General Journals vs. General Ledgers: An Overview

When it comes to tracking the finances of a business, a double-entry system that uses both a general ledger and a general journal is arguably the best method for tracking overall statistics and keeping operations running smoothly and profitably. But to truly understand how the double-entry accounting record system works, one must first appreciate the different functions associated with the two key components: general ledgers and general journals.

Key Takeaways

  • A general journal refers to a book of original entry in which accountants and bookkeepers record business transactions, in order, according to the date events occur.
  • The general ledger tracks five prominent accounting items: assets, liabilities, owner’s capital, revenues, and expenses.
  • Advances in technology have made it so most people don't need to maintain each book of accounts separately.

General Journals

Simply defined, a general journal refers to a book of original entry in which accountants and bookkeepers record business transactions, in order, according to the date events occur. A general journal is the first place where data is recorded, and every page in the item features dividing columns for dates, serial numbers, as well as debit or credit records. Some organizations keep specialized journals, such as purchase journals or sales journals, that only record specific types of transactions.

Despite advances in software technology, there will always be a need to record non-routine transactions in general journals, such as sales of assets, bad debt, and depreciation.

Once a transaction is recorded in a general journal, the amounts are then posted to the appropriate accounts, such as accounts receivable, equipment, and cash transactions.

General Ledgers

A general ledger is a book or file that bookkeepers use to record all relevant accounts. The general ledger tracks five prominent accounting items: assets, liabilities, owner’s capital, revenues, and expenses. Each account is a two-columned T-shaped table. The bookkeeper typically places the account title at the top of the "T" and records debit entries on the left side and credit entries on the right. The general ledger sometimes displays additional columns for particulars such as transaction description, date, and serial number. Transactions from general journals are posted in general ledger accounts, then balances are calculated and transferred from the general ledger to a trial balance.

Special Considerations

Today, most organizations use software to record transactions in general ledgers and general journals, which has dramatically streamlined these basic record keeping activities. In fact, most accounting software maintains a central repository where you can log ledger and journal entries. Advances in technology, however, make it easier and less tedious to record transactions, and you don't need to maintain each book of accounts separately. The person entering data in any module of your company's accounting or bookkeeping software may not even be aware of these repositories. In many of these software applications, the data entry person need only click a drop-down menu to enter a transaction in a ledger or journal.