Accountants refer to a “journal” as “the book of original entry.” Traditionally, when a transaction occurs, it is recorded first in the general journal. Then it’s copied, as appropriate, to a series of special purpose journals that keep track of related categories of transactions such as cash disbursements, sales, purchases, and payroll. The totals from the different journals get copied into the company’s general ledger under account headings such as accounts receivable, accounts payable, equipment costs, depreciation, etc.
Now you understand why a company’s records are referred to in the plural – the books – because there really is a series of physical journals and a ledger that contain the essential financial information. At least that’s how it was done prior to the computer revolution. Now, business accounting software is set up so that a single entry, for example in your checkbook, also gets categorized so that it will be included in reports that mimic the different journals or the accounts in the general ledger.
Here’s a basic description of the different journals:
Cash Disbursement Journal. As mentioned above, the cash disbursement journal can be as simple as a checkbook register. Accounting software allows you to add supplemental information such as expense categories and job numbers. Traditional bookkeepers use special 13-column paper to record this data.
Cash Receipts Journal. The cash receipts journal is the counterpart to the cash disbursement journal. It is where you record payments received by cash or check.
Purchase Journal. The purchase journal differs from the cash disbursement journal because it captures information about expenses that are purchased on credit. For example, suppliers may allow you to purchase goods on account for resale to your customers. This journal can record merchandise you return to the supplier or price adjustments that you receive.
Sales Journal. The sales journal is the income counterpart to the purchase journal. It is where you record sales paid for with credit.
Payroll Journal. The payroll journal captures all of the information that appears on each employee’s check stub: gross wages, payroll taxes for Social Security and Medicare, accrued vacation and sick leave, and benefits deductions for retirement plans and health insurance.