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When it comes to tracking the finances of a business, a double-entryaccounting system that uses both a general ledger and a general journal is arguably the best method for tracking a company's overall financial data and keeping operations running smoothly and profitably.In order to truly understand how such a system of accounting record works, one must first appreciate the different functions associated with these two key components: general ledgers and general journals.
KEY TAKEAWAYS
· The journal consists of raw accounting entries that record business transactions, in sequential order by date.
· The general ledger is more formalized and tracks five key accounting items: assets, liabilities, owner’s capital, revenues, and expenses.
· Advances in software technology have streamline the accounting process and made it easy and efficient to combine both bookkeeping tasks.
General Journals
Simply defined, the general journal refers to a book of original entries, in which accountants and bookkeepers record raw business transactions, in order according to the date events occur. A general journal is the first place where data is recorded, and every page in the item features dividing columns for dates, serial numbers, as well as debit or credit records.
Some organizations keep specialized journals, such as purchase journals or sales journals, that only record specific types of transactions.
Once a transaction is recorded in a general journal, the amounts are then posted to the appropriate accounts, such as accounts receivable, equipment, and cash transactions.
Despite advances in software technology, there will always be a need to record non-routine transactions in general journals, such as sales of assets, bad debt, and depreciation.
General Ledgers
A general ledger is a book or file that bookkeepers use to record all relevant accounts. The general ledger tracks five prominent accounting items: assets, liabilities, owner’s capital, revenues, and expenses.Transactions that first appear in the journals are subsequently posted in general ledger accounts. Then, account balances are calculated and transferred from the general ledger to a trial balance before appearing on a company's official financial statements.
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A general ledger is the record-keeping system for a company’s financial data, with debit and credit account records validated by a trial balance.
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Accounting records include all documentation involved in the preparation of financial statements or records relevant to audits and financial reviews.
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An accountant is a certified financial professional who performs functions such as audits or financial statement analysis according to prescribed methods.
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How to Calculate Credit and Debit Balances in a General Ledger
Balancing the ledger involves subtracting the total number of debits from the total number of credits. In the end, debits must equal credits.
