How to Develop Entries for the General Ledger

4 of 12 in Series: The Essentials of Bookkeeping Transactions

Because your business’s bookkeeping transactions are first entered into journals, you develop many of the entries for the General Ledger based on information pulled from the appropriate journal.

For example, cash receipts and the accounts that are impacted by those receipts are listed in the Cash Receipts journal. Cash disbursements and the accounts impacted by those disbursements are listed in the Cash Disbursements journal. The same is true for transactions found in the Sales journal, Purchases journal, General journal, and any other special journals you may be using.

At the end of each month, you summarize each journal by adding up the columns and then use that summary to develop an entry for the General Ledger. This takes a lot less time than entering every transaction in the General Ledger.

Cash Receipts journal entries

A Cash Receipts journal tracks transactions in which the business receives cash. In the following General Ledger entry, note that the debits and credits are in balance, at $2,900 each. All entries to the General Ledger must be balanced entries. That’s the cardinal rule of double-entry bookkeeping.

Account Debit Credit
Cash $2,900
Accounts Receivable $500
Sales $900
Capital $1,500

In this entry, the Cash account is increased by $2,900 to show that cash was received. The Accounts Receivable account is decreased by $500 to show customers paid their bills, and the money is no longer due. The Sales account is increased by $900, because additional revenue was collected. The Capital account is increased by $1,500 because the owner put more cash into the business.

Cash Disbursements journal entries

A Cash Disbursements journal keeps track of all cash transactions involving cash sent out of the business. The figure below shows how to summarize those transactions so they can be posted to the General Ledger. The following General Ledger entry is based on the transactions that appear in the Cash Disbursements journal in the figure.

Account Debit Credit
Rent $800
Accounts Payable $750
Salaries $350
Credit Card Payable $150
Cash $2,050
A summarized Cash Disbursements journal.
A summarized Cash Disbursements journal.

This General Ledger summary balances out at $2,050 each for the debits and credits. The Cash account is decreased to show the cash outlay, the Rent and Salaries expense accounts are increased to show the additional expenses, and the Accounts Payable and Credit Card Payable accounts are decreased to show that bills were paid and are no longer due.

Sales journal entries

A Sales journal keeps track of all sales transactions. The figure below shows how to summarize those transactions so they can be posted to the General Ledger. The following General Ledger entry is based on the transactions that appear in the Sales journal in the figure.

Account Debit Credit
Accounts Receivable $800
Sales $800
A summarized Sales journal.
A summarized Sales journal.

Note that this entry is balanced. The Accounts Receivable account is increased to show that customers owe the business money because they bought items on store credit. The Sales account is increased to show that even though no cash changed hands, the business took in revenue. Cash will be collected when the customers pay their bills.

Purchases journal entries

A Purchases journal keeps track of all purchases of goods to be sold. The figure below shows how to summarize those transactions so they can be posted to the General Ledger. The following General Ledger entry is based on the transactions that appear in the Purchases journal in the figure.

Account Debit Credit
Purchases $925
Accounts Payable $925
A summarized Purchases journal.
A summarized Purchases journal.

Like the entry for the Sales account, this entry is balanced. The Accounts Payable account is increased to show that money is due to vendors, and the Purchases expense account is also increased to show that more supplies were purchased.

General journal entries

A General journal keeps track of all miscellaneous transactions that are not tracked in a specific journal, such as a Sales journal or a Purchases journal. The figure below shows how to summarize those transactions so they can be posted to the General Ledger. The following General Ledger entry is based on the transactions that appear in the General journal in the figure.

Account Debit Credit
Sales Return $60
Accounts Payable $200
Vehicles $10,000
Accounts Receivable $60
Purchase Return $200
Capital $10,000
A summarized General journal.
A summarized General journal.

Checking for balance — Debits and credits both total to $10,260. In this entry, the Sales Return and Purchase Return accounts are increased to show additional returns. The Accounts Payable and Accounts Receivable accounts are both decreased to show that money is no longer owed. The Vehicles account is increased to show new company assets, and the Capital account, which is where the owner’s deposits into the business are tracked, is increased accordingly.

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The Essentials of Bookkeeping Transactions

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