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Word of the Week 'Journal'

January 16, 2019

The record of journal entries appearing in order by date. Some refer to the journal as the book of original entry, since the entries are first recorded in a journal. From the journal the entries will be posted to the designated accounts in the general ledger. With manual systems there are likely to be a sales journal, purchases journal, cash receipts journal, cash disbursements journal, and the general journal. With computerized accounting systems, it is likely that the general journal will be used sparingly. The software is likely to record the other transactions automatically as invoices are entered, checks are prepared, receipts processed, etc.

 

What is the difference between a general ledger and a general journal?

Journals are referred to as books of original entry. Accounting entries are recorded in a journal in order by date. A company might use special journals (sales, purchases, cash disbursements, cash receipts), or its accounting software will generate entries for routine transactions, but there will always be a general journal in which to record non routine transactions, such as depreciation, bad debts, sale of an asset, etc. In the general journal you must enter the account to be debited and the account to be credited and the amounts. Once a transaction is recorded in the general journal, the amounts are then posted to the appropriate accounts.

Accounts (such as Cash, Accounts Receivable, Equipment, Accumulated Depreciation, Accounts Payable, Sales, Telephone Expense, etc.) are contained in the general ledger.

To recap...the general ledger houses the company's accounts. The general journal is a place to first record an entry before it gets posted to the appropriate accounts.

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