A Deep Dive On General Journal Accounting

In accounting, a general journal is a master ledger of every financial transaction a business makes in the course of a given year in chronological order. The general journal includes unique transactions not necessarily recorded in other accounting journals, including checks and invoices issued. All figures entered into the general journal are considered raw. General journal accounting helps bookkeepers and accountants with the reconciliation process and in the creation of financial statements.

A general ledger, on the other hand, is a formal accounting record that is used to keep track of all relevant business accounts including income statement accounts and balance sheet accounts. The general ledger tracks five key financial items: expenses, liabilities, assets, revenue and capital, and it is used to produce financial statements.

Accounts payable journal entries, accrued revenue journal entries, bills receivable journal entries and depreciation journal entries are all directly related to the general journal and general ledger in that they reflect liabilities, reflect revenue earned but not yet received, document a company’s right to receive money from a debtor at a future date, or they allow for the expensing of an asset’s costs during each accounting period. Let’s take a closer look at those types of journal entries now.

Accounts Payable Journal Entries

An accounts payable journal entry is made in the accounts payable ledger every time something is purchased by the company from a supplier on credit. 

The typical accounts payable journal entry consists of the following:

• The date: This is the date the transaction took place. 
• A description of the transaction: The description usually consists of the invoice number and a brief summary regarding what was purchased.
• The amount involved: The amount will be recorded in a pair of offsetting debit and credit entries.

Here’s an example of an accounts payable journal entry:

Date	Description	Account	Debit	Credit
6/1/24	Invoice #509Inventory	Inventory	$500
		Accounts Payable		$500

Accrued Revenue Journal Entries

Accrued revenue involves money that arrives over time usually in the form of installment payments. To record an accrued revenue journal entry follow these steps:

• Record each payment your company receives in the revenue account as an adjusting entry.
• Record the amount the customer still has to pay and inform the customer. Keeping them updated on upcoming payments often helps ensure the next payment arrives on time.
• After receiving payment, adjust the company income statement to reflect the amount received. 

Accrued revenue is entered under current assets on the company balance sheet and as earned revenue on your company’s income statement. 

Accurate accrued revenue journal entries are critical in accounting. First and foremost, because without them, the accuracy of a company’s financial statements would likely be called into question. Here are some other reasons accrued revenue journal entries are important:

• They comply with the matching principle which states revenues should be noted in the time period in which they are earned. This helps provide a more accurate picture of overall financial performance.
• They demonstrate compliance with generally accepted accounting principles (GAAP), as well as international financial reporting standards (IFRS).
• They ensure that profitability and revenue trends are correctly tracked over time.
• They help management avoid misconceptions based solely on cash flow numbers and determine if the company is actually generating a profit.
• Finally, accrued revenue journal entries help to encourage better financial discipline within an organization.

Bills Receivable Journal Entries

Bills receivable are amounts due a company for services provided or goods sold. Proper management of bills receivable is essential if you are to maintain effective management of working capital. 

The journal entry for bills receivable involves updating the bills receivable account. In bills receivable, the journal entry will include the date, the account name, the debit amount to bills receivable, the credit amount to accounts receivable, and a description of the transaction. 

Bills receivable are important to record because they affect the accuracy of financial statements, they help keep track of assets and liabilities, and they help a company manage their credit posture more effectively.

Depreciation Journal Entries

The depreciation journal entry is a cornerstone of accounting that enables businesses to accurately spread the true cost of assets over the course of their lifespan. By accurately documenting the decline in asset values, a business can get a clearer picture of their real financial situation.

The recording of depreciation involves debiting the depreciation expense account and crediting the accumulated depreciation account. The two combined create a true picture of the book value of a given asset as time passes.

Depreciation journal entries are important for several reasons:

• To ensure accurate financial reporting: Faithful recording of asset depreciation helps enhance the credibility of financial statements.
• To reduce tax exposure: Accurate tracking of asset valuations can have a significant impact on a company’s tax liability by being a non-cash expense that reduces taxable income.
• To aid in asset replacement planning: By providing a true picture of an asset’s value, depreciation journal entries enable you to plan for their timely replacement.

In Conclusion

General journal accounting is the process of systematically recording all of a company’s financial transactions in chronological order. It serves as a jumping-off point in the process of maintaining accurate financial records and the production of financial statements that management and stakeholders can have confidence in.