Subdivision of Journal

Before learning about the subdivisions of a journal, it is important to know what a journal is. The definition of a journal considers it as the book that contains all the prime entries. If any company makes any transaction, it first records it in the journal before copying them into any ledger accounts. The companies prefer to list all the transactions in chronological order. The company or the organization has two options of maintaining journals- they can either maintain a single journal for all transactions or maintain separate journals for each transaction type. Let us learn about these types of journals in detail.


Subdivisions of Journal

Based on the type of journals, we can divide them into general journals and special journals. Let us look at each of them.


General Journal

In this subdivision of journals in accounting, people record all their transactions in chronological sequences. These people record all those transactions that do not occur regularly or do not find a place in special journals. 

It is important to learn two terminologies associated with general journal- journalizing and journal entry. Journalizing is the act of recording the transactions. Journal entry is the record of transactions that the companies maintain in the journal.

General journals mainly include the opening and closing entries, any adjustment entries, rectification entries, as well as the due income and expense entries. 

[Image will be uploaded soon]

Fig: A common layout of a general journal


Special Journals

People call special journals by the name of subsidiary books. They also maintain their transactions in the special journal in chronological sequences. However, the transactions recorded in these journals are mainly encountered frequently. The transactions belong to similar types. People record these similar transactions in these special journals.

Most organizations maintain eight kinds of subsidiary books. The inclusions in this subdivision of journals are cash book, sales book, purchases book, return inwards book or sales return, return outwards book or purchase return, bills payable book, bills receivable book, and journal proper. You can consider the cash book to be both a ledger as well as a subsidiary book. Looking at the type of book, you will understand how to answer which subdivision of the journal is known as which book.

[Image will be uploaded soon]

Fig: Types of Special journal


What is the Need for Such Subdivisions of Journals?

Any business issues several transactions. As the business grows larger, the number of transactions increases. Therefore, it becomes increasingly tough to maintain all the transactions by following a single means of the journal entry.  Such difficulties arise due to the following limitations of a journal.

  • Every time a transaction takes place, it is important to note the name of the account. The person maintaining the record has to write the same name every time it conducts a transaction. Moreover, all the credit and debit transactions also need to be accounted for. This entire process can prove to be cumbersome for the person maintaining such records.

  • The journal needs to write down every narration. Writing down such ideas also adds to the task.

  •  If there is a need to take prompt action, such as taking information from such journals, the system might not be able to do so. 

  • Since a single person handles every journal, they cannot install systems that can perform internal checks on the records.

  • The journal’s size keeps on increasing due to the high volume of transactions flowing in every day. 

To cope up with such limitations of the general journal, many organizations consider using subsidiary books. In these books, they can maintain separate journals for every kind of transaction, allowing them easy accessibility, proper division of labour, and faster maintenance of records.

 

Compound Journal

In any simple journal, the companies use only one account for any credit or debit transaction. All such transactions are conducted from that single account. However, in a compound journal, a single transaction involves more than one account for debiting and crediting purposes. Each of these processes is associated with more than one account.


Solved Examples

Generate the compound journal entry for the following:

  • Started business with stock ₹10000, business ₹50000, and cash ₹40000.

  • Bought goods from Vipin ₹5000 and for cash ₹10000.

  • Paid Vipin₹4700 in full settlement.

Ans.

In the books of ABC

Journal entries

Serial No.

Particulars


Amount (Dr.)

Amount (Cr.)

1.

Stock A/c

Dr.

10000



Building A/c

Dr.

50000



Cash A/c

Dr.

40000



To Capital A/c



100000


(Starting a business with stock, building, and cash as Capital)




2.

Purchases A/c

Dr.

15000



To Vipin’s A/c



5000


To Cash A/c



10000


(purchase of goods on credit and in cash)




3.

Vipin’s A/c

Dr.

5000



To Cash A/c



4700


To Discount received A/c



300


(payment to Vipin in full settlement)





FAQs (Frequently Asked Questions)

1. What are the Different Types of Journals?

Ans: Before knowing about the types of journals, it is important to know what a journal is. A journal is the conglomeration of all the details of transactions taking place. There are different ways of maintaining records in a journal. Based on these ways, a journal can be subdivided into a general journal and a special journal. A general journal contains all the information about every transaction in a single journal copy. The person maintaining a general journal maintains all the records in chronological sequences. However, since all the information about different types of transactions is considered in a single file, it isn't easy to maintain it.

Moreover, the process of finding any information from such journals is time-consuming. For such reasons, companies prefer to maintain a special journal or subsidiary book. In a special journal, separate journals are maintained for different types of transactions. Such a process helps in easy maintenance and reference whenever required.

2. What are the Problems Faced in Maintaining a General Journal?

Ans: Due to the simple nature of a general journal, the process comes with several limitations. Some of them are:

  • Since the companies maintain the information for all the transactions in a single file, the entire process is very hectic. 

  • Generally, the company employs a single person to maintain a general journal. Since all the work is bestowed on a singular entity, it will spell too much work on that entity. Moreover, the person might create more errors while maintaining such information.

  • Although the concerned person maintains all the information in chronological order, the process of taking out certain information from the list is quite cumbersome due to the volume of information present in the journal. Therefore, the concerned personnel takes a lot of time to find such information by searching with only one parameter- the date of entry.

  • The person might also find difficulty in installing systems for internal checks of the records.