The difference between the general ledger and general journal
/The general ledger and general journal are both components of a double-entry accounting system. In order to understand how a double-entry system functions, we need to have a clear understanding of the differences between the general ledger and general journal, which are noted below.
Types of Information Stored
The general ledger contains a summary of every recorded transaction, while the general journal contains the original entries for most low-volume transactions. When an accounting transaction occurs, it is first recorded in the accounting system in a journal. There may be several journals, which are either designed to contain special types of transactions (such as for cash receipts, cash disbursements, or sales) or for all other types of transactions. These other transactions are recorded in the general journal. Examples of entries made into the general journal are asset sales, depreciation, interest income, interest expense, and the sale of bonds or shares in the company to investors.
Thus, the general journal is a catch-all location for the initial entry of certain transactions that do not occur in sufficient volumes to deserve recordation in a specialized journal. These transactions are recorded in chronological order, which makes the general journal an excellent place in which to research accounting transactions by date.
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Level of Detail Stored
The general ledger contains a summary at the account level of every transaction that a business has engaged in. This information comes from the various journals in aggregated form, in summary-level entries. The information in the general ledger is then aggregated further into a trial balance, from which the financial statements are created.
Thus, the general journal is where those transactions are first recorded that are not being stored in a subject-specific journal, while the general ledger stores the summary-level information from each of the journals. This means that the general journal contains a larger amount of detailed accounting information than the general ledger, which in turn contains more detailed information than the financial statements.
Decline in the Use of Journals
The use of journals has declined since the advent of computerized accounting systems. Many smaller accounting software systems store all transactional information directly in the general ledger, dispensing with all of the various types of journals, including the general journal.
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