal which is used exclusively for a company’s sales of merchandise to customers that are allowed to pay at a future date. The sales journal will have only one column in which to enter the amount of each sales invoice. At the end of the month the total of the column is debited to Accounts Receivable and credited to Sales. Throughout the month, the individual sales invoices will be posted to each customer’s record found in the company’s subsidiary ledger for Accounts Receivable.

• In large organizations where hundreds or even thousands of transactions occur each month, the use of a single journal is not adequate.
• This includes both debits and credits and allows for an accurate reflection of the company’s financial position.
• The total amounts in these journals are periodically transferred to the general ledger in summary form.
• Instead, transactions can be recorded in special
  journals and totals can then be posted to subsidiary ledgers and then general
  ledger.
• Notice how these two different types of entries are recorded in different journals?
• For example, a merchandise purchase is recorded on a single line that registers credit to the supplier’s account, the supplier’s name, the date and the amount, and any other desired information.

Also at the end of the month,
the total debit in the cost of goods sold column and the total
credit to the merchandise inventory column would be posted to their
respective general ledger accounts. The sales journal is used to record sales on account (meaning
sales on credit or credit sale). Selling on credit always requires
a debit to Accounts Receivable and a credit to Sales. Because every
credit sales transaction is recorded in the same way, recording all
of those transactions in one place simplifies the accounting
process.

Companies using a perpetual inventory system also record a second entry for a sale with a debit to cost of goods sold and a credit to inventory. Many companies enter only purchases of inventory on account in
the purchases journal. Some companies also use it to record
purchases of other supplies on account.

In large businesses, where transactions of various categories occur hundreds or thousands of times each month, it is inconvenient to record them in the general journal. Any accounts used in the Other Accounts column must be entered
separately in the general ledger to the appropriate account. Figure 7.25 shows how the refund would be posted to the
utilities expense account in the general ledger. What other questions can be answered through the analysis of information gathered by the accounting information system? An accounting information system should provide the information needed for a business to meet its goals. Gearhead will want to know its financial position, results of operations, and cash flows.

How many types of special journals are there?

Special journals are journals that an organization maintains to record their business transactions that are frequent or repetitive in nature. The transactions would be posted in chronological order in the
sales journal. As you can see, the first transaction is posted to
Baker Co., the second one to Alpha Co., then Tau Inc., and then
another to Baker Co. On the date each transaction is posted in the
sales Accounting Special Journals journal, the appropriate information would be posted in the
subsidiary ledger for each of the customers. As an example, on
January 3, amounts related to invoices and are posted
to Baker’s and Alpha’s accounts, respectively, in the appropriate
subsidiary ledger. At the end of the month, the total of $2,775
would be posted to the Accounts Receivable control account in the
general ledger.