General and special journals are primary bookkeeping documents of a business. Both these documents are used by businesses for similar purposes.
A general journal is used more commonly by businesses either with a manual or digitized bookkeeping system. A special journal is created for specific accounts by some businesses when they require detailed records.
Let us discuss what are the general and special journals, how do they work, and their key differences.
What is General Journal?
A general journal is the primary bookkeeping document of a business that records all accounting transactions.
It is a source document that keeps a record of all the financial transactions of a business. Each transaction is categorized into a specific category called a ledger account.
A general ledger can have several types of accounts. Commonly used general journal accounts are sales revenue, interest expense, depreciation, receivables, payables, etc.
It is a chronological record of financial transactions of a business. Each transaction is recorded with details including the transaction date, amount, type, description, counter-party, and so on.
A general journal follows the double-entry bookkeeping system usually. It means each transaction would affect at least two ledger accounts. However, some businesses may use the single-entry bookkeeping method as well for simplicity.
What is a Special Journal?
A special or specialty journal is an accounting document that records financial transactions of special ledger accounts.
There are four major special types of journals:
- Cash receipt journal
- Cash payment journal
- Purchases journal
- Sales journal
These journals record specific transactions with extended details that cannot be recorded in the general journal. Although these are four broad categories, a business can create any number of specialty journals.
A special journal will usually record details that are otherwise not recorded in the general journal.
It does not follow the double-entry bookkeeping rules. However, when maintained accurately, it can be used to record general ledger entries as well.
How Does It Work? – General Journal Vs Special Journal
A general journal usually follows the double-entry accounting rules. It means each transaction would require at least two ledger accounts.
The broader categories of the general journal accounts include sales revenue, COGS, admin expenses, cash, inventory, and debt.
Each journal account can be further divided into a subsidiary or sub-journal account. By following the double-entry bookkeeping method, the general journal accounts should remain balanced at any given time.
A trial balance and adjusting entries can reconcile the journal account balances. These are common accounting practices that help create the general ledger.
It means a general journal acts as a primary bookkeeping document that provides essential accounting data for the preparation of the ledger book. That in turn, offers necessary data for the preparation of financial statements.
Unlike the general journal, a specialty journal is not a mandatory document for all businesses. It is often created when businesses require special information on specific accounts.
Once a business creates a special journal, it can record all relevant transactions in that document. Each transaction can be recorded with full details including the transaction date, amount, type, and so on.
The working mechanism of both types of journals is similar. The key difference is that usually, a general journal follows double-entry bookkeeping while the special journal does not.
How to Create it? – General Journal Vs Special Journal
A general journal comes with fewer columns than a special journal. Specialty journals are created to record more transactions details.
The general process of creating these journals is similar. Both take similar approaches to recording bookkeeping transactions chronologically.
Here are a few key steps in the process.
STEP 01:
The first step is to create the format of the journal. It also includes creating subsidiary ledger accounts and the allocation of account titles, numbers, etc.
STEP 02:
The second step for the general journal is to record the transaction and identify at least two accounts that would be affected. It means for every transaction the total of the debit and credit sides will be equal in the general journal accounts.
The specialty journal will record each transaction chronologically. It may affect one or more accounts. However, it would often have unbalanced debit and credit sides.
STEP 03:
At the end of the accounting period, the journal account balances would be transferred to the general ledger.
A general ledger is the summary of journal accounts. Similarly, the account balances from the special journal would also be transferred to the general ledger.
STEP 04:
In the last step, the general ledger balances would be used as the input information for preparing financial statements.
Types and Formats
A general journal represents all accounts except the specialty accounts. Therefore, there is only one type of general journal in use commonly.
The format of the general journal is simply to create columns for each input data set. Usually, a general journal will have the following information:
- Transaction Date
- Transaction Details
- Account title
- Amount
- Description Notes
A general journal can have different journal accounts. Some commonly used general journal accounts include:
- Inventory
- Accounts Receivable
- Accounts Payable
- Equipment
- Interest Income and Expense
A special journal can be created for different journal accounts. Each account would represent a different type of special journal.
Commonly used special journals include:
- Cash Payment or Disbursement Journal
- Cash Receipt Journal
- Bills Receivable and Payable Journals
- Sales Journal
- Sales Returns and Allowances Journal
- Purchases Journal
- Purchases Return and Allowances Journal
The format of both journals is similar. However, a specialty journal contains more columns usually than a general journal.
| Date | Transaction Reference | Details | Ledger Folio | Amount | Payer/ Payee | Account Details | Notes |
Advantages and Disadvantages
A general journal is a commonly used form of recording financial transactions. The specialty journal also provides several advantages to a business.
Pros of using a general journal include:
- It is a primary source of accounting data for any business.
- It organizes the bookkeeping tasks of a business.
- It is used to provide source information for the general ledger that is eventually used for creating financial statements.
- It offers useful input data for managing the operational efficiency of a business.
Similarly, a special journal comes with several benefits including:
- It offers informed stored separately for specialty bookkeeping accounts of a business.
- It records specific details about a special account that are usually omitted from a general journal.
- For high-volume businesses, the special journal will help in the segregation of accounting duties. It will create a consistent accounting record of the business and increase its accounting efficiency.
- The bookkeeping data recorded in a special journal also move forward to the general ledger. It means it complements the general journal for bookkeeping purposes.
Here are a few disadvantages of a general journal:
- It is a time-consuming and tedious task.
- It is often used by businesses having manual bookkeeping.
- It requires bookkeeping skills and expertise.
- Without using a digital system or software, it is difficult to extract valuable information.
- Removing errors and omissions from a general journal can be difficult.
Some limitations of a special journal include:
- Special journals are useful for businesses following manual bookkeeping and accounting practices. Most modern businesses follow accounting software that does not require special journals.
- Special journals cannot be used as source documents unless maintained accurately.
- A business recording general ledger entries from the special journals would find it hard to trace and eliminate bookkeeping errors.
- A business may need to assign several bookkeepers to maintain different types of special journals if it follows high-volume transactions.
General Journal Vs Special Journal – Key Differences and Similarities
Both types of journals offer useful bookkeeping data and serve similar purposes.
A general journal includes all types of bookkeeping accounts except specialty accounts. It is the primary source of bookkeeping and businesses must keep it either manually or using a digital log.
On the other hand, a specialty journal is not a mandatory bookkeeping document. It is optional for businesses that require detailed information on specific journal accounts.
A general journal works on the double-entry bookkeeping rules. It means its debit and credit balances should always be equal.
A specialty journal can follow the double-entry or single-entry bookkeeping rules. Also, the debit and credit balances for a specialty journal account would not show equal balances until forwarded to the general ledger.
Both types of journals act as the primary source documents for the general ledger. A general ledger summarizes all bookkeeping accounts maintained by a business.
The general format and presentation of these journals are also similar. A business can add different columns and details in a specialty journal. Similarly, any details can be recorded in a general journal, however, most businesses avoid it for complexity.
Eventually, all types of journals provide input bookkeeping data for the preparation of financial statements. Thus, both these journals complement each other rather than offering contrasting data.
