WHAT ARE THE VARIOUS SPECIAL JOURNALS USED IN BUSINESS? EXPLAIN EACH.
The four main special journals are the sales journal, purchases journal, cash disbursements journal, and cash receipts journal.
Special journals are used in accounting systems to journalize transactions and make the process of documenting transactions easier. A vast number of transactions occur in a single day in any large company organization, making it difficult to record every single transaction in the appropriate T-account and sub-ledger.
SALES JOURNAL
The sales journal (also known as the sales book or sales day book) is a unique journal used to keep track of all credit sales. Every entry in the sales journal is effectively a debit to the accounts receivable account and a credit to the sales account. All cash sales are kept in a separate diary called the cash receipts journal.
Here, the term sales refers to the sale of only those goods or merchandise in which the business normally deals. The sale of used or outdated assets (such as old plant, machinery, equipment and newspapers etc.) are not recorded in sales journal. These transactions are entered in general journal (also known as journal proper).
PURCHASE JOURNAL
A purchase journal (also known as a purchase book or a buy day book) is a specific journal that businesses use to keep track of all credit purchases. All cash purchases go into a separate journal called a cash payment journal or a cash disbursements journal.
The invoice provided by the supplier (or seller) is known as the purchase invoice or inward invoice. It usually provides the following information:
The invoice number for the goods purchased.
The date on which the invoice is prepared.
The name, address, email, and phone number of both buyer and seller.
A proper description of merchandise i.e., quantity, quality, rates and total amount of the merchandise purchased.
The details about terms and conditions of sale.
CASH DISBURSEMENT
The cash disbursements journal (also known as the cash payments journal) is a unique journal used by a company to track all cash withdrawals. A cash disbursements notebook, in other words, is used to record every transaction that involves a credit to cash. A separate diary, known as the cash receipts journal, is used to track all financial inflows.
The usual examples of cash outflows in a business are given below:
Payment of cash for cash purchases.
Payment of cash for previous credit purchases i.,e. payment to accounts payable or creditors
Payment of cash for various expenses like rent, advertisement, carriage, wages and salaries etc.
Payment of cash for the purchase of a tangible or intangible asset.
Cash refunds for goods returned by customers.
Payment of cash for donations, charities and Zakat etc.
CASH RECEIPTS JOURNAL
The cash receipts diary keeps track of all of a company's cash inflows. To put it another way, this diary is utilized to keep track of all cash that enters the business. Another diary, known as the cash disbursements journal or cash payments journal, is used to record all financial outflows.
For making entries in a cash receipts journal, all inflows of cash are can be divided into the following three categories:
Receipt of cash from cash sales
Receipt of cash from credit customers or receivables and
Receipt of cash from other sources