Specifications

2  Lesson 1 Computer Tutorial 3
TOPIC 1.1
Journals and ledgers
With a manual accounting system, each transaction is recorded in chronological order in a
book of original entries called the journal. If all the transactions are recorded in one master
journal, the journal is called the general journal. Exhibit 1-1 is an example of a general
journal. Often, specialized journals are also used. For example, a cash receipts journal records
all cash receipts, while a sales journal records all sales.
EXHIBIT 1-1
Example of a manual general journal
GENERAL JOURNAL Page J-5
Date
2002
Account Title and Description
Post
Ref.
Dr.
Cr.
July
5
Office supplies
S-23
6
0
00
Office equipment
S-24
3
0
0
00
Accounts payable
S-35
3
6
0
00
Purchased supplies and equipment
on credit
12
Cash
S-12
5
0
0
00
Legal fees earned
S-51
5
0
0
00
Collected a legal fee
The journal is the primary record of a company’s transactions. Each transaction is represented
by a journal entry. Each journal entry comprises detailed lines showing a date, the name of
the account affected by the transaction, a description, a posting reference, and a debit or credit
amount. The simplest journal entry consists of one debit amount and one matching credit
amount. However, it is possible for a single transaction to result in a complex journal entry
with multiple debit and credit amounts.
Unless specialized journals are used, the general journal contains all transactions. However, it
is difficult to determine from the general journal the balance of an individual account because
the journal lists all transactions in chronological order. Since the objective of recording a
company’s transactions is to produce categorized financial information, the journal entries
must also be analyzed and organized by specific accounts. The general ledger serves this
purpose because in this ledger each account has a separate page for recording transactions and
displaying the account balance.
The general journal (as well as specialized journals) and the general ledger are thus closely
linked. Each debit or credit recorded in a journal for a particular account is subsequently
posted to the corresponding general ledger page on a regular basis. Sometimes, only totals are
posted from a specialized journal to the appropriate ledger account.
In the general ledger, a running balance is kept so the current balance for each account is
always indicated. A trial balance can thus be easily prepared by copying the balance of each
account to a worksheet. Subsidiary ledgers are sometimes used to record information on
special parts of the company’s accounting records. Exhibit 1-2 shows examples of the two
types of ledgers.