General Ledger & Journals
What Information does a General Ledger and General Journal contain ?
Let's take a look at a sample record for each to find out exactly what financial information they provide.
- Name of Account and Account Number
- Date of Posting
- Description-additional notes about the entry if needed
- Posting Reference-journals name (abbreviation) , page, and entry reference
- Amounts of the debits or credits transferred (posted) from the General Journal
- Current Balance of the Account
Sample of a General Ledger Page
The Posting Reference GJ-1-1 refers to:
1-Entry Number 1
|Account Name:Cash||Account Number:100|
|Date||Description||Post Ref||Debit Amount||Credit Amount||Balance|
|Jan 1,xxxx||Beginning Balance||5000|
Notice that the account has an amount column for debits (left side or first column) and an amount column for credits (right side or second column).
Journals are preliminary records where business transactions are first entered into the accounting system. The journal is commonly referred to as the book of original entry.
Specialized Journals-are journals used to initially record special types of transactions such as sales, cash disbursements, and cash receipts in their own journal.
The end result of double entry bookkeeping is having an up to date , in balance, and properly
posted Ledger. In our prior lessons we recorded all our debits and credits (transactions) directly in the General Ledger. This would work for a small business that had very few transactions
but would become unwieldy for most businesses with any volume of activity. By its very definition the General Ledger is supposed to be a summary record of a business’s
It logically follows that since we only want summary amounts in our Ledger we need to record
our detail entries some place else first. What record(s) do we use to do this ? You’re right ! Journals are our preliminary records. All our transactions are first entered in a preliminary record called a journal or book of original entry. This process is called journalizing.
After our business transactions have been entered in our journal(s), they are then periodically (usually monthly) summarized and totaled and then transferred (posted) to the General Ledger as summary entries.
What type of information is included in the Journal Record ?
- Entry Number
- Date of each transaction
- Names and/or the account numbers of the accounts to be debited or credited
- Amounts of the debits and credits
- Posting Reference-Account Number in the General Ledger
- Explanation or description of the entry
The journals contain all the chronological (by date) information necessary to record debit and credit amounts in the accounts of the General Ledger.
Sample Of A General Journal Page
|General Journal||Page 1|
|Entry No||Date||Account Name||Post Ref.||Debit||Credit|
|Record Supplies Expense|
|Record Cash Sale|
|GJ-1-3||Jan 10,xxxx||Advertising Expense||500||400|
|Record Advertising Expense|
|Record Utilities Expense|
Do you notice anything odd about any of our entries in our General Journal ?
Look at entry number 4 (GJ-1-4). It doesn’t have a posting reference. Why not ? The answer is simple. Entry Number 4 has not yet been posted to the General Ledger. This is our way of keeping up with what entries have and have not been posted to the General Ledger.
Let's continue by taking a look at ABC Mowing's Balances.
The Balances in our Table are the Beginning Balances in ABC's General Ledger Accounts presented below.
|ABC's Beginning Account Balances as of December 1,xxxx|
|Cash||5,500||Accounts Payable||(2,000)||Owner's Capital||(7,500)|
|Accounts Receivable||1,600||Mowing Revenues||(1,000)|
|Mowing Equipment||2,500||Advertising Expense||200|
Note: Credit Balances are indicated using parentheses ()
ABC Transactions for December xxxx
1. December 2, xxxx ABC mows a client’s yard and receives a check # 484 from the customer for $50 for the service provided.
Journal Entry 1 GJ-1-1
2. December 4, xxxx ABC purchases $100 worth of office supplies for inventory and stores them in their storage room. The office supply store gives them an invoice # 983 that allows them to pay for them in 15 days (on account).
Journal Entry 2 GJ-1-2
3. December 8, xxxx ABC places an ad in the local newspaper receives the invoice from the supplier # 555 and writes a check # 900 for $25 to the newspaper.
Journal Entry 3 GJ 1-3
4. December 10, xxxx ABC purchases five mowers for $10,000 and finances them with a note from the local bank.
Journal Entry 4 GJ 1-4
5. December 15, xxxx ABC mows another customer’s yard and sends the customer a bill (invoice # 1000) for $75 for the service they performed. They allow their customer 10 days to pay them for this service (on account).
Journal Entry 5 GJ 1-5
6. December 20, xxxx the owner of ABC needs a little money to pay some personal bills and writes himself a check # 901 for $500.
Journal Entry 6 GJ 1-6
7. December 22, xxxx ABC pays the office supply company $100 with a check # 902 for the office supplies that they charged (promised to pay).
Journal Entry 7 GJ 1-7
8. December 27, xxxx ABC receives a check # 55 from the customer who they billed (invoiced) $75 for services and allowed 10 days to pay.
Journal Entry 8 GJ 1-8
9. December 29, xxxx ABC purchased some mulch for $60 and received an invoice # 777 from their supplier who allows them 15 days to pay. The mulch was used on a customer’s yard.
Journal Entry 9 GJ 1-9
10. December 31, xxxx ABC bills (prepares an invoice # 1001) the customer $80 for the mulch and mowing his yard and receives a check for $80 from the customer.
Journal Entry 10 GJ 1-10
ABC's General Journal
|General Journal||Page 1|
|Entry Number||Date||Account Name||Post Ref.||Debit||Credit|
|Record Customer Check # 484 and revenue from mowing job|
|GJ-1-2||Dec 4,xxxx||Inventory-Office Supplies||115||100|
|Record Invoice # 983 for office supplies purchased on account|
|GJ-1-3||Dec 8,xxxx||Advertising Expense||510||25|
|Record Check # 900 for advertising services|
|GJ-1-4||Dec 10,xxxx||Mowing Equipment||150||10000|
|Record purchase of mowing equipment financed by bank note|
|GJ-1-5||Dec 15,xxxx||Accounts Receivable||110||75|
|Record Invoice # 1000 on account to customer for revenue earned mowing yard|
|GJ-1-6||Dec 20,xxxx||Owner's Draw||310||500|
|Record owner's draw Check # 901|
|GJ-1-7||Dec 22,xxxx||Accounts Payable||200||100|
|Record Check #902 paid to supplier for office supplies charged on account (Invoice # 983)|
|Record Customer's Check # 55 received from customer on account|
|GJ--1-9||Dec 29,xxxx||Mulch Expense||520||60|
|Record Invoice # 777 with credit terms for purchase of mulch|
|Record Check # 555 received from customer paying our Invoice # 1001 for mowing services|
ABC's General Ledger
|Account Name: Cash||Account Number: 100|
|Dec 1||Beg Bal.||5500|
|Account Name: Accounts Receivable||Account Number: 110|
|Dec 1||Beg Bal.||1600|
|Account Name: Inventory-Office Supplies||Account Number: 115|
|Dec 1||Beg Bal.||0|
|Account Name: Mowing Equipment||Account Number: 150|
|Dec 1||Beg Bal.||2500|
|Account Name: Accounts Payable||Account Number: 200|
|Dec 1||Beg Bal.||(2000)|
|Account Name: Note Payable-Bank||Account Number: 210|
|Dec 1||Beg Bal.||0|
|Account Name: Owner's Capital||Account Number: 300|
|Dec 1||Beg Bal.||(7500)|
|Account Name: Owner's Draws||Account Number: 310|
|Dec 1||Beg Bal.||600|
|Account Name: Mowing Revenue||Account Number: 400|
|Dec 1||Beg Bal.||(1000)|
|Account Name: Advertising Expense||Account Number: 510|
|Dec 1||Beg Bal.||200|
|Account Name: Mulch Expense||Account Number: 520|
|Dec 1||Beg Bal.||100|
So you know !
There are various symbols that are used to indicate Debits and Credits and whether an account’s balance is a Debit or a Credit. Ways and symbols you might run across are:
Dr for Debit and Cr for Credit
+ (Plus Sign) for Debit and – (Minus Sign) for Credit
No Bracket for Debit and < > (Brackets) for Credit
No Parentheses for Debit and ( ) (Parentheses) for Credit
Note : The plus (+) and minus (sign) are often used by accounting and bookkeeping programs to indicate debits and credits. Don’t get confused and think that the plus sign means an increase or that the minus sign means a decrease. They do not . In this case, they are simply symbols that mean either a debit or a credit.
In this Lesson, we illustrated the recording of ABC's transactions in the General Journal and the posting -transferring the balances to the the General Ledger Accounts.
You have now been introduced to some of bookkeeping and accounting’s formal records, namely the General Ledger and General Journal. You could get by with just these two records, but if your business like most has many transactions instead of the few that ABC had you’d be spending a heck of a lot of time recording and posting.
In this course the only Journal we'll use is the General Journal.
While you could record all your transactions just using this journal, bookkeeping has a better solution.
What’s the solution to streamlining the recording and posting processes.
Special Journals are the solution.
Instead of using just one journal to record all our business transactions we use many. Although this tutorial is not going to discuss the Special Journals in detail, I wanted to make you aware of them and the purpose they serve and the types of transactions recorded using them.
Some Special Journals a business will normally have are:
- Cash Receipts Journal
- Cash Disbursements Journal (Check Register)
- Payroll Journal
- Sales Journal
- Purchase Journal
- General Journal
All these journals are designed to record special types of business transactions and post the totals accumulated in these journals to the General Ledger periodically (usually once a month) using a manual system.
For a quick peak at Special Journals
Sorry, no Lesson can be tossed aside so let's learn about
the Trial Balance