The key difference between General Journal and General Ledger is that 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.
Differences Between General Journal and Ledger
In the world of finance, accountancy is one stickler field in which all the norms and laws are required to be followed both in spirit and text. The main financial statements include an income statement, balance sheet, and cash flow statement. In order 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 all of this process is at recording the business transactions in the general journal.
What is a General Journal?
The general journal 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 kind of 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 system. 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 into a general journal, the next step is to classify the transactions based on the accounts which they affect. So general ledger is one more book of accounts that records the transaction, after being posted into a general journal, on the basis of 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 between them is that the general journal serves as the initial book of entry. Both of these 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 general ledger to trial balance.
- A general journal usually contains columns for serial numbers, dates, accounts and debit or credit records in addition to providing a description for every transaction. Companies also contain some account-specific journals such as sale or purchase journals 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 all already present in the general or specific journals. A ledger takes into consideration five accounting items:
- Expenses
- Assets
- Revenues
- Liabilities
- Shareholder’s Equity
- Unlike the format of a journal, a ledger has a two-columned, T-shaped table for each and every accounting item with an account title at the top of the T-shaped table, and a record of debit and credit entries in the table. As per the convention followed, left the side of the T-shaped table usually contains the debit entries, the right of the T-shaped table contains the credit entries. Many companies also mentioned some journal-specific information into a general ledger like serial numbers, dates, and description of the transaction.
Comparative Table
| Basis | General Journal | General Ledger | ||
| Definition | It refers to the book of accounts which record every business transaction in chronological order | It refers to the book of accounts which contains the entries, classified on the basis of affected account types, after being first posted into a general journal and then finally making its way into a general ledger | ||
| Entry Point | It is the first point of entry of any kind of business transaction to make it to the company’s book of accounts | It is the second point of entry in accountancy for recording a transaction after it enters the accounting system through general journal | ||
| Entry Basis | Every entry is recorded on the basis of chronological order | Every entry is recorded on the basis of affected account types | ||
| Accountancy System | It 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 | ||
| Example | Date: December 31, 2018 Debit to Depreciation Expense for $1,000 Credit to Accumulated Depreciation 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
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 of such software products provide a centralized repository to log entries into journals and ledger. 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 help in automating such redundant manual tasks. Also, the user interface is designed in such a manner that the user entering the humungous volume of business transactions do not have to really care about the central repository and the background processing to reconcile the entries that finally make it to the financial statements.
Conclusion
The general journal is a catch-all book of accounts where initial entry of the business transaction is recorded for the first time, in chronological order, making general journal an excellent place to review accounting 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. This information entered into the journal and summarised into the ledger is then aggregated further into a trial balance, which is used to generate the financial statements of the business entity.
The use of journals has been on a steep decline with the increasing use of automated accounting systems. Most of the accounting systems allow the user to information directly into the general ledger and skipping the need to make journal entries. So, the need for the journal may have been getting more and more obsolete in the computerized environment but it still holds great importance in the world of bookkeeping.
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