Under double entry system there are mainly 7 different types of journal in accounting. Transactions are primarily recorded in journal and there after posted to ledger. It is difficult to find out effects and information relating to transaction if all the transactions are recorded in a single journal.
Recording of all transactions in one general journal is a time consuming, laborious and troublesome task. That is why in modem times the use of many journals instead of one journal has been introduced in almost all business concerns specially the medium and large size business concerns.
For convenient keeping of accounts, maintaining more than one special journal according to nature of transactions instead of one journal is called classification of journal. The transactions of same nature are recorded in a special journal. These are termed as daily journal, subsidiary journal or special journal.
Most large size business concerns record particular transactions in special journal, side by side general journal.
Types of Journal in Accounting
- Purchase journal
- Sales journal
- Cash receipts journal
- Cash payment/disbursement journal
- Purchase return journal
- Sales return journal
- Journal proper/General journal
Here it should be mentioned that most of the business organizations of our country are of small or medium size. These organizations maintain cash book for recording daily cash receipts and cash payments instead of maintaining cash receipt journal and cash payment journal separately.
But where cash receipts journal and cash payments journal are maintained cash book is not needed.
The special journal used for recording credit purchase of merchandise is called purchase journal. In purchase journal transactions of merchandise purchased on credit for sale are recorded. Asset purchased on account is not recorded in the purchase journal.
But many are of opinion to record all credit transactions in multi-column purchase journal. For instance Pyle and Larson have shown credit purchase of assets and supplies etc. in a purchase journal under separate column – debiting asset or office supplies and crediting accounts payable.
Since purchase journal is meant for recording merchandise purchased on credit purchase of assets and other things on credit should not be recorded in purchase journal rather recording of these in general journal is more acceptable.
Format of purchase journal:
Single-column purchase journal:
Single-column purchase journal is used only for recording credit purchase of merchandise. In this respect the format of purchase journal under periodic and perpetual systems is same.
But in case of periodic system purchase account and in case of perpetual system merchandise inventory accounts are debited and accounts payable is credited in both the cases:
Multi-column purchase journal
Some organizations use multi-column purchase journal where in credit purchase of merchandise, assets and other things are recorded. Organizations concerned use columns of journal according to their need.
At the time of sale the value which is exempted from catalogue price as per terms by the seller to the purchaser is called trade discount.
The trade discount is allowed in order to give benefit to the buyer of goods so that he can earn a definite amount of profit by selling goods. For example, at the time of price fixing the price of a commodity is fixed at $100 including 5% trade discount.
At the time of selling the seller can sell this commodity granting 5% trade discount i.e. the buyer gets benefit to sell the commodity at $95. Trade discount is not recorded in the books of account because it does not bring any financial change of seller or buyer.
Only in invoice the trade discount is shown by way of deduction from invoice price. In purchase and sale books / journals the net purchase or sale value after deducting trade discount from total value of goods is shown.
In both the cases i.e. in cash sale or credit sale trade discount is generally allowed. Specimen of a invoice and generally accepted traditional purchase book or journal is given below:
Posting in Ledger
Purchase journal is not written in accordance with double entry system i.e., it is not written determining debit account and credit account. So, at the time of posting in the ledger its duel aspects are to be completed. It is not mandatory to show the journal entry which is submitted at the end of the purchase journal.
For convenient postings in the ledger these journals have been given. Opening purchase account in the ledger the weekly or monthly purchase is to be debited as miscellaneous account in its debit side.
Opening individual account in the name of creditor or creditors recorded in the purchase journal respective receivable amounts is credited in credit side.
Balancing ledger accounts is not generally determined or shown till the end of the year, because posting in these accounts may be needed throughout the whole year.
Sales journal is used for recording credit sale of merchandise only. Cash sale of merchandise is recorded in cash receipt journal. Credit sale of asset is recoded in general journal.
Cash Receipts Journal
The special journal used for recording all types of cash receipts is called cash receipts journal. In modem age introduction of cash receipts journal is in practice in medium and large size business organizations. All kinds, of cash receipts are recorded in this journal. The main sources of cash receipts are two:
Cash from cash sale and cash from accounts receivable. There might have other sources of cash receipts. For example, taking loan from bank, interest receipts, cash-sale of assets etc.
Since cash book does not contain separate required column for recording cash receipts, it fails to provide information regarding various cash receipts and cash flow. To overcome these entire limitations multi-column cash receipts journal is required.
Generally in cash receipts journal two debit columns for cash receipts and cash discount and three credit columns for accounts receivable, sales and other accounts are there. Cash received from various sources other than cash sales and account receivables are recorded in other accounts column.
If perpetual inventory system is followed in recording merchandise inventory, a separate journal entry is passed along with sale journal where cost of goods sold is debited and merchandise inventory is credited.
It may be mentioned that under periodic inventory system this additional journal entry is not required. The format of generally used cash receipt journal is shown below:
Periodic Inventory System: Under periodic inventory system the format of cash receipt journal is as follows:
Perpetual Inventory System: Under perpetual inventory system the format of cash receipt journal is as follows:
Cash Payment Journal
The; special journal used for recording various transactions relating to cash payment is called cash payment journal. Business concerns usually pay debts by cheques. Payment by cheque is treated as cash payment.
For acceptability of cash payment business organizations pay bills by cheques. Cash payment journal contains many money columns as cash payments are made under many heads.
Payment to accounts payable is an important item among the cash payment items and for this account payable provision for a separate debit money column is made in cash payment journal.
As purchase discount arises with various payments a separate purchase discount credit money column is kept in it. A cash credit column is provided for cash payment and cheque payment.
Another debit column for office supplies is also contained in cash payment journal. Besides, for showing other payment there contains other accounts-debit column. A format of multi-column cash payments journal is shown below:
Purchase Return Journal
The special journal, where purchase returns of credit purchase are recorded, is called purchase return journal.
In case of isolation of purchase agreement or in case of defective goods the purchaser returns the- goods to the seller. While returning goods to the seller a slip containing reasons of return of goods is sent along with goods.
This is called a debit note. The seller also sends a note to the purchaser as a reply which is called credit note. It may be mentioned that goods purchased on cash if returned are not recorded in the purchase return journal.
A format of purchase return journal is shown below:
Sales Return Journal
The special journal, where the credit sale returns are recorded, is called sales return journal. The sales return journal is prepared from debit notes sent by the buyer with returned goods. In reply the seller sends a credit note.
The format of sales return is similar to that of sales journal excepting challan/invoice column where credit note is written. It may be mentioned that where the sales return transactions are large in number this sales return journal is maintained.
But where such return transactions are very few in number, these are recorded in general journal.
The transactions other than the transactions recorded in cash receipts journal, cash payment special, purchase journal, sales journal etc. are recorded in journal proper or general journal.
Purchase of assets on credit, stock of goods at the year end, rectification of errors, adjustment of accounts etc. are recorded in journal proper.
Therefore, the journal, where in the transactions which cannot be directly recorded in a particular journal are recorded, is called journal proper.
In journal proper generally the following transaction are recorded;
- Opening Entry: The journal entry which is passed at the beginning of current year for recording assets and liabilities of previous year is called opening entry.
- Closing Entry: The journal entries, which are passed to close the periodical expenses and income transferring them to income statement, are called closing entries. That is all income – expense accounts, sales-purchase accounts and profit- loss accounts are closed through transfer to income statement.
- Adjustment Entry: The journal entry through which accrued expenses and income and advance income, expenses, depreciation, specific provisions etc. are adjusted is called adjustment entry.
- Rectification Entry: The entry, through which errors in accounts are rectified, is called rectification entry.
- Transfer Entry: The entry which is made for transferring fund from one account to another account is called transfer entry.
- Credit purchase and sale of assets: The entry which is needed for recording transactions relating credit purchase and sale of assets is called credit purchase and sale of assets entry. For example, Furniture purchased from Sonargaon Furniture $5,000.
- Other Entry: Entries which cannot be recorded in other journal.