Definition:

The general journal is the book that entity firstly records all of the daily financial transactions in it. It is also called a book of original entries because all of the transactions are records in this book before moving to other books.

The entity also records other non-financial transactions that occur in the business into this book also. That non-financial transaction included depreciation, adjustments as well as an accrual. Those financial transactions including sales transactions, purchase transactions, cash receipts, cash payments, and many other important financial transactions.

Journal entries are the first step in the accounting cycles where an accountant or bookkeeper analyzes the business transaction that occurred every day in business and then recorded a journal entry on the general journal.

Sometimes, the general journal is called the book of original entries. This is because all of this book initially records all of the business’s financial transactions before moving into other books.

Transfer from the general journal to General Ledgers:

The accountant needs to transfer the journal entries from the general journal to the general ledger or the specific ledger.

For example, any journal entries related to sales transactions should transfer to sales ledgers, and all the transfers must respect the debit and credit rule. The increase in sales should be recorded on the credit side of the sales ledger.

However, if an entity using the accounting system to records its financial transactions, there is no need to transfer the journal entries from the general journal to ledger accounts or general ledgers.

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When an accountant book the transactions, and the authorized person approves it, that transaction will directly affect the general journal, general ledgers, trial balance, and general ledgers.

Special journal:

Sometimes, an accountant or bookkeeper might decide not to records the journal entries of certain kinds of financial transactions in the general journal. But the record that kind of financial transaction in their own journal. This is called a special journal.

The same as a general journal, the special journal is used in the manual accounting system only. If the entity uses a system to records its accounting transaction, there is no special journal use.

There are many special journals, and the four common types of special journals that normally use are Sales Journal, Purchase Journal, Cash Receipts Journal, and Cash Payments Journal. This is because this kind of journal has the most transactions.

Template:

As you can see in the general journal template above, the key information that should be included at the top is the name of the entity and the period that the journal is recording.

In the detail of the journal, key information that should be included is a line of the journal, date of the transactions, name of the account, and description of transactions. Additional information that should include is a reference and, more importantly, is debit and credit.

This is the key information that should be included in the journal’s format, and there may be a difference in format depending on the entity’s management decision.

Example:

As you can see in the example above, we have the entity’s name, the ABC Co. Accounting period from 01 January 2018 to December 2018.

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The first entries for this example are related to cash transactions that shareholders inject into the entity for investment capital. That is the reason why we can see there is a debit to cash and credit to capital. The date and description are clearly stated here.

The second transaction is related to rent expenses. Expenses are increased in debit, so we need to debit the amount when we record it in the journal. If the entity pay by cash, then credits the same amount to cash. If the bank pays it, then we should credit the same amount by banks.

The recording of journal entries needs to follow the debit and credit roles. For example, expenses are increasing in debit, and revenues are increasing in credit.

Assets have the same nature as expenses. They increase in debit and decrease in credit. Equity is the same as liabilities and revenues. The increase is in credit, and the decrease is in debit.

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