Definition
The financial accounting term special journals refers to a series of dedicated documents used by smaller businesses to chronologically record transactions before posting to the general ledger. Typically, these special journals include the following categories: cash receipts, credit sales, purchases on account, and cash payments.
Explanation
While larger companies will rely on sophisticated accounting applications, smaller businesses may still use physical journals to record transactions prior to posting to the company's accounting ledgers. Journal entries are chronological lists of debits and credits to accounts, along with a description of the transaction. Each entry in a journal is comprised of four parts:
Date of the transaction or event
Account to be debited
Account to be credited
Brief explanation of the transaction or event
Specialized journals provide businesses with more granularity than a general journal, and typically consist of two broad categories of sales and expenses. Within these two categories, a company might utilize the following special journals:
Cash Receipts: used to record transactions involving cash received by the company. This could involve a check or currency received by the business. The double entry accounting system would call for a debit to cash and a corresponding credit entry to sales revenue.
Credit Sales: used to record transactions involving the sales of merchandise or services on account. This could involve a sale made on credit, with a future promise to pay. The double entry accounting system would call for a debit to accounts receivable and a corresponding credit entry to sales revenue.
Purchases on Account: used to record transactions involving a purchase by the company on account. This might involve the receipt of an invoice from a supplier, with payment due on a future date. The double entry accounting system would call for a debit to the expense account and a corresponding credit entry to accounts payable.
Cash Payments: used to record transactions involving the payment by the company for the purchase of goods or services. The double entry accounting system would call for a debit to the expense account and a corresponding credit entry to cash.
Journal entries are eventually posted to the general ledger as part of the accounting cycle.
Example
On July 1st, 20XX, Company A purchases $250,000 in transformers from its supplier Company XYZ, payable in 60 days. The following entry would be made in Company A's credit sales journal.
| Date | Account Description | Account Number | Debit | Credit |
| 7/01/20XX | Transformers | 368 | 250,000 | |
| Accounts Payable | 232 | 250,000 | ||
| Purchase of $250,000 in transformers from Company XYZ, payable in 60 days. | ||||
Related Terms
double entry accounting, events and transactions, general ledger, journalization, accounting cycle
