A general journal is an accounting tool companies use to record financial information. This journal is a staple of the double-entry bookkeeping system since debits and credits are recorded to represent actual financial transactions. This journal follows the concept of the accounting equation, which is assets equal liabilities plus owner’s equity. All debits recorded in the journal will equal the total amount of credits recorded by the company, maintaining the integrity of the accounting equation. The general journal is comprised of individual transaction accounts, along with special entries from other special journals.
The general journal often includes individual transaction accounts that do not relate to other special journals. Common general accounts include selling and administrative expenses, payroll, marketing, or advertising expenses, as well as other various overhead accounts. The financial information recorded in these accounts is not generally attributed to a specific business department or products produced by the company. These accounts commonly represent the company’s overhead that must be paid so the business can remain a going concern.
Special entries found in the general journal come from a number of special accounting journals. These journals often include payroll, sales, accounts payable, accounts receivable, and cash. Companies may have several special journals, depending on their business operations and the design of their accounting office workflow. The payroll journal includes all the information relating to payments made when hiring outside labor. This information may be separated as payments made for retirement plans, health, or other benefits, as well as regular compensation and bonuses. Companies often allocate payroll balances to various departments; unallocated amounts may fall into the company’s general journal.
The sales journal includes information relating to all sales of goods or services meet individuals and businesses. This journal may also include information relating to the cost of goods sold to maintain accurate inventory records. Financial information included in the general journal relating to sales often includes adjustments made to sales amounts, sales discounts, or inventory adjustments.
The accounts payable journal lists all amounts owed to vendors, suppliers or other individuals and businesses. Companies use this special journal since they often have extensive accounts payable balances owed to various individuals or businesses. The accounts receivable journal is very similar to the accounts payable journal. However, the receivables journal holds information regarding the monies owed by individuals or businesses to the company. The general journal is often used in conjunction with these special journals for writing off outdated balances or correcting errors made when recording financial tables or receivables amounts.
The final special journal includes entries relating to the company’s cash balances. Any errors related to banking or other adjustments may be recorded in a company’s general journal. Smaller companies with limited capital resources may not use a special journal for recording cash entries, since cash relates to all functions in the business.
