7.2 Describe and Explain the Purpose of Special Journals and Their Importance to Stakeholders
What are Special Journals?
Special journals are journals used to record specific types of transactions. Instead of recording all transactions in one general journal, businesses use separate journals for different transaction types.
Purpose:
- Efficiency: Faster recording of repetitive transactions
- Organization: Group similar transactions together
- Control: Easier to review and verify specific transaction types
- Division of Labor: Different people can handle different journals
Types of Special Journals
Common special journals include:
- Sales Journal: Records credit sales
- Purchases Journal: Records credit purchases
- Cash Receipts Journal: Records cash received
- Cash Disbursements Journal: Records cash paid out
General Journal: Still used for transactions that don't fit special journals (adjusting entries, correcting entries, etc.)
Sales Journal
Purpose: Record all credit sales (sales on account)
Format:
Sales Journal
Date Invoice # Customer Account Amount VAT Total
─────────────────────────────────────────────────────────────────
Example:
Sales Journal
Date Invoice # Customer Amount VAT 17% Total
─────────────────────────────────────────────────────────────────
Nov 15 INV-001 Customer A €1,000 €170 €1,170
Nov 18 INV-002 Customer B 2,000 340 2,340
Nov 22 INV-003 Customer A 1,500 255 1,755
─────────────────────────────────────────────────────────────────
Totals €4,500 €765 €5,265
Posting:
- Individual amounts posted to customer accounts (subsidiary ledger)
- Total posted to Sales Revenue and Accounts Receivable (general ledger)
Luxembourg Considerations:
- Must track VAT by rate
- Must include PCN account numbers
- Must support digital invoicing requirements
Purchases Journal
Purpose: Record all credit purchases (purchases on account)
Format:
Purchases Journal
Date Invoice # Supplier Account Amount VAT Total
─────────────────────────────────────────────────────────────────
Example:
Purchases Journal
Date Invoice # Supplier Amount VAT 17% Total
─────────────────────────────────────────────────────────────────
Nov 10 SUP-001 Supplier X €2,000 €340 €2,340
Nov 15 SUP-002 Supplier Y 3,000 510 3,510
Nov 20 SUP-003 Supplier X 1,500 255 1,755
─────────────────────────────────────────────────────────────────
Totals €6,500 €1,105 €7,605
Posting:
- Individual amounts posted to supplier accounts (subsidiary ledger)
- Total posted to Inventory/Purchases and Accounts Payable (general ledger)
Cash Receipts Journal
Purpose: Record all cash received (cash sales, collections from customers, etc.)
Format:
Cash Receipts Journal
Date Source Account Cash Sales Receivables Other
─────────────────────────────────────────────────────────────────
Example:
Cash Receipts Journal
Date Source Cash Sales Receivables VAT
─────────────────────────────────────────────────────────────────
Nov 12 Cash Sale €1,170 €1,000 - €170
Nov 15 Collection 2,340 - €2,340 -
Nov 18 Cash Sale 1,755 1,500 - 255
─────────────────────────────────────────────────────────────────
Totals €5,265 €2,500 €2,340 €425
Posting:
- Cash column posted to Cash account
- Sales column posted to Sales Revenue
- Receivables column posted to Accounts Receivable
- VAT column posted to VAT Payable
Cash Disbursements Journal
Purpose: Record all cash paid out (purchases, expenses, payments to suppliers, etc.)
Format:
Cash Disbursements Journal
Date Payee Account Cash Purchases Payables Expenses
─────────────────────────────────────────────────────────────────
Example:
Cash Disbursements Journal
Date Payee Cash Purchases Payables Expenses
─────────────────────────────────────────────────────────────────
Nov 10 Supplier X €2,340 - €2,340 -
Nov 15 Rent 1,200 - - €1,200
Nov 20 Supplier Y 3,510 - 3,510 -
Nov 25 Salaries 4,000 - - 4,000
─────────────────────────────────────────────────────────────────
Totals €11,050 - €5,850 €5,200
Posting:
- Cash column posted to Cash account
- Purchases column posted to Inventory/Purchases
- Payables column posted to Accounts Payable
- Expenses posted to respective expense accounts
Advantages of Special Journals
Efficiency:
- Faster recording of repetitive transactions
- Less writing (summarize similar transactions)
- Easier to find specific transactions
Organization:
- Group similar transactions together
- Easier to review and verify
- Better for audit purposes
Control:
- Easier to spot errors
- Better division of duties
- Clearer audit trail
Scalability:
- Can handle high volume of transactions
- Multiple people can work on different journals
- Better for larger businesses
Luxembourg Context
Special Journals in Luxembourg:
- Must support PCN account classifications
- Must track VAT by rate
- Must maintain proper audit trail
- Must support eCDF and FAIA requirements
- Often integrated into accounting software
Software Integration:
- Modern accounting software (Sage BOB, Odoo) includes special journal functionality
- Automatically creates journals from transactions
- Generates reports from journal data
- Exports data for compliance
Luxembourg Compliance Note
Special journals in Luxembourg must:
- Support PCN account classifications
- Track VAT by rate
- Maintain audit trail
- Be exportable for FAIA
- Support digital invoicing
- Be retained for 10 years
Think It Through
Why would a business use special journals instead of recording all transactions in a general journal? What are the advantages for a Luxembourg SME with many daily transactions?