What is the difference between General Journal and General Ledger?

Journals, also known as Books of Prime Entry or Books of Original Entry are the first books of accounting in which transactions are recorded in a chronological order following certain rules and regulations of accounting that helps summarizing the information in a way that preserves the value and completeness of financial information.

The term Entry is used in accounting world to signify the recording of transaction in journal or journals.

In some cases, if volume of transaction is large and thus keeping track of transactions is not easy then more than one journal are maintained. Usually journals are divided on the basis of entity’s functions so that each journal holds the information about specific set of transactions. For example, Sales Journal keeps the record of all credit sales.

General journal, as the name suggests, usually holds the record of such transaction that are not recorded in any other journal. In other words such transactions for which no separate journal is kept ended up in general journal. For example, sale or purchase of non-current asset, additional capital invested in the business.

Most often separate journals are maintained sale and purchase of inventory and any other transaction is recorded in general journal. However, entity may have even more journals depending on the information needs. To learn more about journals and their types please read What is Journal and how many types of journals are in accounting?

Once transactions are entered in relevant journals, this information is then posted to specific accounts which are most often grouped together in the form of ledgers.

The term posting is used to signify the recording of information in ledgers by seeking financial data from journals.

To quickly understand the difference between journal, account and ledger and how these are connected to each other consider the following figure and points:

  • Journal is place where transaction is first recorded after approval from internal control system of the entity which is usually granted by raising a certain source document which serves as an evidence of transaction.
  • Account is a place to which information is posted from journals. Simply put, account is a place where transaction related to particular item or activity of the business are recorded. For example, sales account, purchases account, salary account.
  • Ledger is a place where accounts of similar nature are grouped together. For example sales ledger contains the accounts of all the debtors. purchases ledger contains the accounts of all the creditors.

General ledger, just like general journal, that holds all such accounts for which no separate ledger is maintained. For example, Machinery account, Capital account, Salary expense account etc.

I hope this would be now clear that the word journal is not equivalent to general journal. Similarly, ledger is not equivalent to general ledger. But once students grasp the concept how entries and postings are done, they easily understand of which journal and ledger discussion or question is about even if no specific names are used. So, if you have just stated learning how to record transactions, do as much practice as you can!

Summary
  • General journal is a place where such transactions are recorded for the first time for which no separate or special journal is maintained. For example: sale of non current asset.
  • General ledger is a place where such accounts are grouped together for which no separate or special ledger is maintained. For example: Capital account.

4 COMMENTS

  1. great article…. thanks 🙂

  2. I was having hard time to differentiate this 2 thing but you help me alot

  3. Daffa Elseed Ahmed Daffa Elseed

    Thank you so much for these invaluable information.
    Good Bless you

  4. binitha mini p soman

    based on the above information give one word questions with four options

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