Journal and Ledger

Journals

In accounting, a first recording of financial transactions as they occur in time, so that they can then be used for future reconciling and transfer to other official accounting records such as the general ledger. A journal will state the date of the transaction, which account(s) were affected and the amounts, usually in a double-entry bookkeeping method.

For an individual investor or professional manager, a detailed record of trades occurring in the investor's own accounts, used for tax, evaluation and auditing purposes.

Journalising is an essential part of objective record-keeping and allows for concise review and records transfer later in the accounting process. Journals are often reviewed as part of a trade or audit process, along with the general ledger(s).

A general journal entry includes:

1.   The date of the transaction;

2.   Titles of the accounts debited and credited;

3.   The amount of each debit and credit; and,

4.   An explanation of the transaction also known as a Narration.

An Example of a General Journal

General Ledgers

A company's main accounting records. A general ledger is a complete record of financial transactions over the life of a company. The ledger holds account information that is needed to prepare financial statements, and includes accounts for assets, liabilities, owners' equity, revenues and expenses.

A general ledger is typically used by businesses that employ the double-entry bookkeeping method - where each financial transaction is posted twice, as both a debit and a credit, and where each account has two columns. Because a debit in one account is offset by a credit in a different account, the sum of all debits will be equal to the sum of all credits.

The ledger is a permanent summary of all amounts entered in supporting journals which list individual transactions by date. Every transaction flows from a journal to one or more ledgers. A company's financial statements are generated from summary totals in the ledgers.^[2]

Ledgers include:

·         Sales ledger, records accounts receivable. This ledger consists of the financial transactions made by customers to the company.

·         Purchase ledger records money spent for purchasing by the company.

·         General ledger representing the 5 main account types: assets, liabilities, income, expenses, and equity.

For every debit recorded in a ledger, there must be a corresponding credit so that the debits equal the credits in the grand totals.