Difference Between a General Journal & General Ledger in Accounting

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Accountants use different tools when recording and reporting a company’s financial transactions. Two of the most common tools are the general journal and general ledger. Most -- if not all -- companies use these tools to organize financial information in an understandable manner. Though related, each item has a specific role in the accounting possible.

General Journal

The general journal is a chronological record of all transactions in a company’s business operations. Accountants record specific journal entries in the general journal that represent changes in two or more financial accounts. For example, a company purchases bike parts for $500. An accountant debits inventory and credits cash, placing the entry on a particular date with a brief description in the general journal.

General Ledger

In accounting, the general journal is the main record for financial accounts. Each account holds specific information relating to a group of transactions. Accounts fall under specific groups, such as revenue, cost of goods sold, asset, expense and liability. The general ledger contains the account number, account name and current balance for the account. The accounts in the general ledger lead to the trial balance, which is the tool a company uses to prepare financial statements.

Relationship

The general ledger requires information from the general journal in order to maintain proper account balance. Each general ledger account has debits and credits in it. The debits and credits are often the result of journal entries entered into the general journal. When accountants source a general ledger transaction, they will often go to the general journal. This creates a necessary relationship between the two accounting tools.

Considerations

A general journal is not always necessary. Many companies use different journals for specific transactions. For example, cash, accounts payable or accounts payable journals hold similar information to the general journal. Foregoing the use of a general journal also creates a more accurate accounting system. Rather than hunting through a series of entries, accountants can review one journal that holds specific information.

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References

  • "Fundamental Financial Accounting Concepts"; Thomas P. Edmonds, et al.; 2011
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