Differences Between General Journal and Ledger

In finance, accountancy is one stickler field in which all the norms and laws require to be followed both in spirit and text. The main financial statements include an income statement, balance sheet, and cash flow statement. To compile the financial statements of a business entity, there are numerous stages of measuring, recording, and presenting the reconciled form of every business transaction. Now, the starting point of this process is to record the business transactions in the general journal.

What is a General Journal?

The general journalGeneral JournalThe General Journal is a book of entry that holds the initial record of every transaction before being posted to the concerned accounts like Sales Journal, Purchase Journal, & Cash Journal etc. read more is one of the books of accounts that records every business transaction relating to all the accounting items like sales, inventory, accounts receivables, accounts payables, adjustment entries, etc., in chronological order. It is the entry point for any business transaction to make its way into the books of accounts of the company before it flows to the next level of classification of transactions in accountancy. It must be noted that there is a concept of duality in accounts that results in a double-entry accounting systemDouble-entry Accounting SystemDouble Entry Accounting System is an accounting approach which states that each & every business transaction is recorded in at least 2 accounts, i.e., a Debit & a Credit. Furthermore, the number of transactions entered as the debits must be equivalent to that of the credits. read more. Hence, every business transaction is recorded in such a way that it affects two accounts in terms of credit and debit entry.

You are free to use this image on you website, templates, etc., Please provide us with an attribution linkHow to Provide Attribution?Article Link to be HyperlinkedFor eg:Source: General Journal vs General Ledger (wallstreetmojo.com)

What is General Ledger?

Once a transaction is posted in a general journal, the next step is to classify the transactions based on the accounts they affect. So a general ledger is one more book of accounts that records the transaction after being posted into a general journal, based on the type of account affected by the transaction in terms of credit and debit.

General Journal vs. General Ledger Infographics

Key Difference Between General Journal and Ledger

The main difference is that the general journal serves as the original book of entry. Both books of accounts provide a way to record business transactions through the double-entry accounting system via debits and credits.

  • First, the business transaction is recorded in the general journal, and then the entry is posted in respective accounts in the general ledger. After the balances for accounts are calculated, the entries are transferred from the trial balanceTrial BalanceTrial Balance is the report of accounting in which ending balances of a different general ledger are presented into the debit/credit column as per their balances where debit amounts are listed on the debit column, and credit amounts are listed on the credit column. The total of both should be equal.read more.A general journal usually contains columns for serial numbers, dates, accounts, and debit or credit records in addition to describing every transaction. Companies also include account-specific journals, such as the sale or purchase journalsPurchase JournalsPurchase Journals, also known as Purchase Book or Purchase Daybook, are special journals which a Company uses to keep track of all the credit purchases. While Purchase Journal records credit transactions, a General Journal records cash purchases. read more, which records only specific types of transactions, whereas general journals record all remaining transactions.A general ledger contains all relevant details regarding all the accounts for which entries are already present in the general or specific journals. A ledger takes into consideration five accounting items: ExpensesAssetsRevenuesLiabilitiesShareholder’s Equity Unlike a journal format, a ledger has a two-column, T-shaped table for every accounting item with an account title at the top and a record of debit and credit entries. As per the convention, the left side of the T-shaped table usually contains the debitDebitDebit represents either an increase in a company’s expenses or a decline in its revenue. read more entries, and the right of the table contains the credit entries. Many companies also mentioned journal-specific information in a general ledger like serial numbers, dates, and transaction descriptions.

Comparative Table

Applications

With the abundance of technological advancements in the fields of software, there are numerous accounting solutions provided by many technology giants like Oracle Suite, Tally, etc. Most such software products offer a centralized repository to log entries into journals and ledgers. Due to such accountancy software products, recording transactions have become far easier. There is no need to maintain all the books separately and reconcile manually as this software helps in automating such redundant manual tasks. Also, the user interface is designed so that the user entering the humongous volume of A business transaction is the exchange of goods or services for cash with third parties (such as customers, vendors, etc.). The goods involved have monetary and tangible economic value, which may be recorded and presented in the company’s financial statements.read morebusiness transactionsBusiness TransactionsA business transaction is the exchange of goods or services for cash with third parties (such as customers, vendors, etc.). The goods involved have monetary and tangible economic value, which may be recorded and presented in the company’s financial statements.read more does not have to care about the central repository and the background processing to reconcile the entries that finally make it to the financial statements.

  • ExpensesAssetsRevenuesLiabilitiesShareholder’s Equity

Conclusion

The General ledger is more of a summary at the account level of every business transaction, which comes from various journals containing chronological accounting entries. The general journal is a catch-all book of accounts where the initial entry of the business transaction is recorded for the first time in chronological order, making the general journal an excellent place to review accounting transactions. This information entered into the journal and summarized into the ledger is then aggregated further into a trial balance, which is used to generate the financial statements of the businessFinancial Statements Of The BusinessFinancial statements are written reports prepared by a company’s management to present the company’s financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more entity.

The use of journals has been on a steep decline with the increasing use of automated accounting systems. Most accounting systems allow the user to enter information directly into the general ledger, skipping the need to make journal entries. So, the need for the journal may have been becoming increasingly obsolete in the computerized environment, but it still holds great importance in bookkeepingBookkeepingBookkeeping is the day-to-day documentation of a company’s financial transactions. These transactions include purchases, sales, receipts, and payments.read more.

This has been a guide to the General Journal vs. General Ledger. Here we discuss the top differences between general ledger vs. general journal along with its applications, infographics, and comparison table. You may also have a look at the following articles –

  • General Ledger vs Sub Ledger DifferencesAccounts Payable vs Notes PayableJournal vs LedgerFull Form of GL