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Describe the purposes of the General Journal, General Ledger, Trial Balance, and Financial Statements, and how...

Describe the purposes of the General Journal, General Ledger, Trial Balance, and Financial Statements, and how they "flow into" each other.

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250 words or more

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General Journal: When a transaction takes place and that transaction is of such nature that could not  be recotrded in specific journal , then that transaction is recorded by general joural. for example the adjusting entries are recorded in general journal like entry of depreciation.

General ledger: It is record in accounting which shows all the transaction related to a particular account at one place in a summarised form with date , amount and the corresponding account of transaction.

Trial balance: It is an accounting record which shows all accounts at one place at a particular date in a summarised form by showing all accounts in vertical form along with their respective amount.

Financial statements : It is an accounting record which shows all the financial activities under four differnt heads:-

1. Balance sheet : it shows assets , liabilities and Equity

2. Income statement: it shows all Incomes/ gains and expenses/losses

3. Cash flow statement: it shows cash outgoing and incoming under different heads like operating activities, investing activities, financing activities.

4. Statement of shareholders' equity: it shows changes in shareholders' equity from prior period.

So, first a particular entry, say depreciation, is recorded in General journal then from general journal ,all the entries related to depreciation on all fixed assets for an accounting period would be shown at one place in general ledger with different lines for deprerciation of different fixed assets then the account depreciation would be shown in trial balance with one consolidated amount taken from general ledger then this amount from trial balance would go to Income statement which is one of the components of financial statements.

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ekkarill92 answered 2 years ago
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