Accounting journals are a lot like that diary you may have kept as a child — or maybe still do keep! They’re a day-to-day recording of business transactions that take place within a company’s accounting department. Accountants call journals the “books of original entry” because no transactions get into the accounting records without being entered into a journal first. Two basic types of journals exist: general and special.
General accounting journals
A general journal is a catchall type of journal for transactions that don’t logically belong in one of the special journals. Transactions are recorded in the general journal via journal entries —that’s a shocker!
Depending on the size of the business, either all entries are recorded in the general journal or, in the case of a company with many special journals, only adjusting, reversing, or nonroutine entries are booked in the general journal.
A general journal entry always includes the following:
Date the transaction took place
Chart of account titles and numbers
Amount of the debits and credits
Brief explanation of why the transaction is being booked
Special accounting journals
If a company has many similar transactions, it uses special accounting journals. Consider some examples of special accounting journals and some transactions they may contain:
Sales journals record all sales a business makes to customers on account, which means no money changes hands between the company and the customer at the time of the sale.
Cash receipts journals record cash sales, customer payments on account, or interest and dividend payments.
Cash disbursement journals show any payment the business makes using a form of cash. These entries include purchases transactions or payments on debt.
Purchases journals show purchases a company makes on account.
Payroll journals record all payroll transactions, including gross wages, taxes withheld, and other deductions, such as health insurance paid by the employee, leading to net pay, which is the amount shown on the employee’s check.
While an accrual-based business will have cash journals, a cash-based business won’t have a sales or purchases journal as a cash-based business only recognizes transactions when cash changes hands.
