Business transactions are first recorded in a journal and then transferred to ledger at appropriate regular intervals of time. Small organizations with limited number of transactions can use only a single journal known as general journal or journal proper. 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. These journals are collectively known as special journals. Other names used for special journals are books of original entry and subdivision of journal.
Special journals are journals that an organization maintains to record their business transactions that are frequent or repetitive in nature. When transaction volume in a business organization rises and a single journal becomes inadequate, it is advantageous to maintain a separate journal for all frequent or repetitive transactions such as purchases, purchases returns, sales, sales returns, cash receipts and cash payments etc.
Types of special journals
The number of special journals used by a business organization depends on its nature and size. The following journals are commonly used in merchandising companies:
- Purchases journal
- Purchases returns and allowances journal
- Sales journal
- Sales returns and allowances journal
- Cash receipts journal
- Cash payments or disbursements journal
- Bills receivable journal
- Bills payable journal
- Journal proper or general journal
Importance of Special Journals:
The special journals are used to journalize and make the process of recording transactions easier in an accounting system. 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.
Special Journals also act as monitoring tools for business organizations. These journals reduce the chances of alterations in accounting records as the entries in them are made in a chronological order.
The importance of special journals has decreased for larger companies these days. Larger businesses, often use computerized accounting systems which bifurcate transactions on their own and update all the sections of the accounting record with only a single entry of transaction. However, accounting software programs are expensive and most of the smaller and medium-sized organizations may not afford to buy and maintain them. Such small and medium size entities opt to use special journals to organize their business transactions.