So, you’ve just made a business transaction—maybe you finally paid that vendor who’s been hounding you, or perhaps you splurged on a fancy new espresso machine for the office (because caffeine equals productivity, right?). Whatever it is, congrats! You’ve stepped into the thrilling world of accounting. Don’t roll your eyes just yet; it’s more exciting than it sounds. Promise.

Every grand adventure has to be documented somewhere, and in the business world, that place is the general journal. Think of it as your company’s financial diary—only instead of juicy secrets, it’s filled with numbers and transactions (which are arguably just as thrilling). This trusty book records all your original transactions in chronological order. That’s why some folks call it the book of original entry, the chronological book, or even the daybook. In this article, we’ll dive into what a general journal is and walk through some general journal entry examples. Buckle up; it’s time to demystify the first phase of accounting!

Related: Sale of Assets Journal Entry Examples

General Journal Explained: Your Company’s Financial Storybook

Alright, let’s cut to the chase. The general journal is where all your company’s financial tales are first penned down. Think of it as the original manuscript of your business’s financial saga. It’s the first place where transactions are recorded as they happen, in chronological order. So yes, it’s essentially your business’s diary—but with fewer teenage angst entries and more numbers.

Typically, businesses keep a general journal for each fiscal year. When a new year dawns, it’s out with the old journal and in with the new—kind of like swapping out an old planner for a fresh one. Each page in the general journal has columns for dates, account titles, and those all-important debit and credit columns. Each entry captures the essentials: the date of the transaction, the accounts involved, and the amounts debited and credited. It’s like a well-organized scrapbook of your company’s financial moves.

In your general journal, entries might play solo or roll with a squad of similar transactions. Once you jot down a transaction, the amounts get posted to their respective ledger accounts—like the Equipment account, Accounts Payable, Accounts Receivable, or the ever-popular Cash account. Some businesses get fancy and keep specialized journals—like sales or purchase journals—that only record specific types of transactions. But the general journal? It’s the catch-all hero that records everything else.

The Purpose of a General Journal: More Than Just Numbers

So, why bother with a general journal? Well, besides being a thrilling read for accountants, it serves several key purposes:

• Tracking Assets and Liabilities: Keep tabs on what you own and what you owe. Kind of important when you think about it.
• Recording Business Events: Capture every financial twist and turn, from mundane purchases to monumental sales.
• Reconciling Accounts: Ensure your accounts are accurate and in harmony. No one likes surprise discrepancies.
• Taxation and Audits: Track investment transactions for those delightful tax seasons and potential audits.
• Budgeting: Plan and allocate costs and expenses appropriately. Avoiding budget overruns is always a plus.
• Monitoring Revenue and Expenses: Keep an eye on the money flowing in and out. Knowledge is power, after all.
• Posting to Ledger Accounts: Release specific entries to the general ledger accounts, keeping everything organized.
• Producing Financial Statements: Use the data to create your financial statements—like the grand finale of your financial story.

Maintaining an accurate and up-to-date general journal is crucial. It’s like tending to a garden; neglect it, and things get messy fast. With a well-kept journal, accountants can easily track spending, spot any miscalculations, and ensure all funds are where they’re supposed to be. Plus, it’s the foundation for compiling key financial statements like income statements, balance sheets, and cash flow statements. In short, it’s the unsung hero of your accounting world.

See also: Gain on Sale Journal Entry Examples

General Journal Examples: Entry Formats with Calculations—Let’s Get Technical

Now that we’ve got the basics down, let’s dive into the nitty-gritty of general journal entries. While bookkeepers might add their personal flair, the general format is pretty standard across the board. Each entry records transactions in order by date and includes two sides: debits and credits. It’s the classic accounting equation in action, ensuring everything stays balanced.

Here’s the scoop on what a standard general journal entry includes:

Date	Description	Posting Reference (PR)	Debit	Credit

Let’s break down those five columns:

Date: Marking Time in the Financial Universe

Every transaction gets a date stamp, noting exactly when it happened. Usually, you’ll write the year at the top and then just note the month and day for each entry. It’s all about keeping things chronological—because in accounting, as in comedy, timing is everything.

Description: Telling the Story Behind the Numbers

The description column lists the accounts involved and a brief narration of the transaction. Debit entries are listed first, and credit entries follow, indented slightly to the right. An explanation beneath the entries adds context—think of it as the footnote to your financial story.

Posting Reference (PR): Connecting the Dots

This column is your roadmap, indicating where each transaction is posted in the ledger accounts. It’s like leaving breadcrumbs for anyone retracing the transaction’s steps. For example, if the Cash account is on page 101 of your ledger, you’d note “101” in the PR column next to any cash entries.

Debits and Credits: The Balancing Act

Finally, the debit and credit columns show the amounts affecting each account. Remember, in accounting, every debit has a corresponding credit. It’s the universe’s way of keeping balance—a comforting thought, really.

Example Format of General Journal Entries

Here’s how it all comes together:

Date	Description	PR	Debit	Credit
2022, Jan 1	Inventory	17	$5,000
	Cash			$5,000
	To record inventory payment

Rules for Creating General Journal Entries: The Do’s and Don’ts

Before you dive in, here are some golden rules to keep in mind:

• Debits and Credits Must Balance: The total debits must equal total credits for each entry. No exceptions.
• Debit the Receiver, Credit the Giver: This helps determine which accounts to debit and credit.
• Debit Expenses and Losses, Credit Income and Gains: This keeps your income statement accurate.

If your debits and credits don’t balance, it’s like a wobbly table—you need to fix it before moving on.

Related: Credit Sales Journal Entry Examples

General Journal Entries Examples: Bringing It All Together

Let’s put theory into practice with some real-world examples. We’ll walk through a few scenarios to see how general journal entries capture business transactions.

General Journal Entry Example 1: Edward’s Retail Adventures

Edward runs a retail store and records the following transactions:

• June 5: Purchased $1,000 worth of wine from ABC Wine Company, but the goods arrived damaged. He returned them, and his account was credited.
• June 17: Customer Anne Richard returned merchandise worth $500 because it didn’t meet her needs. Edward issued a credit to her account.
• June 30: Recorded monthly depreciation expense of $1,500.

Here’s how Edward would record these in his general journal:

Date	Description	PR	Debit	Credit
2022, June 5	Accounts Payable: ABC Wine Company		$1,000
	Purchase Returns and Allowances			$1,000
	To record the return of damaged wine
June 17	Sales Returns and Allowances		$500
	Accounts Receivable: Anne Richard			$500
	To record merchandise returned by customer
June 30	Depreciation Expense		$1,500
	Accumulated Depreciation			$1,500
	To record monthly depreciation expense

General Journal Entry Example 2: Jotscroll Company’s January Transactions

Jotscroll Company records the following transactions in January 2021:

Date (Month)	Date (Day)	Transactions
January	1	Started business with $300,000 in cash
	5	Purchased goods for $1,500 cash
	7	Sold goods for $2,000 cash
	9	Purchased goods from ABC Ltd for $3,000 on credit
	11	Received $2,500 interest in cash
	13	Sold goods to Anne for $5,000 on credit
	18	Returned goods worth $500 to ABC Ltd
	20	Received returned goods from Anne worth $1,000
	25	Owner withdrew $2,200 for personal expenses
	30	Paid rent of $3,500

The general journal entries would look like this:

Date	Description	PR	Debit	Credit
Jan1	Cash		$300,000
	Capital			$300,000
	To record capital introduced to start the business
Jan5	Purchases		$1,500
	Cash			$1,500
	To record the purchase of goods with cash
Jan7	Cash		$2,000
	Sales			$2,000
	To record goods sold for cash
Jan9	Purchases		$3,000
	ABC Ltd account (accounts payable)			$3,000
	To record goods purchased on credit
Jan11	Cash		$2,500
	Interest			$2,500
	To record interest received in cash
Jan13	Anne’s account (accounts receivable)		$5,000
	Sales			$5,000
	To record goods sold on credit
Jan18	ABC Ltd account		$500
	Purchase return			$500
	To record goods returned to the supplier
Jan20	Sales return		$1,000
	Anne’s account			$1,000
	To record goods returned from customer
Jan25	Drawings		$2,200
	Cash			$2,200
	To record cash withdrawn for personal expenses
Jan30	Rent		$3,500
	Cash			$3,500
	To record payment of rent

And so on for each transaction.

Takeaways

Remember, each entry must balance, so double-check your debits and credits.

Read also: Cash Sales Journal Entry Examples