When an accounting transaction occurs, it is first recorded in the accounting system in a journal. There may be several journals, which are either designed to contain special types of transactions (such as for cash receipts, cash disbursements, or sales) or for all other types of transactions. These other transactions are recorded in the general journal. Examples of entries made into the general journal are asset sales, depreciation, interest income, interest expense, and the sale of bonds or shares in the company to investors.
Thus, the general journal is a catch-all location for the initial entry of certain transactions that do not occur in sufficient volumes to deserve recordation in a specialized journal. These transactions are recorded in chronological order, which makes the general journal an excellent place in which to research accounting transactions by date.
The general ledger contains a summary at the account level of every transaction that a business has engaged in. This information comes from the various journals in aggregated form, in summary-level entries. The information in the general ledger is then aggregated further into a trial balance, from which the financial statements are created.
Thus, the general journal is where those transactions are first recorded that are not being stored in a subject-specific journal, while the general ledger stores the summary-level information from each of the journals. This means that the general journal contains a larger amount of detailed accounting information than the general ledger, which in turn contains more detailed information than the financial statements.
The use of journals has declined since the advent of computerized accounting systems. Many smaller accounting software systems store all transactional information directly in the general ledger, dispensing with all of the various types of journals, including the general journal.