General Journal

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General Journal or Journal Proper – Definition and Explanation:

Majority of all business transactions pass through books of original entry before being posted to ledgers. General journal sometimes called journal proper or simply a journal. It is a book of original entry to record non routine transactions for which no special journal exists. This means general journal shows non cash transactions excluding purchases, sales and returns of goods.

Preparation Procedure and Posting Entries in General Journal:

The procedure of entering business transactions in general journal can be explained with the given diagram:

general journal procedure

The following is a brief list of transactions to be recorded in general journal:

(i) Purchases or sales of non-current assets on credit.

(ii) Entries to rectify the errors.

(iii) Adjusting entries.

(iv) Entries to open a new set of books.

(v) Entries to close nominal accounts to income statement.

(vi) Entries to record dissolution of business.

(vii) Entries to record purchase of a business.

Entries in general journal normally consists of; or components of general journal:

(a) Date of transaction, i.e., year in the first line, whereas month and date in the second line.

(b) Details relating to the accounts affected by transaction. We always place the name of the account debited in the first line close to the left hand margin in line.

(c) Narration sometimes called narrative containing brief but comprehensive information regarding the subject matter of the transaction.

(d) Reference to ledger account or original source document (often called a folio).

(e) The debit amount is written in the first amount column against the name of account debited and the credit amount is written in the second amount column against the name of account credited.

Format:

Following is the format use for general journal:

format of general journal

Solved Example:

The following transactions relate to XYZ and Co. for the last week of January 2019:

January 27 – A vehicle costing $6000 was purchased on credit from Unique Motors.

January 28 – Major repairs to equipment costing $1200 initially recorded as repairs are now transferred to equipment account.

January 31 – Drawings of $2800 made by owner during the year are closed or transferred to his capital account.

Required:

Prepare a general journal to record the above transactions:

Solution:

example general journal

Posting from General Journal to the Ledger:

Once the entries are made in the general journal, the entries should then be posted to the actual double entry accounts which may be in any part of the ledger, i.e., these accounts could be in the sales ledger, purchases ledger or in the general ledger.