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General Journal vs General Ledger

Updated on April 16, 2024
Article byWallstreetmojo Team
Reviewed byDheeraj Vaidya, CFA, FRM

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.

General Journal vs General Ledger

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The key difference between General Journal and General Ledger is that the general journal is the journal of the company in which initial record keeping of all the transaction is done, which are not recorded in any of the specialty journal maintained by the company like purchase journal, sales journal, cash journal, etc., whereas, general ledger prepared by the company is the set of the different master accounts in which the transactions of the business are recorded from the related subsidiary ledgers.

General Journal Vs General Ledger Explained

Both a general journal and a general ledger have been an integral part of the accounting process of business across the world due to the clarity and completeness in documenting business transactions.

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.

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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.

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. Therefore, 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.

Infographics

Now that we understand the basics of both a general ledger and a general journal, let us refer the infographics below to understand their differences better through the visual representation.

General Journal VS General Ledger info

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Key Differences

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. Let us discuss other such differences between these two key accounting concepts through the points below.

Comparative Table

Let us put both a general journal and a general ledger head-to-head and have a deeper understanding of their differences and their significance in terms of accounting through the comparative table below.

BasisGeneral JournalGeneral Ledger
DefinitionIt refers to the book of accounts that records every business transaction chronologically.It refers to the book of accounts which contains the entries, classified based on affected account types, after being first posted into a general journal and finally making its way into a general ledger.
Entry PointIt is the first entry point of any business transaction to make it to the company’s book of accounts.It is the second entry point in accountancy for recording a transaction after it enters the accounting system through a general journal.
Entry BasisEvery entry is recorded based on chronological order.Every entry is recorded based on affected account types.
Accountancy SystemIt follows the concept of duality, i.e., every transaction recorded under the double-entry accounting system.It also follows the concept of duality, i.e., every transaction recorded under the double-entry accounting system.
ExampleDate: December 31, 2018
Debit to Depreciation ExpenseDepreciation ExpenseDepreciation is a systematic allocation method used to account for the costs of any physical or tangible asset throughout its useful life. Its value indicates how much of an asset’s worth has been utilized. Depreciation enables companies to generate revenue from their assets while only charging a fraction of the cost of the asset in use each year. read more for $1,000
Credit to Accumulated DepreciationAccumulated DepreciationThe accumulated depreciation of an asset is the amount of cumulative depreciation charged on the asset from its purchase date until the reporting date. It is a contra-account, the difference between the asset's purchase price and its carrying value on the balance sheet.read more for $1,000
Depreciation Expense: Debited as of December 31, 2018, for $1,000
Accumulated Depreciation: Credited as of December 31, 2018, for $1,000

Applications

After having an in-depth understanding of both concepts individually and their differences let us understand their applicability in the world of business and accounting through the points below.

This has been a guide to General Journal vs. General Ledger. Here we explain its differences with its applications, infographics, & comparison table. You may also have a look at the following articles –