Definition
A journal is a historical record of business transactions or events. The General Journal (GJ) is the primary accounting book where business transactions are first recorded.
- Transactions are recorded in chronological order: by date, from earliest to latest, as they happen.
- It follows the double-entry system (debits = credits). See Debit and Credit.
Why Use a Journal
- It shows the complete effect of a transaction in one place.
- It gives a chronological record of transactions that cross-references both the source document and the ledger entry.
- It helps prevent or locate errors, because the debit and credit amounts for each entry can be compared easily.
Format of a Journal Entry
Each journal entry must include:
- Date: the date of the transaction.
- Accounts affected: the accounts debited are written first, then the accounts credited (indented).
- Debit and credit amounts: recorded in the debit and credit columns.
- Narration: a brief explanation of the transaction.
| Date | Details/Accounts | Debit (Dr) | Credit (Cr) |
|---|---|---|---|
| Date | Account debited | Amount | |
| Account credited | Amount | ||
| (Narration) |
Steps for Journal Entries
- Find out which accounts are affected by the transaction.
- Classify each account as A, L, OE, Income or Expense.
- State whether each account is increased or decreased.
- Use the rules of debit and credit to decide whether each account gets a debit or a credit entry.
- Record a narration.
Each entry is then posted to the General Ledger.