What Is a General Journal Entry in Accounting?

A general journal entry serves as the foundational record of every financial transaction within an accounting system. It captures the initial details of an economic event, providing a chronological log of all business activities. This initial recording makes the general journal known as the “book of original entry.” Its primary purpose is to ensure a complete and accurate historical account of a business’s financial operations.

Essential Components of a Journal Entry

Every general journal entry has several components. It begins with the date the transaction occurred, establishing a timeline for financial events. Following the date, account titles affected by the transaction are listed. These titles identify financial categories, such as “Cash,” “Accounts Payable,” or “Sales Revenue.”

The entry then allocates monetary values into two columns: a debit column and a credit column. These columns record the financial impact on the identified accounts. Finally, a description accompanies the entry, clarifying the transaction for future reference.

Recording Transactions with Double-Entry Accounting

Creating a general journal entry involves applying double-entry accounting principles, which dictate that every financial transaction affects at least two accounts. This system ensures that for every debit entry, there must be an equal credit entry, maintaining the accounting equation: Assets = Liabilities + Equity. The mechanics of debits and credits depend on the account type.

Asset and expense accounts increase with a debit and decrease with a credit. Conversely, liability, equity, and revenue accounts increase with a credit and decrease with a debit. The process begins by identifying the accounts involved in a transaction and classifying them by type. Next, the appropriate debit and credit rules are applied to determine which accounts are increased or decreased. This ensures total debits always equal total credits.

Illustrative Journal Entry Examples

Recording common business activities into the general journal demonstrates double-entry principles. For example, if a business sells goods for $500 cash on August 1, 2025, the entry would debit Cash for $500 and credit Sales Revenue for $500. The description would note “To record cash sales.” This reflects the increase in an asset (Cash) and an increase in a revenue account.

Consider paying rent expense of $1,000 on August 5, 2025. This transaction would debit Rent Expense for $1,000 and credit Cash for $1,000, with a description of “To record monthly rent payment.” Here, an expense increases, and an asset (Cash) decreases. If a business purchases $300 of supplies on credit on August 10, 2025, the entry would debit Supplies for $300 and credit Accounts Payable for $300, explaining “To record purchase of supplies on account.” This increases an asset (Supplies) and increases a liability (Accounts Payable).

The Journal Entry’s Role in the Accounting Cycle

Once a general journal entry is recorded, the information is transferred, a process known as “posting,” to the general ledger. The general ledger serves as a collection of all accounts, providing a summary of each account’s activity and current balance. Each debit and credit from the journal entry is moved to its respective account in the ledger.

This posting process is important because general ledger balances are subsequently used to prepare financial statements, such as the income statement and balance sheet. The general journal functions as the chronological, detailed record of all transactions, providing the underlying support and audit trail for the summarized financial information found in the ledger.