General journal entry is the first step in the accounting cycle. Under this step transactions are recorded in a chronological order (one by one), indicating:
- Transaction date
- General ledger accounts impacted (Debited and Credited) – number, name of the particular account is indicated
- Amounts underlining the transactions
Double entry is done, as usually double entry accounting principle is being applied. Therefore one account of General ledger (or several accounts) will be debited and one account (or several accounts) will be credited.
Debits will have to be equal to credits
General journal serves as a list of all business transactions occurred during the accounting period. So general journal entries serve as a summary of all transactions. This summary is then moved (posted) to general ledger and based on the further on financial statements will be prepared.
General Journal Entries – Format
It is common that general journal format is columnar, i.e. separate columns include number and name of general ledger account, separate column is for debits and separate columns is for credits. In this way it is easier to check equality between Debits and Credits.
For example:
In case the company acquired on account inventory, the following general journal entry will be made
Inventory $ XXX
Accounts payable $ XXX
General journal entries will also include adjusting entries, posted at the end of the accounting period, reversals of transactions, if needed.
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