General journal

By: Rashid Javed | Updated on: October 21st, 2021

A Journal entry is the first step of the accounting or book-keeping process. In this step, all the accounting transactions are recorded in general journal in a chronological order. The general journal is maintained essentially on the concept of double entry system of accounting, where each transaction affects at least two accounts.

Other names used for general journal are “journal book” and “book of original entry”.

The process of making a journal entry

The first step in the process of preparing a journal entry is to analyze the accounts involved in a business transaction and then apply the rules of debit and credit based on the type of each account. After identifying the accounts involved in the transaction and deciding upon the applicable rules, the journal entry is recorded in the general journal in a specified format which includes the following details:

  1. Date of transaction
  2. Ledger accounts involved
  3. Amount of transaction
  4. A brief narration to describe the transaction

Format of general journal

Let’s understand the format of general journal and the process of making a journal entry through an illustration.

Transaction:

January 05: Purchase of machinery by making cash payment of $15,000.

Analysis of transaction:

journal-entries-img1

Recording journal entry:

According to rules of debit and credit, when an asset increases, its account is debited and when an asset decreases, its account is credited. In this transaction, machinery (an asset) is increasing, and cash (an asset) is decreasing.  So the journal entry would be made as follows:

journal-entries-img2

All business transactions are recorded in the general journal in a manner illustrated above. After making journal entries in the journal, they are periodically posted to the ledger accounts.

A D V E R T I S E M E N T

Example:

The Moon Service Inc. engaged in the following transactions during the month of November 2015:

  • Nov. 01: Issued 20,000 shares of common stock at $20 per share
  • Nov. 03: Paid office rent for the moth of November $500.
  • Nov. 06: Purchased office supplies $250.
  • Nov. 12: Purchased office equipment on account $4,500
  • Nov. 16: Purchased business car for $25,000. Paid $10,000 cash and issued a note for the balance.
  • Nov. 21: Billed clients $24,000 on account.
  • Nov. 25: Declared dividends $3,000. The amount of dividends will be distributed in December.
  • Nov. 28: Paid utility bills for the month of November $180.
  • Nov. 29: Received $20,000 cash from clients billed on November 21.
  • Nov. 30: Paid salary for the month of November $7,500

Required: Record the above transactions in a general journal.

Solution:

journal-entries-img3

The use of software packages for journalizing:

These days most of the companies use some form of software package that automates many tasks involved in journalizing their business transactions. A basic understanding of manual procedure to record transactions in a general journal is, however, necessary to know how software packages perform their function.

Click on the next link below to see how ledger accounts of Moon Service Inc. will be prepared.

A D V E R T I S E M E N T
27 Comments on General journal
  1. Jessica

    Nov. 29th states you received the full $24,000 from your client but in your journal it only says $20,000, why is this?

    1. iam_dbz

      the question says $20,000 not $25,000

    2. abu ayub shakib

      first you can see the journal date 21Nov full amount on account. on the other hand nov 29 said that you only received 20000 not full amount

    3. mohamed abdulkadir muse

      20000 you get by why 4000 still account receivable but in account must be identify 24000 as revenue .

    4. Sunandan Chatterjee

      Require reply of above query of 24000 to 20000

      1. Accounting For Management

        The amount of services provided was 24000 still accounts receivable. Out of which only 20,000 have been collected. The remaining balance of 4,000 is yet to collect from receivables.

        Regarding revenue realization, we must recognize the revenue of 24,000 on Nov. 21 because we provided the services on Nov. 21. The revenue is recognized when you earn.

    5. em

      The amount collected is only $20000.Just record the amount received. $4000 is a receivable for the next entry is there is any.

    6. Syed Younus Ali Zaidi

      because they not settlement

    7. Don

      Where would the remaining 4,000 go in the Journal entries page?

  2. Govind Kumar Thakur

    Very Nice

  3. Jamshid Rasool

    The Best Information about accounting Cycle

  4. emmanuel

    your learning it is so good. i like it

  5. junior

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  7. anne

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  9. Sanjeev Kumar

    Good,knowledgeable, for Debit and Credit.

  10. MATHIAS ANDAKO

    THANK YOU MUCH FOR THE HELP .

  11. Manahil

    I just need to know what will be the general journal of this transaction
    On 1 may/ paid $45000
    cash and issued a note for the balance

  12. Yakison Kuna

    Nice refresher

  13. Elaine

    Thanks. My knowledge is 50 years old; help my church with the record
    keeping. Know more than most. Again, thanks!

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