An essential part of bookkeeping is keeping a detailed record of your financial transactions. Businesses typically achieve this by maintaining a general journal. The simple format of a general journal entry helps you keep track of all essential transaction information, including the transaction date, the amount and account debited, the amount and account credited, and the transaction description.
Diligently recording general journal entries gives you an accurate and detailed source of truth for significant financial documents, such as ledgers, balance sheets, profit and loss statements, and cash flow statements. Below, we discuss the ins and outs of general ledgers and provide general journal example entries.
What is a General Journal?
In double-entry bookkeeping, the general journal is the book that lists all business transactions in chronological order. General journals are also called books of original entry because they are the first place transactions are recorded before getting posted to ledgers. Essentially, the general journal acts as a basic source of truth for business transactions.
Entries in general journals reflect the debits and credits of each transaction. The composition of a general journal entry requires showing a transaction as a debit to one type of account and a credit of equivalent value to a different kind of account. General journal entries also provide information for each transaction, including dates, posting references, debit descriptions, credit descriptions, and overall transaction descriptions.
Once you create your journal entries, you post the transaction amounts to their corresponding accounts, such as cash, accounts receivable, accounts payable, expenses, etc.
General Journal vs Special Journal
The general journal is the first place you record your business transactions. However, some companies elect to have specialized journals to record specific types of transactions. These include:
- The Sales Journal exclusively lists all sales made on credit. Typically, sales journals debit assets (accounts receivable) and credit revenue (sales).
- The Purchases on Credit Journal lists all purchases made on credit. Purchase journals will usually debit assets and expenses and credit liabilities (accounts receivable).
- The Cash Receipts Journal lists all transactions that involve receiving cash. It debits assets (cash) and credits revenue.
- The Cash Disbursement Journal lists all transactions that involve decreasing cash. It typically credits assets (cash).
Businesses that use special journals relegate the general journal for adjusting entries, closing entries, correcting entries, and recording transactions that do not fall into any of the above four transaction types.
Having dedicated journals for each type of transaction prevents the general journal from becoming too cluttered and confusing. It also makes transactions easier to track. Because there are consistent patterns regarding the types of accounts, debits, and credits that fall under each journal type, it is easier to locate and post transactions to the correct accounts.
General Journal vs General Ledger
General journal entries record all raw transactions in chronological order. They act as the reference for the general ledger, which posts transactions into sub-ledgers representing the different account types listed in your chart of accounts. General journals provide an easy format for recording transactions, while general ledgers provide an easy representation of the flow of money across accounts.
General ledgers are also the basis for most financial statements. You add up the debits and credits of general ledgers to get the trial balance. From there, you can create balance sheets, income or profit and loss statements, and cash flow statements.
Our General Journal vs General Ledger Example can better illustrate the differences between the two, though it would help to first learn how to format general journal entries and view individual journal entry examples.
How to Fill In A General Journal Entry
| Date | Account | PR | Debit | Credit |
| XX-XX-XXXX | Account type | $XX.XX | ||
| Account type | $XX.XX | |||
| Description |
The general journal consists of five columns: date, account, posting reference (PR), debit, and credit.
Date
The date shows when a transaction occurred. Typically, you only input the date once per transaction instead of populating every row.
Transactions must be sorted in chronological order for ease of reference.
Account
The account column lists the accounts affected in each transaction. You list the debited account first, then the credited account on the following row. After listing each account, use the succeeding row to write a short description of the transaction.
The account column is also referred to as the description, explanation, or account title column.
Posting Reference
The PR number denotes the page number of the transaction’s corresponding general ledger account. It allows you to cross-reference entries on your general journal and general ledger easily.
For example, your journal entry states that you debited your cash account. Your general ledger displays cash account transactions on page 11. Therefore, your PR number is 11.
Debit
The debit column lists the amount debited. It is always written to the left of the credit column.
Credit
The credit column lists the amount credited. It is always written to the right of the debit column.
Examples of General Journal Entries
Let’s say you started a salon that provides hairdressing services and supplies. Below are a few examples of possible journal entries.
For the sake of simplicity, let’s assume you don’t use special journals. We’ll also leave the PR column blank.
Owner Investment
On January 1, 2024, you transferred $10,000 from your personal bank account to your business bank account. This would be recorded as a debit to assets and a credit to equity.
| Date | Account | PR | Debit | Credit |
| 01-01-2024 | Cash (Asset) | $10,000 | ||
| Owner’s Equity (Equity) | $10,000 | |||
| Received cash from owner |
Paying Rent
You are charged rent on the first day of the month. You pay directly out of your bank account, thus debiting expenses and crediting assets.
| Date | Account | PR | Debit | Credit |
| 01-01-2024 | Rent (Expense) | $3,000 | ||
| Cash (Assets) | $3,000 | |||
| Paid rent |
Purchasing Equipment on Credit
You used the business credit card to purchase $2,000 worth of inventory. This is a debit to assets and a credit to liabilities.
| Date | Account | PR | Debit | Credit |
| 01-03-2024 | Inventory (Asset) | $2,000 | ||
| Credit Card Debt (Liabilities) | $2,000 | |||
| Purchased inventory with credit card |
Providing Services
By the end of the week, you generate a revenue of $2,500 from hairdressing services. This debits $2,500 to cash assets and credits the same amount to revenue.
| Date | Account | PR | Debit | Credit |
| 01-05-2024 | Cash (Asset) | $2,500 | ||
| Revenue | $2,500 | |||
| Provided services |
Selling Products
By the end of the week, you made $800 selling hair products. However, because you sold the products on a markup, the total amount you spent on the products was just $300. You track the cost of goods sold as an expense, then track the loss in inventory. This means you debit assets and expenses of $800 and $300, respectively, then debit the corresponding amounts to revenue and inventory.
| Date | Account | PR | Debit | Credit |
| 01-05-2024 | Cash (Asset) | $800 | ||
| Revenue | $800 | |||
| Cost of goods sold (Expense) | $300 | |||
| Inventory (Asset) | $300 | |||
| Sold goods |
Refunding Customers
A customer was dissatisfied with a service and asked for a partial refund of $50. This is a debit to revenue and a credit to assets.
| Date | Account | PR | Debit | Credit |
| 01-08-2024 | Revenue | $50 | ||
| Cash (Asset) | $50 | |||
| Refunded customer |
Paying Salaries
You have three hairdressers on your payroll. Their total wages for the first two weeks amounted to $5,400. You transfer the money directly from the business bank account, resulting in a debit to expenses and a credit to assets.
| Date | Account | PR | Debit | Credit |
| 01-15-2024 | Salaries (Expense) | $5,400 | ||
| Cash (Assets) | $5,400 | |||
| Paid bi-monthly salaries |
Borrowing Money from the Bank
You need extra cash, so you get a bank loan of $15,000. This is a credit to liabilities and a debit to cash assets.
| Date | Account | PR | Debit | Credit |
| 01-16-2024 | Cash (Assets) | $15,000 | ||
| Bank Loan (Liabilities) | $15,000 | |||
| Requested bank loan |
Earning Interest on Bank Deposits
Your business bank account deposit earned $12.50 in interest after one month. This is a debit to cash and a credit to revenue.
| Date | Account | PR | Debit | Credit |
| 01-30-2024 | Cash (Assets) | $12.50 | ||
| Interest (Revenue) | $12.50 | |||
| Earned revenue |
General Journal Adjusting Entry Examples
The general journal also contains a special type of entry called an adjusting entry. These entries account for services rendered or products purchased during a different accounting period than the transfer of their corresponding cash payments. Below are a few examples.
Accrued Expenses
When you accrue expenses, you acquire a product or service and pay for it at a later date.
Let’s say a vendor billed you $500 for graphic design services. They rendered the service in December 2023, but you only paid your bill in January 2024. The initial entry would look like this:
| Date | Account | PR | Debit | Credit |
| 12-18-2023 | Vendor Services (Expenses) | $500 | ||
| Accounts Payable (Liabilities) | $500 | |||
| Graphic design service expense |
When you pay your bill, you will need to create an adjusting entry for the decrease in cash and the elimination of your accounts payable liability. The adjusting entry would look like this:
| Date | Account | PR | Debit | Credit |
| 01-18-2024 | Accounts Payable (Liabilities) | $500 | ||
| Cash (Assets) | $500 | |||
| Paid bill for graphic design services |
Accrued Revenue
Accrued revenue is the reverse of accrued expenses: you rendered a service or sold a product to a customer, but they have yet to pay. This typically occurs when you sell on credit.
Last December, you billed your customer $200 for an art commission. They paid the amount in full the following month. Your initial entry will look like this:
| Date | Account | PR | Debit | Credit |
| 12-20-2023 | Accounts Receivable (Assets) | $200 | ||
| Sales (Revenue) | $200 | |||
| Rendered client service |
The adjusting entry should convert your accounts receivable into cash. This means debiting cash and crediting accounts receivable.
| Date | Account | PR | Debit | Credit |
| 01-20-2024 | Cash (Assets) | $200 | ||
| Accounts Receivable (Assets) | $200 | |||
| Rendered client service |
Deferred Expenses
Adjusting entries for deferred expenses track services rendered or products received after making payments in advance. Deferred expenses are also called prepaid expenses.
Last December, you paid $300 upfront for an order of office supplies. However, the store was closed for the holidays and only had the manpower to ship your supplies the following month. Your December journal would still need to account for the loss of cash, so you record the amount as a prepaid expense.
| Date | Account | PR | Debit | Credit |
| 12-21-2023 | Prepaid Expense (Expenses) | $300 | ||
| Cash (Assets) | $300 | |||
| Ordered office supplies |
Once your office supplies arrive, you have $300 worth of assets. You must use an adjusting entry to account for the addition of assets and the elimination of prepaid expenses.
| Date | Account | PR | Debit | Credit |
| 01-02-2024 | Office Supplies (Assets) | $300 | ||
| Prepaid Expense (Expenses) | $300 | |||
| Office supplies arrived |
Deferred Revenue
Deferred revenues occur when customers pay for your products or services in advance. You need to create an adjusting entry to account for the service rendered.
A customer provides an upfront payment of $12,000 to reserve your property for a wedding that will occur the following year. To note that the property has not yet been used, you create an account called unearned revenue, which will be credited as the $12,000 cash payment is debited.
| Date | Account | PR | Debit | Credit |
| 11-03-2023 | Cash (Assets) | $12,000 | ||
| Unearned Revenue (Revenue) | $12,000 | |||
| Customer reserved venue |
When the beautiful wedding finally occurs, you mark the revenue as earned by debiting unearned revenue and crediting sales revenue.
| Date | Account | PR | Debit | Credit |
| 11-03-2024 | Unearned Revenue (Revenue) | $12,000 | ||
| Sales Revenue (Revenue) | $12,000 | |||
| Venue rental |
Estimates
Adjusting entries also accounts for changes in value that are difficult to estimate. The most common example of an adjusting entry estimate is depreciation expenses.
For example, you have a corporate vehicle that is worth $5,000. It is expected to depreciate by $800 per year. You record a depreciation expense of $800 at the end of each year. This is a debit to expenses and a credit to contra assets.
| Date | Account | PR | Debit | Credit |
| 01-10-2024 | Depreciation Expense (Expense) | $800 | ||
| Accumulated Depreciation (Contra Asset) | $800 | |||
| Car depreciation |
General Journal Closing Entry Examples
At the end of each accounting period, you’ll want to reset the balances of temporary accounts like revenue and expenses so that you can create an accurate picture of how much you earn and spend for the succeeding accounting period. To do this, you need to create closing entries that transfer account balances from temporary accounts to permanent accounts.
Closing Entry for Revenue Accounts
Let’s say you earned $11,000 last January. You don’t want the amount to carry over to February, because then your revenue account won’t accurately reflect how much you earned that month. To reset the account, debit $11,000 to revenue and credit an equivalent amount to an account called income summary.
| Date | Account | PR | Debit | Credit |
| 01-30-2024 | Revenue (Revenue) | $11,000 | ||
| Income Summary (Revenue) | $11,000 | |||
| Closed revenue account |
Closing Entry for Expense Accounts
A similar principle applies to expense accounts. If you spent a total of $5,000 last January, you shouldn’t carry the balance over to February, because then you’ll fail to accurately record that month’s spending.
Instead, you should debit the income summary account you created previously, then credit all relevant expenses. This way, your income summary account will reflect your profits, then reduce all relevant expense account balances to $0.
| Date | Account | PR | Debit | Credit |
| 01-30-2024 | Income Summary (Revenue) | $5,000 | ||
| Rent Expense | $1,200 | |||
| Utility Expense | $400 | |||
| Wages Expense | $3,400 | |||
| Closed expense accounts |
Closing Entry for Income Summary
Finally, you close the income summary account by moving the balance to retained earnings. Using the previous examples, our income summary balance would be $6,000. This means we’d have to debit $6,000 to the income summary account and credit an equivalent amount to retained earnings.
| Date | Account | PR | Debit | Credit |
| 01-30-2024 | Income Summary (Revenue) | $6,000 | ||
| Retained Earnings (Revenue) | $6,000 | |||
| Closed income summary |
General Ledger vs General Journal Example Entries
To illustrate the difference between a general journal and a general ledger, we’ve provided a simple example.
General Journal Example
In general journals, all entries are listed in chronological order. This is because you record them as they occur. It serves as a reference for the general ledger.
Each entry contains the debit and credit side of the transaction. This makes it easier to track the flow of value across accounts.
| Date | Account | PR | Debit | Credit |
| 11-01-2024 | Inventory (Assets) | $2,000 | ||
| Accounts Payable (Liabilities) | $2,000 | |||
| Purchased inventory | ||||
| 11-04-2024 | Accounts Receivable (Assets) | $4,000 | ||
| Sales Revenue (Revenue) | $4,000 | |||
| Rendered service for client 1 | ||||
| 11-07-2024 | Accounts Receivable (Assets) | $5,000 | ||
| Sales Revenue (Revenue) | $5,000 | |||
| Rendered service for client 2 | ||||
| 11-08-2024 | Accounts Payable (Liabilities) | $2,000 | ||
| Cash (Assets) | $2,000 | |||
| Paid inventory bill |
General Ledger Example
Meanwhile, the general ledger is divided into sub-ledgers, which represent each account in your chart of accounts. The entries posted under each account are then sorted in chronological order.
| Date | Transaction | Debit | Credit |
| Cash | |||
| 11-08-2024 | Paid inventory bill | $2,000 | |
| Inventory | |||
| 11-01-2024 | Inventory purchase | $2,000 | |
| Accounts Receivable | |||
| 11-04-2024 | Bill to client 1 | $4,000 | |
| 11-07-2024 | Bill to client 2 | $5,000 | |
| Accounts Payable | |||
| 11-01-2024 | Bill from inventory supplier | $2,000 | |
| 11-08-2024 | Paid inventory bill | $2,000 | |
| Revenue | |||
| 11-04-2024 | Rendered service to client 1 | $4,000 | |
| 11-07-2024 | Rendered service to client 2 | $2,000 | |
Simplify Journal Keeping With EpicBooks
Maintaining accurate journals can be a time-consuming process. Reduce the manual load of day-to-day bookkeeping tasks by seeking assistance from EpicBooks. Our bookkeepers will take care of your journal entry, tracking accruals, prepayments, and other adjustments. With experts handling your business journals, you can focus on your business journey.
Aside from journal entry, we also provide strategic bookkeeping, reconciliation, fixed asset tracking, and more. Refer to the EpicBooks services page for more information.
