At the end of a given period, we take the General Journal and utilize it to create the General Ledger!
The general ledger takes the beginning balance of each account, and then shows all the journal entries related to the account for the month, resulting in the final balance for that account for the month.
In other words... we use the General Ledger to categorize journal entries by account!
You may here the term "posting" journal entries...
To "post" a journal entry means taking it from the General Journal and placing it into the General Ledger!
So, if we were to take the journal entries in this General Journal...
MARCH
Date | Transaction | Debit | Credit |
---|---|---|---|
3-1 | Equipment | $1,000 | |
Cash | $1,000 | ||
New lemon squeezer | |||
3-5 | Cash | $500 | |
Notes Payable | $500 | ||
Borrow a loan from local bank | |||
3-7 | Cash | $250 | |
Common Stock | $250 | ||
Issue common stock shares |
...and post them into a General Ledger, they'd look like so!
CASH (Asset)
Date | Description | Debit | Credit | Balance |
---|---|---|---|---|
3-1 | Beginning Balance | $1,500 | $1,500 (Dr) | |
3-1 | New lemon squeezer | $1,000 | $500 (Dr) | |
3-5 | Borrow a loan from local bank | $500 | $1,000 (Dr) | |
3-7 | Issue common stock shares | $250 | $1,250 (Dr) |
EQUIPMENT (Asset)
Date | Description | Debit | Credit | Balance |
---|---|---|---|---|
3-1 | Beginning Balance | $500 | $500 (Dr) | |
3-1 | New lemon squeezer | $1,000 | $1,500 (Dr) |
NOTES PAYABLE (Liability)
Date | Description | Debit | Credit | Balance |
---|---|---|---|---|
3-1 | Beginning Balance | $1,000 | $1,000 (Cr) | |
3-5 | Borrow a loan from local bank | $500 | $1,500 (Cr) |
COMMON STOCK (Equity)
Date | Description | Debit | Credit | Balance |
---|---|---|---|---|
3-1 | Beginning Balance | $1,000 | $1,000 (Cr) | |
3-7 | Issue common stock shares | $250 | $1,250 (Cr) |
NOTE: The typical General Journal contains way more transactions. But you're cramming for your exam! We're going to keep things simple, so that you understand what's going on here, and then are ready to apply that onto your exam!
KEEP IN MIND: More journal entries doesn't change the process behind the General Ledger. You're still just organizing journal entries in the General Journal by account!
To create this General Ledger, all we did was enter the starting amounts for each account...
...and then add in the journal entries corresponding to them over the course of March!