In small business concerns where transactions occur very few, each transaction is recorded in general journal and then posted to the related accounts in the general ledger. The use of a single journal is satisfactory for small business enterprises where the transaction volume is usually small. In large business concerns where transactions of various categories occur by the hundreds or thousands or more monthly, it is found inconvenient to record them by means of entries in the general journal and sometime it becomes impossible for one book-keeper/accountant to journalize all the transactions of business concern in one journal. To overcome this problem, the journal is divided into sub-journals called “special journals”. Each special journal is designed to record the transactions of a specific nature.
Special journals are required only for the types of transactions that occur frequently or of repetitive nature. For example, a business concern has many transactions in which cash is received and many in which cash is paid out. One special journal will be used for recording cash receipts and another for recording cash payments.
Types/kinds of special journal
The number of special journals used by a business concern depends upon the size and need of a particular enterprise. We shall discuss six commonly used special journals. These are:
- Purchases journal
- Purchases returns and allowances journal
- Sales journal
- Sales returns and allowances journal
- Cash receipt journal
- Cash payment journal
Entries that are not of repetitive nature are recorded in general journal. Examples of such entries are adjusting entries, closing entries, transferring entries and correcting entries etc.