1. Purpose of the General Journal
The General Journal is the book of original entry. It acts as a chronological diary of all financial events before they are sorted into individual accounts. Journalizing ensures that both sides of a transaction are recorded together in one place, reducing errors.
2. Standard Journal Entry Format
A formal journal entry must follow strict formatting rules:
- The date is listed first.
- Debit accounts are listed at the top.
- Credit accounts are listed below the debits and indented to the right.
- A brief narrative explanation (narration) follows below the accounts to explain the transaction.
Date Account Titles & Explanation Ref Debit ($) Credit ($)
-------------------------------------------------------------------------------------
2026-03-15 Rent Expense E402 3,500
Cash A101 3,500
(To record payment of monthly
office rent via bank transfer)
3. Simple vs. Compound Journal Entries
- Simple Entry: Involves exactly one debit account and exactly one credit account (as shown in the rent example above).
- Compound Entry: Involves three or more accounts simultaneously, while keeping total debits equal to total credits.
- Example: A company purchases a truck for $30,000, paying $10,000 in cash and signing a note payable for the remaining $20,000.
Date Account Titles & Explanation Ref Debit ($) Credit ($)
-------------------------------------------------------------------------------------
2026-03-18 Delivery Truck A150 30,000
Cash A101 10,000
Notes Payable L201 20,000
(To record purchase of delivery vehicle
using partial cash down payment)
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