Difference Between General Journal And Special Journal

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. Entering transactions in the general journal and posting them to the correct general ledger accounts is time consuming. In the general journal, Accounting Special Journals 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. 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.

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• 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.
• A sale of items on credit would also be entered in the sales journal with a corresponding debit to accounts receivable and a corresponding credit to sales.
• There is also a
  single column for the debit to Cost of Goods Sold and the credit to
  Merchandise Inventory, though again, we need to post to both of
  those.

The total of all of the cash disbursements for the month would
be recorded in the general ledger Cash account (Figure
7.27) as follows. Note that the information for both the cash
receipts journal and the cash disbursements journal are recorded in
the general ledger Cash account. Paying bills is recorded in the cash disbursements journal ((Figure)) and is always a debit to Accounts Payable (or another payable or expense) and a credit to Cash.

What are the 4 books of accounts?

We would
enter these four types of transactions into their own journals,
respectively, rather than in the general journal. Thus, in addition
to the general journal, we also have the sales journal, cash
receipts journal, purchases journal, and cash disbursements
journals. When the customer pays the amount owed, (generally using a
check), bookkeepers use another shortcut to record its receipt. The
cash receipts journal is used to record all receipts of cash
(recorded by a debit to Cash). In the preceding example, if Baker
Co. paid the $1,450 owed, there would be a debit to Cash for $1,450
and a credit to Accounts Receivable. A notation would be made in
the reference column to indicate the payment had been posted to
Baker Co.’s accounts receivable subsidiary ledger.

• Because every
  credit sales transaction is recorded in the same way, recording all
  of those transactions in one place simplifies the accounting
  process.
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• It is done as it makes it easy for an accountant to track transactions of the same nature.
• Most companies have four special journals, but there can be more depending on the business needs.
• Special journals handle specific transactions such as cash receipts or sales.

In the daily course of any large business organization, great number of transactions occurs 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 was a single transaction in a day. In this way, special journals make the recording and maintaining of accounting records easier and less complex. If you pay cash (usually by writing a check), for any reason, even if it is only a part of the transaction, the entire transaction is recorded in the cash disbursements journal. Special journals handle specific transactions such as cash receipts or sales.

Fact Checked

Special journal is a journal that is used to record similar types of transactions. Special Journals Sales are used to record transaction of sales and cash receipt journal are used to record transaction of cash receipt against sales. Special journals are generally used for those transactions that take place frequently in the business. It is not really useful in those companies where the number of transactions is not large. At the end of the month, we would post the totals from the sales
journal to the general ledger (Figure
7.19). (Figure)Match the special journal you would use to record the following transactions.

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What Does Special Journal Mean?

A specialty journal will only record the business transactions that are related to that particular journal itself. The four commonly used specialty journals are sales journal, purchases journal, cash receipts journal, and cash payments journal. The company can have more specialty journals, but these four will include the bulk of business transactions. In the cash receipts journal, the credit can be to Accounts
Receivable when a customer pays on an account, or Sales, in the
case of a cash sale, or to some other account when cash is received
for other reasons. For example, if we overpaid our electric bill,
we could get a refund check in the mail.

• For illustrative purposes, the following discussion is based on a manual accounting system.
• For example, the purchases journal below includes columns for supplies and equipment.
• We would use the cash
  receipts journal because we are receiving cash, but the credit
  would be to our Utility Expense account.
• Special journals mostly deal with subsidiary accounts but this is not a rule.
• The final balance indicated on each subsidiary purchases journal shows the amount the company owes ABC and XYZ.

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. The numbers in the general ledger would add up to zero if you did that, but it’s not the right way to handle things. To maintain proper internal controls, this transaction should be treated as a whole, documented in the cash receipts log, and tied to a single invoice number and date.

Subsidiary Ledgers

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.

• Under the periodic inventory method, the July 6 shipping costs would go to a Transportation In account and the July 25 discount would go to Purchases Discounts.
• At the end of the month, the total of $2,775
  would be posted to the Accounts Receivable control account in the
  general ledger.
• General journals are used for initial record keeping of all business transactions except for the ones that will be included in the specialty journal.
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• Likewise, external users want this data (balance sheet, income statement, and statement of cash flows) to make decisions such as whether or not to extend credit to Gearhead.
• 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.
• However, accounting software programs are expensive and most of the smaller and medium-sized organizations may not afford to buy and maintain them.

If it is a credit purchase (also known as a purchase on account), it is recorded in the purchases journal. General ledger may not be able to maintain all individual transactions of a company. This is especially true in large organizations where there may be thousands of transactions each day. In this article, we will discuss the most common types of subsidiary ledgers. The special journals are used to journalize and make the process of recording transactions easier in an accounting system.