Inadequacy of the Old Journal.—As explained in the previous chapter, every business transaction was formerly entered in the journal. This necessitated the making of a formal debit and credit entry for every item, many of which were of the same kind. As the object of every business is to sell something, during any business day a large number of sales, in consequence, had to be analyzed, classified, and entered separately. The entry in each case was a credit to Sales, and either a debit to the customer if the sale was “on time,” or a debit to Cash if the sale was for cash. It was soon perceived that instead of making a separate entry for each sale, one entry could be used for bringing into the books all the sales for a given day. This was accomplished by carrying a memorandum of the individual transactions until the close of the day when a formal summary or compound entry was made in the journal. Such a summary or compound journal entry is illustrated below:

The memorandum of each sale was made in a blotter to record the quantities and kind of goods sold but such entry formed no part of the double-entry record, being merely the source of information for the formal summary entry.

The Special Journal a Labor-Saving Device.—This use of the journal can also be made in connection with other transactions, with similar great saving of labor. Throughout the day in every business there is a large number of cash transactions—receipts and disbursements—which require a debit and credit record. Also purchases of merchandise, although not numerous for any particular day, comprise a large number of entries during the course of a month or year. To save the labor of so many entries, the original journal is divided into separate books known as special journals, each containing the original entries for a particular group of similar transactions, the number of books corresponding to the number of groups into which the various transactions are divided.

For instance, where the policy of the business is to encourage the settlement of outstanding customers’ accounts by notes, the use of a notes receivable book or journal effects a very appreciable saving of labor. Through the use of such a book, limited to a record of nothing but notes receivable, it is unnecessary to write each time a note is received, a complete journal entry as follows:

• Notes Receivable1,500.00
• James Jackson1,500.00

Instead, the entry of Jackson’s name in the notes receivable journal is in itself evidence of a debit to Notes Receivable account. Thus only the credit side of the entry need be shown, with appropriate explanation and detail, the formal debit being suppressed. When, however, the books are closed at the end of each regular period, the total of all these entries in the notes receivable journal is formally labeled “Notes Receivable, Dr.” and posted to the debit of the Notes Receivable account. This procedure brings on the ledger one debit entry for the transactions of the entire month. The corresponding credits have been posted in detail day by day from their journal record.

So also, when it is the practice of the business to issue many of its own notes either in payment of purchases or for discount purposes, a “Notes Payable Journal” may be used. The method of handling this book is similar to that of handling the notes receivable journal as described above. A similar procedure is followed in the case of sales, purchase, and cash transactions referred to above. The method of handling these four groups of transactions will be explained in detail in the chapters which follow.

Basis of Subdivisions.—The basis for dividing the one general journal into special journals is the relative frequency with which transactions of a similar nature occur. It would evidently be of no utility to create a special journal if the number of transactions to be recorded in it was small, as the saving in the labor of making the entries would be more than offset by the trouble of using an extra book.

Customary Subdivisions.—The special journals most frequently met with are those for purchases, sales, and cash. The Purchase Journal contains the original entry of purchases, the Sales Journal the original entry of sales, and the Cash Journals the original entry of cash transactions. All other original entries are made in the general journal. For the sake of brevity, the general journal is usually designated by the single term “Journal.”

It should be thoroughly understood that no matter how many special divisions of the journal may be in use, such books combined with the general journal comprise the journal record of transactions. None of them is merely a memorandum record to be summarized and to be formally recorded later. The record made in each is formal, although abbreviated, and each must be posted completely, both debit and credit, in order to secure in the ledger a full record of all business transactions.

A brief explanation will be given in following chapters of the more simple forms of special journals.