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General (or Nominal) Ledger vs. General Journal: What’s the Difference?
- CLFI Team
- 4 min read
Understanding how financial transactions flow through the accounting system is key to reading any company’s financial statements. Two of the most fundamental tools used to record and organize those transactions are the general journal and the general ledger. They are often confused, but each serves a distinct purpose within the bookkeeping process.
The Flow of Accounting Information
In every accounting system, financial data travels in a structured sequence. It starts with the identification of a transaction — say, an equipment purchase or a sales invoice — and ends with the preparation of financial statements. The general journal captures each transaction as it occurs, in chronological order. The general ledger, meanwhile, groups and classifies those same transactions by account type, allowing balances to be monitored over time.
Definition:
General Journal
A chronological record of all accounting transactions, showing the accounts affected, debit and credit amounts, and a brief description of each transaction.
Definition:
General (Nominal) Ledger
A complete collection of all individual accounts used by an organization, each showing the cumulative total of transactions from the journal that affect that account.
Journal First, Ledger Next
The general journal acts as the book of first entry. Every transaction — whether cash received, revenue earned, or expenses incurred — is initially recorded there. Each line in the journal shows which account is debited and which is credited, following the double-entry principle.
Once the journal entry is made, the information is transferred (or “posted”) to the general ledger. The ledger is therefore the book of final entry, where transactions are grouped by account: all cash transactions in the Cash account, all sales in the Sales Revenue account, and so on. This classification enables accountants to prepare trial balances and financial statements.
Comparing the Two
| Feature | General Journal | General Ledger |
|---|---|---|
| Purpose | Initial record of transactions in chronological order. | Classified record summarizing transactions by account. |
| Focus | Recording and documentation. | Summarizing and reporting. |
| Format | Each transaction listed with debit and credit entries. | Each account shows running totals (debit, credit, and balance). |
| Used For | Tracking daily entries and supporting audit trails. | Preparing the trial balance and financial statements. |
Example Exercise: Posting from Journal to Ledger
Posting from Journal to Ledger
A step-by-step walkthrough of how a business investment is recorded, posted, and verified under the double-entry system.
Suppose a business owner invests £10,000 in cash to start the company. When this happens, the accountant first records the event in the general journal, identifying the two affected accounts — Cash and Owner’s Capital.
Cash increases, so it’s debited. Owner’s Capital also increases, but as part of equity, it’s recorded as a credit.
Record the transaction in the journal
Post each line to the ledger (running balances)
The same information is now posted to the general ledger, where each account keeps a running total.
| Cash (Asset) | ||
|---|---|---|
| Date | Debit | Credit |
| 11 Nov 2025 | £10,000 | — |
| Balance | £10,000 (Debit) | |
| Owner’s Capital (Equity) | ||
|---|---|---|
| Date | Debit | Credit |
| 11 Nov 2025 | — | £10,000 |
| Balance | £10,000 (Credit) | |
The Cash Account now shows a £10,000 debit balance. The Owner’s Capital Account shows a £10,000 credit balance.
Verify totals (trial balance check)
Finally, the accountant confirms that the total debits equal the total credits. This ensures the double-entry rule is correctly applied.
Why This Exercise Matters
Understanding how a simple transaction flows from the journal to the ledger — and how each side of the entry keeps the accounting equation balanced — is the cornerstone of all financial record-keeping. The exercise illustrates not just a mechanical process, but the logic that underpins every reliable financial statement.
When an owner invests £10,000 in cash, the business gains an asset and the owner’s equity increases by the same amount. This dual recording ensures that resources and claims on those resources are always in equilibrium. Every subsequent event in accounting — a sale, an expense, or a payment — follows the same rule: every action has two effects that keep the books balanced.
This audit trail from source documents to journal, to ledger, to statements is what gives accounting its credibility and reliability.
For anyone managing budgets, reviewing performance, or interpreting accounts, this foundation is essential. Before moving to more advanced areas such as accruals, depreciation, or profit measurement, it is important to fully grasp how the double-entry principle ensures consistency across all transactions. Once this principle is clear, the rest of accounting becomes a matter of recognising which accounts are affected — and how the two sides of each entry interact to tell the financial story of a business.
Definition
Balance Sheet
A financial statement showing what a business owns and owes at a specific point in time, summarising assets, liabilities, and equity. For a step-by-step guide to interpreting it, read How to Read a Balance Sheet – Finance for Non-Finance Managers .
Programme Content Overview
The Executive Certificate in Corporate Finance, Valuation & Governance delivers a full business-school-standard curriculum through flexible, self-paced modules. It covers five integrated courses — Corporate Finance, Business Valuation, Corporate Governance, Private Equity, and Mergers & Acquisitions — each contributing a defined share of the overall learning experience, combining academic depth with practical application.
Chart: Percentage weighting of each core course within the CLFI Executive Certificate curriculum.
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