Definition to Special Journal
The special journal is the specialized entries of such transactions that are required to be recorded in the books in the form of journals. In this way, the financial transactions are being recorded in the proper ledgers to avoid the mismatch while finalizing the books of accounts. This is also a very good process of recording the entries since it follows a double-entry system.
This type of special journal is required in case of manual accounting. By this method, the finalization work is eased out since the accountant of the company usually takes some care to check the posting of the special journal into the proper ledgers and thus avoids the mistakes of debit and credit while doing accounting.
Types of Special Journal
Various types of special journal are explained below:
- Cash Receipt Journal: It records all the cash receipts which are done in the company in the financial year. It is a specialized transaction that records the sales of the items which are done using cash and when it is received.
- Cash Payment Journal: It records the payments which are done by using cash. It is also a special journal that records the cash payments made to the creditors by the company in the financial year.
- Purchase Journal: The purchase journal helps to record all the purchases which are made on credit in the financial year. This special journal helps to keep a check on the orders placed.
- Sales Journal: This type of journal helps to record the sales made during the year. This account keeps a track of the debtor’s balances or customer balances who purchase the items from the company and the company keeps a check whether the dues are received or not.
Examples of Special Journal
A company has recorded sales for the financial year for $4,000. The company will record the same in the sales journal which is also known as a special journal. Now while recording the sales the company will create a sales invoice in the name of the company ad it will present the same before the other party on the future date when the payment is required to be made. In the year-end when the accountant will check the books of accounts the Accounts Receivable A/c will be debited with $ 4,000 and the sales will be credited with $ 4,000
The ledger of Accounts receivables will be taken care of and all the payments, if not settled by the customers, will be settled on the given dates. Thus this helps to eliminate the efforts to check all the ledgers in case of any mismatch in the books of accounts also it provides detailed information of the debtors of the company thus making it easy for the company to rely on the special journal i.e. Sales Journal.
Advantages of Special Journal
Some of the advantages are given below:
- The special journal is designed in such a way that it is very helpful for the company to post the entries in the books of accounts. The accountant can get detailed information about the ledgers. The changes of getting the posting wrong are minimal to a greater extent.
- The transactions of the company are recorded in the special journal and each transaction can be easily traced and checked because the entries are done on an individual basis for example the accountant will clearly mention the name of the debtors in the Account receivable A/c so that in case of the settlement the accountant can inform the higher authority regarding the payment which is still due with the customers.
- As the name suggests a special journal helps to improve the accounting efficiency of the company. The transaction is recorded in such a way that the double-entry system is also followed therefore the accountant will understand the dual effect of each of them.
- The biggest advantages of the special journal are that it provides better internal control. If the accountant of the company has posted all the entries correctly then it will be very easy for the management to understand their cash or credit transactions of the year and can take a wise decision by understanding the same.
- A continued checking process is always there when it comes to posting the entries. When a posting is done it affects two ledgers and thus it is always checked before and after posting the transactions and so the chances of frauds and mistakes are reduced in the company.
Disadvantages of Special Journal
Some of the disadvantages are given below:
- The special journals are very useful techniques when it comes to recording transactions but it can be difficult for the accountant who has limited knowledge regarding the posting. The accounting entries in special cases can be very tedious for those who are not able to understand the accounting concepts and its double entries effect.
- The company may have to hire some account experts to do the task for them for that they have to pay some extra salary to the experts and this will increase the cost to the company.
- The special journal entries are very beneficial but it is also very time-consuming. Many small companies may not be willing to adopt this kind of practice.
- One of the disadvantages of the special journal is that it gives effects to two ledgers. When any errors have occurred at that time it may be very difficult for the accountant to trace the erroneous transaction. The accounting treatment will be in both the ledgers thus it can be a challenging task for the accountant to track the error. Therefore all the entries should be taken care of while posting.
The special journal is a specialized journal for special transactions. It gives a detailed information about each and every transaction. In spite of having many advantages, the special journal has a few disadvantages which should be taken care of otherwise the utility of this accounting technique will go in vain.
Nowadays, companies are more interested in purchasing accounting software which helps them posting the special accounting entries in the books of accounts and the software are designed in such a way that it gives double-entry effects also but it is also a known fact that the user of the software should also be financial and accounting literate.
This is a guide to Special Journal. Here we discuss the types and examples of a special journal along with advantages and disadvantages. You may also look at the following articles to learn more –