Different Types of Special Journals and Subsidiary Ledgers

Different Types of Special Journals and Subsidiary Ledgers

A lot of entrepreneurs, particularly small company, assume that the general ledger can represent all individual business transactions. This is not correct. For clarity and ease of evaluating the accounting information, you have to record individual transactions in special journals and subsidiary ledgers when doing bookkeeping (Also see 3 Top Common Errors in Accounting). Big companies that make thousands of transactions daily have to record their transactions in special journals and subsidiary ledgers.

Types of Subsidiary Ledgers

A subsidiary ledger is a classification of similar accounts where you can record related transactions. For instance, all transactions for individual creditors are recorded in the accounts payable subsidiary ledger. The balances in each subsidiary ledger should equal to what is shown in the general ledger related to the creditors. There are three types of subsidiary ledgers:

1. Accounts Payable Subsidiary Ledger
– Includes transaction data of your creditors.
2. Accounts Receivable Subsidiary Ledger
– Records the transaction data of your customers.
3. Fixed asset subsidiary ledger
– Records every transaction relating to fixed assets.

Types of Special Journals

Special journals are appropriate to record transactions that happen regularly. The calculated balances from the special journals are transferred to the subsidiary journals and finally to the respective chart of account
(Also see The Importance of a Chart of Accounts) in the general ledger. It is unnecessary to record these transactions straight into the general ledger.

The types of special journals differ from one business to another because the nature of business identifies which type of special journals to be applied. Here are the primary types of special journals.

1. Purchases journal
– Record entries when you purchase goods or services for your business.
2. Cash receipts journal
– Record all cash receipts consisting of the collection of cash balances due from cash sales, debtors, and more.
3. Cash payments journal
– Record any information about the payment you made for your business.
4. Sales journal
– Record of all sales. Sales journal consist of all the information about your sales transactions only.

Most company owners find it hard to maintain the record of special journals and transfer the balances from special journals to subsidiary ledger and the general ledger. If you discover yourself facing such problem too, do not hesitate to engage an accounting firm in Johor Bahru to help you so that you have more time on expanding your business.

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