The Journal, the General Ledger and the Trial Balance | Free Bookkeeping & Accounting Course

What you'll learn

How the general journal records every entry in date order.
How posting to the general ledger turns entries into account balances.
Why you make adjusting entries before closing a month, starting with depreciation.
How to prepare a trial balance and what it can (and can't) catch.
How to reconcile your bank account and keep it all in a spreadsheet.

📥 Practice this lesson

Enter journal entries and watch the trial balance update itself, with a check that debits equal credits.

bookkeeping-template.xlsx · Journal and Trial Balance sheets

You can now write journal entries with debits and credits. This lesson shows where those entries live and how to prove the books contain no arithmetic errors: the general journal, the general ledger and the trial balance. You'll also make Brightside's first adjusting entry, the step that separates rough books from accurate ones.

Source document
General journal
General ledger
Trial balance
Financial statements

The general journal: everything, in date order

The general journal (often just "the journal") records every entry in the order it happens. It's the business's complete memory: if someone asks what happened on March 14, the answer is there. A typical layout:

Date	Entry	Account and memo	Debit	Credit
Mar 2	1	Cash Owner's Capital Maya's initial investment	$40,000	$40,000
Mar 3	2	Equipment Cash Espresso machine and grinders	$12,000	$12,000
…	…	…	…	…

In accounting software you rarely type entries like these. When you create an invoice, enter a bill, run payroll or categorize a bank transaction, the software writes the journal entry behind the scenes. Manual journal entries are mostly reserved for month-end adjustments, like the one you'll make below. Either way, every entry should trace back to a source document you can produce if the IRS, a lender or a buyer asks.

The general ledger: everything, grouped by account

The journal tells the story, but it can't tell you how much cash you have without adding up dozens of lines. That's the job of the general ledger, which collects every entry for each account in one place, often drawn as a T-account. Copying entries from the journal to the ledger is called posting; software does it instantly.

Here's Brightside's Cash account after the entries from lesson 4:

                         CASH
          DEBIT                 |          CREDIT
--------------------------------+--------------------------------
(1) Owner investment   40,000   | (2) Espresso machine   12,000
(4) Bank loan          10,000   | (6) Rent                3,500
(5) Sales              18,000   | (7) Wages               7,000
--------------------------------+--------------------------------
Total debits           68,000   | Total credits          22,500
Debit balance          45,500   |

The balance is the difference between the two sides. Debits are larger, so Cash has a debit balance of $45,500, its normal side. An asset account with a credit balance signals an overdraft or a posting error.

1. What's the difference between the general journal and the general ledger?

The journal groups entries by account; the ledger lists them by date
The journal lists entries by date; the ledger groups them by account and shows balances
They're the same record with two different names

The journal tells the day-by-day story. The ledger tells you how much is in each account.

Adjusting entries: before you close the month

At the end of each month some things have happened that no invoice or receipt will tell you about, yet they must be recorded so the numbers follow the accrual basis. The most common adjustments:

Depreciation of equipment and other fixed assets.
Accrued expenses: wages earned by employees but not yet paid, interest on a loan for the month, utilities used before the bill arrives.
Prepaid expenses used up: one-twelfth of an annual insurance policy each month.
Bad debt estimates: the part of accounts receivable that probably won't be collected.
Inventory adjustments: the difference between the books and a physical count.

Lesson 7 covers all of them. For now, Brightside records one month of depreciation on its $12,000 espresso machine ($12,000 ÷ 60 months):

#	Account	Debit	Credit
9	Depreciation Expense	$200
	Accumulated Depreciation		$200

The trial balance

A trial balance lists every ledger account with its balance on a given date. If double-entry was applied correctly, the total of the debit balances equals the total of the credit balances. Here's Brightside's at the end of its first month:

Account	Debit	Credit
Cash	$45,500
Inventory	$1,000
Equipment	$12,000
Accumulated Depreciation		$200
Accounts Payable		$6,000
Notes Payable		$10,000
Owner's Capital		$40,000
Sales Revenue		$18,000
Cost of Goods Sold	$5,000
Rent Expense	$3,500
Wages Expense	$7,000
Depreciation Expense	$200
Totals	$74,200	$74,200

It balances. Here's how each side is made up, as a share of the $74,200 total:

Debit balances

Cash$45,500

Equipment$12,000

Wages Expense$7,000

Cost of Goods Sold$5,000

Rent Expense$3,500

Inventory$1,000

Depreciation Expense$200

Credit balances

Owner's Capital$40,000

Sales Revenue$18,000

Notes Payable$10,000

Accounts Payable$6,000

Accumulated Depreciation$200

From this trial balance you'll build the financial statements: revenue and expense accounts feed the income statement (lesson 8), and asset, liability and equity accounts feed the balance sheet (lesson 9).

Balanced doesn't mean correct

A trial balance catches math errors and one-sided entries. It does not catch a transaction that was never recorded, an entry recorded twice, or an amount posted to the wrong account, such as rent booked as advertising. That's why bookkeepers also reconcile the bank account and review unusual balances.

2. Your trial balance shows debits $450 higher than credits. Which error could explain it?

A $450 transaction was never recorded
A $225 credit was posted as a debit
A $450 expense was posted to the wrong expense account

Posting a $225 credit on the debit side adds $225 to debits and removes $225 from credits: a $450 gap. A missing entry or a wrong-account posting leaves both sides equal, so the trial balance can't detect them.

The bank reconciliation

Once a month, compare the Cash balance in your books with your bank statement and explain every difference. Differences usually come from outstanding checks (written but not yet cashed), deposits in transit (recorded by you, not yet by the bank), bank fees or interest you haven't recorded, and errors. If you only do one control, do this one: it catches duplicates, omissions and fraud early.

Brightside's first reconciliation:

Bank side	Amount	Book side	Amount
Ending balance on bank statement	$48,580	Cash balance in the ledger	$45,500
− Outstanding check #104 (rent)	−$3,500	Unrecorded bank fees	$0
+ Deposit in transit (Mar 31 card batch)	+$420
Adjusted bank balance	$45,500	Adjusted book balance	$45,500

Both sides agree, and both differences are just timing, so no entry is needed. If the bank had charged a fee Brightside hadn't recorded, it would book it (debit Bank Fees, credit Cash) so the ledger matches reality.

Card processors deposit net of fees

Square, Stripe, Toast and similar processors usually deposit your card sales minus their fees. Record the gross sale as revenue and the fee as a separate expense; if you record only the net deposit, you understate both revenue and expenses, and your sales tax reporting won't tie out.

3. What is a bank reconciliation for?

Calculating the month's sales tax
Applying for a bank loan
Matching your book balance to the bank statement and explaining every difference

It explains timing differences such as outstanding checks and deposits in transit, and it exposes errors, missing entries and fraud.

Doing it in a spreadsheet

For a very small business, a sheet with the columns Date, Entry, Memo, Account, Debit and Credit works as a journal. Each account's ledger balance is a SUMIFS away, and a pivot table with accounts in rows and the sums of Debit and Credit in values gives you a trial balance in seconds. In the course template, the Trial Balance sheet uses formulas like this one (account number in column A):

=SUMIFS(Journal!$F$2:$F$300,Journal!$D$2:$D$300,$A2)

When volume grows, you send invoices daily or you hire employees, move to accounting software that connects to your bank. Before you trust any trial balance, run through this list:

Every bank and credit card account is reconciled to its statement.
Month-end adjusting entries (depreciation, accruals, prepaids) are recorded.
No account shows a balance on its "wrong" side, like a credit balance in Cash or Inventory.
Nothing big is sitting in "Uncategorized" or "Ask my accountant."
Total debits equal total credits.

4. Which of these would a balanced trial balance NOT reveal?

A $300 supplier bill entered twice
A journal entry with $500 of debits and $50 of credits
An addition mistake in the Cash ledger total

A duplicate entry adds equal debits and credits, so the totals still match. One-sided entries and addition errors do throw the totals off.

Practice exercise

Post Brightside's Inventory account (entries 3 and 8 from lesson 4) as a T-account and find its balance. Then: a physical count at month-end finds only $940 of supplies instead of the $1,000 on the books. What adjusting entry do you make?

See solution

             INVENTORY
(3) Purchase   6,000 | (8) Used   5,000
---------------------+----------------
Debit balance  1,000 |

The $60 shortfall (spoiled milk, spills, the occasional free drink) is shrinkage. Bring the books down to the count: debit Cost of Goods Sold (or an Inventory Shrinkage expense account) $60 and credit Inventory $60. The new Inventory balance is $940.

Summary

The general journal records every entry in date order; the general ledger groups them by account and shows balances.
Adjusting entries such as depreciation and accruals are made at month-end, before the statements.
A trial balance proves that total debits equal total credits and is the starting point for the financial statements.
A balanced trial balance can still hide omissions, duplicates and wrong-account postings.
Reconcile every bank and card account monthly; it's the single most useful control in bookkeeping.

Next lesson: Inventory and Cost of Goods Sold: FIFO, LIFO and Weighted Average. You'll record inventory purchases and sales, and see how each costing method changes profit and taxes.