The difference between the general ledger and general journal
/What is a General Ledger?
A general ledger is the master set of accounts that summarize all transactions occurring within an entity. There may be a subsidiary set of ledgers that summarize into the general ledger. The general ledger, in turn, is used to aggregate information into the financial statements of a business; this can be done automatically with accounting software, or by manually compiling financial statements from the information in a trial balance report (which is a summarization of the ending balances in the general ledger).
What is a General Journal?
The general journal is part of the accounting record keeping system. When an event occurs that must be recorded, it is called a transaction, and may be recorded in a specialty journal or in the general journal. There are four specialty journals, which are so named because specific types of routine transactions are recorded in them. These journals are the sales journal, cash receipts journal, purchases journal, and cash disbursements journal. There could be more specialty journals, but the four accounting areas represented by these journals contain the bulk of all accounting transactions, so there is usually no need for additional journals. Instead, by default, all remaining transactions are recorded in the general journal. Once entered, the general journal provides a chronological record of all non-specialized entries that would otherwise have been recorded in one of the specialty journals.
Comparing the General Ledger and General Journal
There are several key areas in which the general ledger and general journal differ from each other. They are as follows:
Types of information stored. The general ledger contains a summary of every recorded transaction, while the general journal contains the original entries for most low-volume transactions. 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.
Level of detail stored. 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.
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FAQs
How do entries in the general ledger differ from those in the general journal?
Entries in the general journal are recorded in chronological order and include full transaction details, such as the date, accounts debited and credited, amounts, and an explanatory description. In contrast, entries in the general ledger are organized by individual account, showing the cumulative effect of posted transactions on each account balance. The journal documents the transaction event, while the ledger reflects its impact on financial position and performance.
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