Special Journal

Special Journals 

In a typical 2-column manual accounting system, transactions are entered as debits to one (or more) account and balancing credits to one (or more) account. If you consider some recurring transactions (such as sales) that will hopefully occur many times during an accounting cycle, all this double entry can add up to a lot of work. That's where special journals come into play.

Special journals are designed as a simple way to record a single type of frequently occurring transaction. The types of special journals depends on the nature of the business, but a few types are frequently seen in businesses that rely on manual accounting procedures:

• Sales Journal
• Cash Receipts Journal
• Purchases Journal
• Cash Payments Journal

Sales Journal

Sales journals are used for recording sales of merchandise on account, aka credit sales. (Cash sales are not recorded here, they belong in the cash receipts journal.)

Since every sales entered in the sales journal will result in a debit to accounts receivable and a credit to the sales income account, it is not neccessary to repeat that information, or even both sides of the resulting journal entry in the sales journal. All that is required here is the date and amount of the sale and which customer is responsible for paying. This makes keeping the journal current very simple.

Sales Journal Examples

Consider, for example, that you make 5 credit sales transactions this month. In a 2-column manual accounting system, you would have 5 pairs of entries in your general journal that look like Figure A below.

(To see Figure A, click the A button in the flash program at the bottom of this page. This is where you'll find all the figures for this tutorial.)

That's 10 lines in your general journal. With the sales journal, however, you only have five lines as shown in Figure B below.

Posting from the Sales Journal

When you record credit sales in your sales journal, you post individual transactions to customer accounts in the accounts receivable ledger.

In your general ledger, you only need to post a single total to the Accounts Receivable and Sales accounts, as shown in Figure C.

Sales Returns and Allowances

When merchandise is sold and subsequently returned, or the seller grants an adjustment to price, this entry is recorded in the general journal.

(Remember, the sales journal is used for recording credit sales only. Sales returns are not credit sales, and do not fit into any of the special journals, so they go in the general journal.)

The debit portion of the transaction is recorded in the Sales Returns and Allowances account in the general ledger, while the credit portion is recorded in the Accounts Receivable account (as shown in Figure D below).

In the case of a cash refund, Sales Returns and Allowances is debited and Cash is credited (as shown in Figure D below). Also, since this transaction involves a cash payment, this entry would be recorded in the Cash Payments Journal.

Sales Journal Illustrations

The Sales Journal is a special journal designed to record a single type of frequently occurring transaction — in this case, credit sales. This tutorial covers the concept of the sales journal from the original transactions through the posting process.

Cash Receipts Journal

The Cash Receipts Journal is used to record sales of merchandise for cash. (Credit sales are not recorded here, they belong in the sales journal.)

All transactions in the cash receipts journal involve the receipt of cash, so you'll find a column for debiting cash (Cash DR.). There is also a debit column for sales discounts in case the transaction involves a sale that is discounted.

To balance these debits, you'll find three credit columns. Sales and Accounts Receivable are the two accounts that will mostly be involved in these transactions (besides cash, of course). The column for Other Accounts is for all other types of cash-receiving transactions that don't involve sales or accounts receivable.

See the columns available in the Cash Receipts Journal in Figure A below. (To see Figure A, click the A button in the flash program at the bottom of this page. This is where you'll find all the figures for this tutorial.)

Cash Receipts Journal Examples

Consider the following four examples for your cash receipts journal:

• Customer A sends a check for a prior sale, paying $10,357.55 and taking a $102.55 sales discount;
• You make a cash sale for $452;
• Customer B sends a check for a prior sale, paying $6,120;
• You are paid $3,000 in principal and $155 in interest on a note.

These transactions are posted to the cash receipts journal as shown in Figure A below.

Posting from the Cash Receipts Journal

The column values are posted in their own separate ways: 

• Transactions from the Other Accounts column should be posted individually in the general ledger, as shown in Figure B below. (The account number for the general ledger account is placed in the posting column of the Cash Receipts Journal.)
• Cash Sales recorded in the Cash Receipts Journal should be posted as a single Sales credit total in your general ledger, as shown in Figure C below.
• Like cash sales, sales discounts should be posted as a single Sales Discounts credit total in your general ledger, as shown in Figure C below.
• Cash should be posted as a single debit total in your general ledger, as shown in Figure D below.
• When you record cash payments towards accounts receivables, you should post individual transactions as credits to the customer accounts in the accounts receivable ledger, as shown in Figure E below.

Cash Receipts Journal Illustrations

The Cash Receipts Journal is a special journal designed to record a single type of frequently occurring transaction — in this case, cash receipts. This tutorial will cover the concept of the cash receipts journal from the original transactions through the posting process.

Purchases Journal

The Purchases journal is used for recording credit purchases such as merchandise for resale to customers, business supplies, equipment, and other such purchases. (Cash purchases are not recorded here, they belong in the cash payments journal.)

Purchases Journal Examples

In Figure A below, you'll see five credit purchase transactions posted to the Purchasing Journal. Note that each transaction reflects a credit to Accounts Payable, and a debit to one or more debit accounts depending on the transaction.
(To see Figure A, click the A button in the flash progran at the bottom of this page. This is where you'll find all the figures for this tutorial.)

Posting from the Purchasing Journal

When you record credit purchases in your Purchasing Journal, the column values are posted like so:

• Accounts Payable should be posted as a single credit total in your general ledger, as shown in Figure B.
• Purchases recorded in the journal should be posted as a single debit total in your general ledger, as shown in Figure B.
• Store Supplies and Office Supplies should be posted as single debit totals to your general ledger, as shown in Figure C.
• All other transactions in the Other Accounts column should be posted individually in the general ledger, as shown in Figure D. (The posting reference column reflects the appropriate general ledger account number.)

Purchases Returns and Allowances

When merchandise purchased is subsequently returned, or the seller grants an adjustment to price, this entry is recorded in the general journal.
(Remember, the purchases journal is used for recording credit purchases only. Purchases returns are not credit purchases, and do not fit into any of the special journals, so they go in the general journal.)
The credit portion of the transaction is recorded in the Purchases Returns and Allowances account in the general journal, while the debit portion is recorded in the Accounts Payable account (as shown in Figure E below).
In the case of a non-merchandise return or allowance, Accounts Payable is credited. The account that was credited in the original transaction is debited (as shown in Figure E below).

Purchases Journal Illustrations

The Purchases Journal is a special journal designed to record a single type of frequently occurring transaction — in this case, credit purchases. This tutorial cover the concept of the purchases journal from the original transactions through the posting process.

Cash Payments Journal

The Cash Payments Journal is used to record all cash payments made by a company. (Credit purchases are not recorded here, they belong in the purchases journal.)

All transactions in the cash payments journal involve the disbursement of cash, so you'll find a column for crediting cash (Cash CR.). There is also a credit column for purchases discounts in case the transaction involves a discounted purchase.

To balance these credits, you'll find two debit columns. Accounts Payable is the account most likely to be involved in these transactions (besides cash). The column for Other Accounts is for all other types of cash-payment transactions that don't involve accounts payable.

See the columns available in the Cash Payments Journal in Figure A below. (To see Figure A, click the A button in the flash program at the bottom of this page. This is where you'll find all the figures for this tutorial.)

Cash Payments Journal Examples

Consider the following transactions for your cash payments journal:

• Paid $455 for office equipment;
• Paid $1,200 for purchases;
• Paid $2,000 to Supplier A against accounts payable, taking a purchases discount of $225;
• Paid $1,125 for purchases;
• Paid $765.50 to Supplier B against accounts payable.

These transactions are posted in the cash payments journal as shown in Figure A below.

Posting from the Cash Payments Journal

The column values are posted in their own separate ways:

• Transactions from the Other Accounts column should be posted individually in the general ledger, as shown in Figure B and Figure C below. (The account number for the general ledger account is placed in the posting column of the Cash Payments Journal.)
• NOTE: You could combine the two Purchases entries in Figure C below into a single general ledger posting, but keeping them as separate entries will make it easier later on in case you have to hunt down any difficulties (such as balancing an unbalanced trial balance).
• When you record cash payments against accounts payable, you should post individual transactions as debits to the supplier accounts in the accounts payable ledger. The accounts payable total at month's end is then posted in the general ledger, as shown in Figure D below.
• Purchases discounts should be posted as a single Purchases Discounts credit total in your general ledger, as shown in Figure E below. (These should also be posted as credits to the corresponding supplier account in the accounts payable ledger).
• Cash should be posted as a single credit total in your general ledger, as shown in Figure E below.

Cash Payments Journal Illustrations

The Cash Payments Journal is a special journal designed to record a single type of frequently occurring transaction — in this case, cash payments. This tutorial cover the concept of the cash payments journal from the original transactions through the posting process.

Although companies create special journals for other types of repetitive transactions, almost all merchandising companies use special journals for sales, purchases, cash receipts, and cash disbursements.

Sales journal. The sales journal lists all credit sales made to customers. Sales returns and cash sales are not recorded in this journal. Entries in the sales journal typically include the date, invoice number, customer name, and amount. Invoices are the source documents that provide this information. 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.

Notice the dates and posting references applied to each entry in the illustration to the right. 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.

Many companies use a multi-column (columnar) sales journal that provides separate columns for specific sales accounts and for sales tax payable. Each line in a multi-column journal must contain equal debits and credits. For example, the entries in the sales journal to the right appear below in a multi-column sales journal that tracks hardware sales, plumbing sales, wire sales, and sales tax payable. Individual entries are still posted daily to the accounts receivable subsidiary ledger accounts, and each column total is posted at the end of the accounting period to the appropriate general ledger account.

Purchases journal. The purchases journal lists all credit purchases of merchandise. Entries in this journal usually include the date of the entry, the name of the supplier, and the amount of the transaction. Some companies include columns to identify the invoice date and credit terms, thereby making the purchases journal a tool that helps the companies take advantage of discounts just before they expire. The purchases journal to the right has only one column for recording transaction amounts. Each entry increases (debits) purchases and increases (credits) accounts payable.

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. At the end of the accounting period, the column total is posted to purchases and accounts payable in the general ledger. Account numbers are placed in parentheses below the column to indicate that the total has been posted.

Companies that frequently make credit purchases of items other than merchandise use a multi-column purchases journal. For example, the purchases journal below includes columns for supplies and equipment. Of course, every purchase in the journal below must credit accounts payable; equipment purchased with a note payable or supplies purchased with cash would not be recorded in this journal. Individual entries are still posted daily to the accounts payable subsidiary ledger accounts, and each column total is posted at the end of the accounting period to the appropriate general ledger account.

Cash receipts journal. Transactions that increase cash are recorded in a multi-column cash receipts journal. If sales discounts are offered to customers, the journal includes a separate debit column for sales discounts. Credit columns for accounts receivable and for sales are normally present, but companies that frequently receive cash from other, specific sources use additional columns to record those types of cash receipts. In addition, the cash receipts journal includes a column named Other, which is used to record various types of cash receipts that occur infrequently and therefore do not warrant a separate column. For example, cash receipts from capital investments, bank loans, and interest revenues are generally recorded in the Other column. However, a company that provides consumer loans and receives interest payments from many customers would probably include a separate column for interest revenue. Whenever a credit entry affects accounts receivable or appears in the Other column, the specific account is identified in the column named Account.

Accounts receivable payments are posted daily to the individual subsidiary ledger accounts, and customer account numbers (or check marks if the customer accounts are not numbered) are placed in the cash receipts journal's reference column. At the end of the accounting period, each column total is posted to the general ledger account listed at the top of the column, and the account number is placed in parentheses below the total. 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.