What is the General Journal?
Definition: The general journal is the accounting book that businesses use to record all of their daily financial transactions with debits and credits.
Businesses must record their transactional operations daily. The transactions may include opening stock, purchases, cash receipts, and payments, and other non – financial transactions. All these are recorded in a general journal.
The journal commonly referred to as the book of original entries, captures bookkeeping entries through debiting or crediting one or more business accounts. An ordinary general journal accounts of five columns that record the date, titles, reference for posting, and the debit and credit columns. At the end of it, all the total debit and credit amounts must tally.
General Journal Example
Here is an example of a typical general journal of Sunrays Enterprises
| Date | Account Title | Description | Debit | Credit |
| 05.12.2018 | Inventory | Cash
For Inventory Purchase |
2500 |
2500 |
| 20.12.2018 | Utilities | Cash
For payment of utilities in December |
500 |
500 |
The general journal for Sunrays outlines the yearly sales, and all the journal entries are captured in their respective columns. The debits are done before the credits, and at the end of a certain trading period, each transaction is transferred to its ledger.
General Journal vs General Legder
The terms general journal and general ledger tend to be confusing. The former is already explained, but the latter refers to one more accounting books, whereby transactions from the general journal are transferred.
And while both of them provide a way of recording transactions, their primary difference is in the fact that the general journal acts as the original book of entry.
Here are the differences between the general journal and general ledger:
| General Journal | General Ledger |
| Records every business transaction as an entry point and in a sequential order | Records transactions already entered in the general journal and are classified based on different types of accounts. |
| Transactions are recorded in the order of double entry in the accounting system | The same applies |
| Date: December 31, 2019
Charges to Reduction Expenses for $4,500 Credit to Accrued Devaluation for $4,500 |
Devaluation Expenditure: Recorded as of December 31, 2018, for $4,500
Accrued Devaluation: Accredited as of December 31, 2018, for $4,500 |
A general ledger is ordinarily a outline of all the business transactions being posted in different journals. The two columns within a T-shaped table depict debit and credit entries. The left side is for debit expenditures, and the right side accommodates the credit expenses. All this information is eventually transferred into a trial balance to prepare financial statements.
General Journal in Accounting Software
In the early days, all the entries were done manually into excel programs. There were risks and consequences, including missed or overrated figures. However, in the present era, technological advancement has availed several accounting solutions to help automate the processes. Tally and Oracle Suite are some of the companies providing software products to assist in logging entries into specific journals and entries.
Among the many advantages of using accounting software is the fact that they reduce the need for maintaining separate books. They also reduce manual tasks. Instead, the user can enter numerous amounts of business trade activities within a short period, thanks to the automated accounting systems.
Nonetheless, there are also limitations associated with automated accounting systems. Think about technical issues when you are working on a year-end report; think about the viruses. What about fraud? While many businesses store information in the cloud, the chances of being accessed by hackers are very high. A company insider with access details could also manipulate financial information.
There is a risk of generating the wrong data. Remember, the information in the systems comes from the bookkeeping records.
But despite all these risks, business owners can mitigate them by taking time to establish proper accounts. They can also engage an accounting professional to advise on the best practices and procedures. In any case, any software program should be reliable, user-friendly, and accurate.