The General Journal is used to record transactions that occur. Today, this is usually done electronically with financial software, but of course it used to be done in a large written journal. To record transactions correctly, you need to know the rules accountants used called “transaction analysis.” The two rules are:

• Asset and Expense accounts increase with a debit and decrease with a credit.
• Liability, Equity, and Revenue accounts increase with a credit and decrease with a debit.

Imagine that you purchase a computer with R6000.00 in cash and R12000.00 store credit. An example of a General Journal entry for this transaction is shown below.

Notice that the purchase of one item required an entry for three different accounts. You can see the name of each account under “description” and the number of the account under column ‘F’. The General Journal is kept in chronological order, which can be helpful if you need to look back over the history of your transactions.

There is one glaring piece of information that is missing on the General Journal. You do not see any information about the balance in each account that you have impacted. For example, just by looking at the General Journal, you do not have any idea how much cash you have left after the purchase of the computer. To track the changes in account balances, your accounting team uses a General Ledger.