What Goes in the General Journal & Its Purpose

The general journal serves as the initial record for all financial transactions. It captures details of every event impacting a company’s financial position. This document provides a chronological listing of transactions, laying groundwork for subsequent accounting processes. Businesses rely on it to maintain a complete and accurate history of financial activities. This record-keeping is foundational before information is summarized or categorized.

The Core Purpose of the General Journal

The general journal is called the “book of original entry” as every financial transaction is first documented here. It captures event details, including date, accounts, and amounts. Chronological recording establishes a clear, time-ordered record of business activities.

This chronological sequence creates an audit trail, allowing accountants and auditors to trace transactions to financial statements. This history ensures accuracy and completeness of financial records. It supports compliance with accounting principles, such as GAAP, providing verifiable evidence for financial reporting. The journal’s record facilitates internal control systems.

Common Entries in the General Journal

Many financial transactions are recorded in the general journal, especially those not fitting into specialized journals like sales or cash receipts. Adjusting entries are common, made at the end of an accounting period to ensure revenues and expenses are recognized in the correct period. This includes accruals, such as unpaid salaries recorded as a liability, or unreceived revenues like interest income.

Deferrals are also handled through adjusting entries, recognizing prepaid expenses like insurance premiums not yet fully consumed. Unearned revenues, cash received for services not yet rendered, are adjusted to reflect earned portions. Depreciation, allocating a tangible asset’s cost over its useful life, is another regular adjusting entry.

Closing entries are another transaction type recorded in the general journal, performed at accounting cycle end. These entries transfer temporary account balances (revenues, expenses, dividends) into permanent accounts like retained earnings, resetting temporary accounts to zero for the next period. Correcting entries also rectify errors discovered in previously recorded transactions. These ensure accuracy of account balances and maintain financial statement integrity.

Unusual or infrequent transactions are recorded in the general journal. This includes selling a long-term asset, like equipment or a building, not part of regular sales. Issuing or repaying a significant loan, or owner capital contributions, are other examples recorded here because they do not fit into routine specialized journal entries.

The Mechanics of Journal Entries

Recording transactions in the general journal follows a standardized format for clarity and consistency. Each entry begins with the transaction date, providing a precise timestamp. Below the date, affected account titles are listed.

Double-entry accounting dictates every transaction impacts at least two accounts: one debited, one credited. The debited account is listed first, aligned left, with its monetary amount. The credited account is listed below, indented right, with its matching amount.

A narration accompanies each entry, summarizing the transaction. This helps reviewers understand the entry’s nature and purpose. The double-entry system mandates total debits equal total credits for each entry, ensuring the accounting equation (Assets = Liabilities + Equity) remains balanced. This adherence is a principle underlying all financial record-keeping.

References

1. IRS.gov. Publication 946 (2023), How To Depreciate Property. [https://www.irs.gov/publications/p946](https://www.irs.gov/publications/p946) (Accessed August 4, 2025).