In bookkeeping there are three journals necessary to the bookkeeping process, no matter the size of the business. They track money received and money spent and the purpose for which it was spent. They are all about details and really are the starting point of the information entering system. They are:
The General Journal keeps track of adjustments or corrections made to the other journals, as well as recurring items such as depreciation.
The Purchases Journal is used to record purchases of supplies or inventory made by the business on account. This one is not needed if a business pays for its supplies or inventory with cash or check at the time of purchase, although some businesses that track inventory by Purchase Order numbers sometimes choose to use this Journal even if they pay at the time of delivery. Also, if you make a few purchases on account it is okay to combine this with the Disbursements Journal.
The Receipts Journal keeps track of business income received by cash, check or credit card. Just as you would enter the amount of money deposited into your bank account in a checkbook register, so you would enter money received and deposited into this journal. This journal is generally not used for sales made on account (accounts receivable). You would use the Sales Journal for that. But, if you have very few customers who pay on account, you can combine the Sales and Receipts Journals.
The Disbursements Journal keeps track of all money spent by the business, whether the money is spent by cash, check, debit or credit card. This would include for example, money paid to suppliers, contractors, or your local hardware or office supply store. As with the Receipts Journal, this journal functions much like a checkbook register. Each purchase is recorded by the date of the check, who it is payable to, and for what amount it was written.
Some businesses may use additional Journals in their bookkeeping depending on the size or type of their business. These might include separate Journals for payroll, purchases, sales, or standard entries that are recurring each month such as depreciation.
The Payroll Journal records how much employees have been paid as well as how much as been withheld from their gross pay. If your business has only one or two employees, it is acceptable to make your payroll entries in the Disbursements Journal.
The Sales Journal records individual sales made, and can track the type of sale made as well as the cost associated with the items sold. This journal is used for sales made on account and does not record the deposit of funds to the bank. If you don’t have many customers who purchase on account, you can combine this journal with the Receipts Journal. The Receipts Journal is used for that purpose. A business can also have more than one type of Sales Journal.
The Standard Entries Journal is used to record entries that occur on a regular basis. This journal would only be used if these recurring items are not entered into the General Journal.
In summary, the Journals in bookkeeping record the day to day transactions of a business and the totals for each month. These totals are then transferred at the end of each month to the General Ledger where the information can be seen as a snapshot of the business finances.