General journal entry

General journal entry
See also
Opening entries Accounting process Opening stock Contra entry Month end closing Post closing trial balance Closing the accounts Book of original entry Tax books

General journal entry is the master journal that all company transactions are posted in, according to the date events occur - it is a place of initial recording of data. Once a transaction is put in a general journal, its amount is then booked to the appropriate accounts, e.g. in accounts receivable or cash transactions. The general journal is also called as journal book, journal proper or book of original entry and it is part of accounting bookkeeping system(Walther L.M., Skousen CJ. (2010), p. 34).

There are four special journals that include transaction not recorded in general journal(Heintz J., Parry R. (2007), p. 440):

• Sales journal – recording of sales of goods on credit
• Cash receipts journal – recording of money received and cash sales
• Purchases journal – recording of purchases of goods on credit
• Cash disbursements journal – recording of checks written

The general journal is used by the accountants in the company in case of not recording of transaction in a particular journal.

Entries in a General journal

There are seven types of transactions posted in general journal:

1. Opening Entries – opening the accounts by recording of assets, liabilities and capital amount appearing in the balance sheet at the beginning of the accounting year
2. Closing Entries – transferring the closing balances of accounts to the Trading and Profit & Loss in order to finish the financial year
3. Adjustment Entries – recording of outstanding or prepaid expenses and accrued or received in advance income
4. Transfer Entries – transferring the amount of transaction from one account to another account
5. Rectification Entries - correcting errors that might have been made in the books
6. Purchases of Fixed Assets – purchasing of fixed assets on credit
7. Obsolete Assets – se – selling of obsolete assets on credit

Each of general journal contains the journal entries that require following details:

• Date of transaction
• Accounts in ledger
• Amount of transaction
• Description of transaction

As a result of including the journal entries, the general journal incorporates five columns: date, account title, posting reference (usually the invoice number), debit and credit fields(Porter G., Norton C. (2008), p. 122).

Types of entries in general journal

Each general journal entry is created in line of double entry bookkeeping what means that it has to have at least one debit account and one credit account – the total of debit amount must equal the total of credit amount. In literature there are two types of selected entries(Donatila A. J. (2007), p. 366):

• Simply entry – posting of transaction that affects only two accounts (one debit and one credit account)
• Compound journal entry – posting of transaction that affects three or more accounts.

Process of general journal posting

The process of general journal posting is dependent on the effectiveness of entries control and it includes three steps(Singleton T.W., Singleton A.J. (2010), p. 70-71):

1. The information/data is posted in the general journal based on the appropriate source documents
2. The subsidiary ledgers are updated accordingly if needed
3. The general ledger is updated with journal line items.

References

• Donatila A. J. (2007), Fundamentals of Accounting: Basic Accounting Principles Simplified for Accounting Students, AuthorHouse, USA
• Heintz J., Parry R. (2007), College Accounting, Cengage Learning, USA
• Porter G., Norton C. (2008), Financial Accounting: The Impact on Decision Makers, Cengage Learning, USA
• Singleton T.W., Singleton A.J. (2010), Fraud Auditing and Forensic Accounting, John Wiley & Sons, USA
• Walther L.M., Skousen CJ. (2010), Basics of Accounting & Information Processing, Ventus Publishing ApS, New Jersey

Author: Łukasz Buczak