General Journal in Accounting

The general journal sometimes referred to as the nominal journal, is a journal used to record transactions which do not belong in any of the other special journals such as the sales, purchases, cash receipts, and cash disbursement journals. The general journal is simply a list of journal entries in chronological order, and is used to save time, avoid cluttering the general ledger with too much detail, and to allow for segregation of duties.

General Journal Entries

The general journal is a book of prime entry and the entries in the journal are not part of the double entry posting. Typically, the general journal entries record transactions such as the following:

  • Opening entries
  • Adjusting entries
  • Correcting entries
  • Accounting period end closing entries
  • Allowance for doubtful accounts
  • Fixed asset purchases and sales
  • Depreciation adjustments
  • Goods taken for personal use
  • Transfer between subsidiary ledger personal accounts

The information recorded in the journal is used to make postings to the relevant accounts in the general ledger.

Information Listed in the General Journal

The information in the general journal is taken from the relevant source documents, and each entry includes the following:

  • Transaction date
  • Debit: Account title, general/subsidiary ledger reference, and amount
  • Credit: Account title, general/subsidiary ledger reference, and amount
  • Reason for the journal entry

The general/subsidiary ledger reference refers to the relevant account numbers in those ledgers. In certain instances (see below) an entry may need posting in both the subsidiary ledger and the general ledger and therefore a reference needs to included for both ledgers.

General Journal Entry Examples

The use of the general journal is a three step process.

  1. Information is recorded in the general journal from the appropriate source documents
  2. The journal line items are used to update the subsidiary ledgers (if appropriate)
  3. The journal line items are used to update the general ledger

It should be noted that, if the business maintains subsidiary ledger control accounts in the general ledger, then only step 3 above is part of the posting.

1. General Journal is Updated from Source Documentation

Each transaction is entered into the general journal giving the information listed above. Typical general ledger journal entries would be shown as follows (some information has been omitted to simplify the example) :

Date: July 07

Account Debit Credit
Purchases 90
Accounts payable 90
Total 90 90

Reason: To correct purchase of goods from supplier ABC entered as 300 instead of 390

Date: July 31

Account Debit Credit
Depreciation expense 800
Accumulated depreciation 800
Total 800 800

Reason: To provide for depreciation of equipment for the month of July.

Date: July 31

Account Debit Credit
Accounts payable control 550
Accounts receivable control 550
Total 550 550

Reason: To transfer a balance on accounts payable ledger to accounts receivable ledger.

Date: July 31

Account Debit Credit
Bad debt expense 600
Allowance for doubtful accounts 600
Total 600 600

Reason: To allow for doubtful accounts at the month end.

2. General Journal Used to Update the Subsidiary Ledgers

On a regular (usually daily) basis, the line items in the journal are used to update the subsidiary ledgers as necessary. In the above example, the first general ledger journal is a correction of an error which involves the accounts payable ledger (a subsidiary ledger). The credit side of this entry needs to be entered in the account of supplier ABC in the accounts payable ledger. As the business maintains control accounts in the general ledger, this entry is not part of the double entry posting which is dealt with by step 3 below.

The other two items do not involve a subsidiary ledger and an entry it not required.

3. General Journal to General Ledger

Again, on a regular basis, each of the journals listed in the general journal is used to update the relevant accounts in the general ledger. As the business uses control accounts, all of these entries to the general ledger are part of the posting.

Accounting General Journal Template

Our accounting nominal journal template will help a business to document and post journal entries in a consistent, standard format setting out the required information listed above.

General Journal in Accounting February 8th, 2017Team

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