All transactions in a journal are recorded in chronological order which shows the transaction date, name
of accounts debited and credited, its corresponding amount, and a concise explanation of each transaction.
Recording of each transaction requires debit and credit entries to be of equal amounts.
After transactions have been entered in the journal, the debits and credits from that journal are transferred
to the ledger account. While the general journal organizes transactions in chronological order, the ledger
is organized by account.
A trial balance is then created at the end of the accounting period to ensure the equality of the debit and
credit accounts. A trial balance lists all ledger accounts, with debits in the left column and credits in the
right column.
Source documents serve as evidence and provide data for recording transactions. Based on these
documents, the business can determine how to record the transaction. Source documents include cash
receipts, credit card receipts, cash register tapes, supplier invoices, purchase orders, etc.
After reviewing the source documents, transactions are recorded in a journal, a chronological record of
the entity’s transactions. Amounts are then transferred to the ledger, which is termed as posting. The
ledger is the “reference book” of the accounting system and is used to summarize transactions by account.
Debits in the journal are posted as debits in the ledger and credits as credits. The following figure shows
this process:
Date
Dr
Cr
Cash
Capital
9/1
Cash
75000
Sep 1 75000
Capital
75000
Invested cash in the business
Figure 1. Journalizing and posting transactions in t-accounts
The journalizing and posting process has the following steps:
Transactions are recorded in the journal.
Information is posted
(transferred) to the ledger.