Business and Personal Finance: The Daily Journals

Keeping Track of Transactions – The Daily Journals

When accounting was strictly a pencil-and-paper gig, journals were books containing pages and pages of transactions. Because that was the place where all transactions were first recorded, journals are called the books of original entry. Now, most journal work is done using a computer, making the old paper journals nearly obsolete.

Inside a journal, you can find a chronological listing of your company’s daily transactions. Each entry contains a full picture of one transaction, and this is the only place where the transaction appears as a whole. In addition, journal entries typically include a description, something for you to look back at should questions arise.

Most companies tend to have the same transactions over and over. For the transactions that take place more frequently, such as sales, you can use one of the standard special journals (in this case, the sales journal). There are four special journals that you may use: sales, purchases, cash receipts, and cash payments (also known as disbursements). Transactions that don’t occur very often are recorded in the general journal, a kind of catchall for things that don’t really fit anywhere more specific. The general journal is also the place for adjustments and closing entries (for the temporary accounts).

What a General Journal Page Looks Like

A journal page looks like a transaction diary, detailing everything that took place during the business day. A standard journal entry contains at least three lines: one for the debit account, one for the credit account, and one for the transaction description. An entry can have more than one debit and more than one credit. As long as the total entry balances, meaning that the debits equal the credits, you can have as many of each as necessary to completely record what took place. When you write up a journal entry, always write the debit account flush left in the column. That line (or lines, if there are multiple debit accounts) comes first. The next line contains the credit side of the entry. When you write the credit account, always indent toward the right, to indicate the shift.

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Most general journals have five columns. The first is for the date of the transaction, which may not match the date on which you record the transaction. The second is for the account names affected by the transaction, or an explanation of what took place. Third comes the posting reference, where you would write down the account number after you posted this information to the general ledger (posting is covered in detail in the next section). The last two columns hold the debits and credits. You can’t have both on the same line, and the total debits must equal the total credits.

General Journal Page

Date Account & Explanation Post Ref Debit Credit
02/04/06 Rent Expense $650.00
Cash $650.00
Paid ABC Holdings rent for February 2006

The Sales Journal

If you have a business, you have sales, and hopefully a lot of them. Sales transactions are among the most frequent for any business, and that earns them a special journal. The point of the sales journal is to minimize your task by getting rid of some of the labor involved in manual bookkeeping. Where the general journal requires at least three lines for every entry, a single line is all you need to record sales transactions in the sales journal.

Because it’s the sales journal, you already know that every regular trans- action will hit the sales account as a credit. There also is only one choice for the debit side: accounts receivable. If you have a buy now, pay later arrangement with the customer, accounts receivable will get the debit. If you got paid at the time of the sale (whether it was actual cash or a check or major credit card), the debit account would be cash, and that would be entered in the cash receipts journal instead of the sales journal.

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Here’s what a couple of typical entries in the sales journal would look like:

The Sales Journal

Date Account to Debit Invoice No. Post Ref. Amount
02/14/06Bob Jones151185.60
02/15/06Donna Reed, n/60152355.50

The customer name is the most crucial part of the transactions you enter in the sales journal. Without that, you wouldn’t know whom to bill or for how much. If the terms of a sale are different from the norm for that customer, you should enter that in the journal as well. For example, if you usually let Donna Reed pay you thirty days after a sale, but this time you told her that she could take sixty days to pay, make sure to record that information when you book the transaction; otherwise, thirty days from now, you may not remember that deal.

The Purchases Journal

Product-based companies have to get the things they sell from some- where, whether it’s in the form of finished goods or raw materials. The companies you buy your inventory from are your suppliers, and you count as their customer. In most cases, these types of supplier relationships involve buying on credit. That’s where the purchases journal comes in so handy.


It’s like the flip side of the sales journal; every debit goes to the inventory account, and every credit goes to accounts payable. Most companies use the purchases journal only to record transactions that involve inventory. However, some also use this to record any type of purchase made on account, whether it’s for inventory or equipment or office supplies. If you use your purchases journal as a catchall, you will need an extra column to identify your debit account.

Although the purchases journal is used mainly to track inventory purchases, other items that are included in inventory costs may be recorded here as well. These items may include things such as sales tax or freight (to have the products delivered to your company). If you track these costs separately but still want to enter them in your purchases journal, you simply need to include extra debit columns, dedicated to these inventory add-ons.

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Again, the point of the purchases journal is to save you time and effort, allowing you to record transactions with a single-line entry. Since on- account purchases are made regularly and frequently (for product-based companies), the use of a special journal is called for. When you do pay cash for your purchases, do not record them in your purchases journal; rather, write them up in the cash disbursements journal. This is similar to cash sales going into the cash receipts journal rather than the sales journal.

Purchases Journal (with extra columns)

DateAccount to CreditPost RefA/P Credit Purchases Debit Sales Tax Debit Freight Debit
2/12/06 Ken’s Crafts181.55 140.00 16.55 25.00
2/13/06 Lou’s Lampshades200.00 200.00

The Cash Journals

Since cash is involved in more, and more diverse, transactions than any other account, it merits two special journals. The cash receipts journal holds all transactions for which cash is debited; the cash payments journal carries all the transactions for which the cash account is credited. That’s because any time you receive cash, it increases your cash account; and cash, an asset account, gets increased by a debit. Whenever you pay cash, it decreases your account, calling for a credit entry.


To avoid potential problems with having numerous debits and credits recorded in the same place, early accountants began the practice of putting cash transactions into two separate journals. When you use this system, you don’t have to worry about whether a number should be added or subtracted, because they all go the same way.

The cash receipts journal comes with several credit columns, because cash can come in from different sources. Typical columns include sales, accounts receivable, and a miscellaneous column to hold any other accounts. Similarly, the cash payments journal comes with some standard debit columns, such as accounts payable and purchases, plus a catchall column. However, if you find yourself paying a particular expense with cash very frequently (or collecting cash from an unusual source frequently), you can always add your own special column. Anything that cuts down on your data entry demands is a good thing!

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The cash journals look very similar to the other special journals; only the column headings are really different. Both cash journals have the standard columns of date, account to debit or credit, and posting reference. Then they have columns for the usual debit or credit accounts (for instance, accounts receivable and sales in the case of cash receipts), followed by a general account debit or credit column, and the cash column. In the cash receipts journal, the cash column is for debits; in the cash payments journal, the cash column holds only credits.