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The sales invoice number is entered so the bookkeeper could look up the sales invoice and assist the customer. One benefit of using special journals is that one person can work with this journal while someone else works with a different special journal. Such journals allow a company to record accounting information
and generate financial statements.

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Each general journal is made up of daily entries which are summarized at the end of the month to post them in special journals. The ledger accounts where these postings are recorded differ for various types of special journals. Transactions recorded in special journals are subject to pre-transaction authorization. Entries in the sales journal typically include the date, invoice number, customer name, and amount. 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.

Figure 7.25 shows how the refund would be posted to the utilities expense account in the general ledger. Table 7.1 summarizes the typical transactions in the special
journals previously illustrated. A general journal represents all accounts except the specialty accounts.

• Companies using a perpetual inventory system also record a second entry for a sale with a debit to cost of goods sold and a credit to inventory.
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• It normally includes entries for adjustments like accruals and prepayments, correction of errors, bad and doubtful debts, depreciation, writing down of inventory and sale and purchase of non-current assets.

General journal is also a book of prime entry that is used to record all other transactions which are not recorded in the special journals and cash book. It normally includes entries for adjustments like accruals and prepayments, correction of errors, bad and doubtful debts, depreciation, writing down of inventory and sale and purchase of non-current assets. All the transactions in general journal are recorded in form of double entry.

Reducing Balance Method for Calculating Depreciation

In the accounts payable subsidiary ledger, each vendor (the person or company from whom you purchased inventory or other items) has an account that shows the details of all transactions. The final balance indicated on each subsidiary purchases journal shows the amount the company owes ABC and XYZ. Most companies have four special journals, but there can be more depending on the business needs.

• Special journals are maintained by medium and large businesses where numerous transactions of similar nature occur in a single day and it becomes difficult to record all those transaction by a single bookkeeper in one journal.
• A cash receipt journal and a disbursement journal can be created together to form the cash book of the business.
• Entries in this journal usually include the date of the entry, the name of the supplier, and the amount of the transaction.
• 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.

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 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. The purchase from Gus Grass would be recorded in the accounts payable subsidiary ledger and the total would be recorded at the end on the period by posting directly to merchandise inventory and accounts payable. If the transaction does not involve cash, it will be recorded in
one of the other special journals. If it is a credit sale (also
known as a sale on account), it is recorded in the sales journal.

Main distinctions between Financial and Management Accounting

The articles and research support materials available on this site are educational and are not intended to be investment or tax advice. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Entries that are not repetitive are recorded in the general journal. Examples of such entries are adjusting entries, closing entries, transferring entries, and correcting entries. Several years ago, Traeder and her husband were called to the home of a friend whose former spouse had just ended their life with a gun. Traeder and her husband have guns in their Wausau home and they are locked up.

Using General Ledger (Control) Accounts

Over 12 months, the reporting team obtained records for all but one county in Wisconsin. Special purpose ledgers can also be categorized similarly to a general ledger. However, these accounts are maintained by businesses with special accounting requirements.

The benefits of using a special journal instead of the general journal for the repetitive transactions have been eliminated with today’s inexpensive yet powerful accounting software. For example, when a sales invoice is prepared by using accounting software, both the general ledger and subsidiary accounts will be updated instantly and accurately. A similar special journal is a cash disbursement journal that records all cash payments of a business.

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For example, assume customer John Smith charged an item for $100 on
June 1. It also includes creating subsidiary ledger accounts and the allocation of account titles, numbers, etc. Adopting special journals means recording business transactions can be entrusted to several employees, similar to the division of labor that increases the efficiency of bookkeepers or accountants.

Cash Payment or Disbursement Journal

Instead of having just one general journal, companies group
transactions of the same kind together and record them in
special journals rather than in the general
journal. This makes it easier and more efficient to find a specific
type of transaction and speeds up the process of posting these
transactions. In each special journal, all transactions are totaled
at the end of the month, and these totals are posted to the general
ledger. In addition, instead of one person entering all of the
transactions in all of the journals, companies often assign a given
special journal’s entries to one person. The relationship between
the special journals, the general journal, and the general ledger
can be seen in
Figure 7.8. Special journals handle specific transactions such as cash receipts or sales.

Such journals allow a company to record accounting information and generate financial statements. The data also provides management with the information needed to make sound business decisions. For example, subsidiary ledgers, such as the accounts receivable ledger, provide data about the aging and collectability of receivables. Thus, the proper design, implementation, and maintenance of the accounting information system are vital to a company’s sustainability. Notice how these two different types of entries are recorded in different journals? This system helps keeps accurate and organized records of every type of transaction, so they can be reviewed later in the accounting period.

Therefore, a special journal becomes the primary or source document for the special purpose ledger. 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. 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. Using the reference information, if anyone had a question about this entry, he or she would go to the sales journal, page 26, transactions #45321 and #45324.

Paying bills is recorded in the cash disbursements journal
(Figure
7.11) and is always a debit to Accounts Payable (or another
payable or expense) and a credit to Cash. A general journal is a commonly used form of recording financial transactions. The specialty journal also provides several advantages to a business.