A special journal is a bookkeeping record that keeps a record of special accounts of a business. It is created for bookkeeping accounts that require special records and details to be recorded.
A special journal can be customized and formatted according to the needs of a business. It is followed by businesses with manual bookkeeping systems.
Let us discuss what is a special journal, its different types, and how it is created.
What is Special Journal?
A special journal is an accounting document that records accounting transactions for special accounts.
A journal is a documented record that keeps a record of accounting transactions. These transactions are then transferred to create a combined book of records such as a general ledger.
A special journal is a journal that will accommodate all special ledger accounts that are not recorded in the general journal. It means any special type of account can be listed in the special journal.
Therefore, a business can create any number of special journals as per definition. These journals would record specific transactions related to each category that would then be transferred to the general ledger in a summarized form.
A special journal emphasizes creating detailed records for high-volume or important ledger accounts separately. The format and structure of a special journal are similar to any general journal with a tabular form.
What is the Purpose of a Special Journal?
The foremost purpose of creating a special journal is to reduce the paperwork of general journal. A special journal would record transactions details that are otherwise omitted from the general ledger.
A business can save time and create useful accounting records by creating different types of special journals. Dividing accounting entries into several sub-journals or special journals offers several benefits to a business.
Creating special journals for specific categories helps a business in duty segregation as well. For a high-volume business, it would be impossible to record all accounting transactions accurately in a single general journal with such details.
Another key purpose of a special journal is to keep an overview of specific ledger accounts. For instance, a business can create a sales journal to keep a separate and focused record of its sales revenue.
In short, a special journal reduces the workload for the accountant and spreads the task into several sub-journals rather than recording all transactions into a single general journal.
Types of Special Journal
As mentioned earlier, a business can create any number of special journals to create specific accounting records. However, there are a few types of special journals that businesses commonly use.
- Sales Journal
- Sales Returns and Allowances Journal
- Purchases Journal
- Purchases Return and Allowances Journal
- Cash Payment or Disbursement Journal
- Cash Receipt Journal
- Bills Receivable and Payable Journals
A sales journal will create an accounting record for the sales of a business. The sales transactions would be recorded in a special journal for cash and credit sales.
Sales Returns and Allowances Journal
A complementary sub-journal to the sales journal can be created for recording sales returns or allowances offered. It would help a business understand the effectiveness of its discounts and the causes of canceled sales.
This journal will record inventory and other purchases of a business. It can record credit and cash purchases.
Purchases Return and Allowances Journal
This journal can be created to separately record purchases returned and allowances received from suppliers.
Cash Payment or Disbursement Journal
This special journal would record all cash payments of the business. These payments can be for any purpose and would record as cash payments.
Cash Receipt Journal
It will record the cash receipts of a business. A cash receipt journal and a disbursement journal can be created together to form the cash book of the business.
Bills Receivable and Payable Journals
A business can create separate accounting records for its notes or bills payable and receivables. These journals will record transactions related to credit offered and received by the business.
How to Create Special Journal?
A special journal can be created and maintained like a general journal. As it is for specific accounts, a business can add or delete any number of columns.
The general format of a special journal will look like the following table:
|Date||Transaction Reference||Details||Ledger Folio||Amount||Payer/ Payee||Account Details||Notes|
A Special journal can record important details as needed and depending on the type of special journal in use.
Here are a few key steps to creating a special journal.
The first step is to categorize the special journal columns as per requirement. Each special journal can have different types of details.
The second step is to start recording relevant special account entries into the journal. The record can be maintained in chronological order for consistency.
Each special journal account would show different subsidiary ledger account balances. It is because a special journal does not follow the rules of double-entry accounting.
Then, the account balances from subsidiary ledgers or special journals would be transferred to the general ledger. Here, the debit and credit sides of all ledger accounts would balance as it is a double-entry bookkeeping format.
Example of Special Journal
A common example of a special journal is a cash receipt journal. It records all cash receipts of a business.
A similar special journal is a cash disbursement journal that records all cash payments of a business. Both these journals form the cash book of a business.
Here is an example of a special cash receipt journal format:
|Date||Transaction Reference||Details||Ledger Folio||Amount||Payer||Account Details||Notes|
|01-07-xx||701||Sales||SF 08||$ 150||Jet Printers||Sales Revenue||Primary Sales Revenue|
|02-07-xx||702||Sales||SF 190||$ 1,000||Fine Materials||Sales Revenue||Primary Sales Revenue|
|03-07-xx||703||Sales||SF 208||$ 500||Star Co.||Sales Revenue||Primary Sales Revenue|
Advantages of Special Journal
A special journal serves many advantages to a business.
- A special journal can create accounting records for special and high-volume ledger accounts separately. It will offer an overview of these special accounts to a business at any time.
- This journal will record detailed information about each transaction that would otherwise be impossible to record in a general journal.
- It can help a business extract valuable information for analysis purposes.
- When maintained properly, a special journal can also serve as a source document.
- 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.
Disadvantages of Special Journal
A special journal also has some limitations and disadvantages for a business.
- Special journals are lengthy bookkeeping records. It is a time-consuming effort that requires special bookkeeping skills and expertise.
- 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.
Special Journal Vs General Journal
A general journal is an accounting document that records all types of ledger account transactions.
A general journal is a primary source of bookkeeping for any business. Transactions recorded in a general journal are then carried forward to the general ledger.
A general ledger will also keep detailed transaction information for all ledger accounts.
Most businesses follow the double-entry accounting rules. Therefore, it is important to maintain journals accurately. The transactions recorded in a general journal are then summed to carry forward the balances to the general ledger.
If a business does not create special journals, all special journal accounts would also be recorded in the general journal.
However, many businesses often create special journals to create special bookkeeping records.
Special Journal Vs Special Ledger
A special purpose ledger represents the summary of special purpose charts of accounts. It works on the same rules as a general ledger.
A general ledger is a summary of the chart of accounts of the general journal. These account balances are brought forward to the general ledger after validating them through the T-accounts.
Similarly, special purpose ledgers show the summary of special journal accounts. Therefore, a special journal becomes the primary or source document for the special purpose ledger.
Special purpose ledgers can also be categorized similarly to a general ledger. However, these accounts are maintained by businesses with special accounting requirements.