GENERAL LEDGER: Visual Guide to Posting Journals - YouTube

Hey I’m James you're watching Accounting Stuff 

and in this video we're going to cover the general ledger 

What does it mean? I like to think of the general ledger 

as a database that stores a complete record of all your 

accounts and journal entries But don't worry if this 

doesn't make sense right away all would be revealed in this video 

First i think we should see where the general ledger fits in the 

big picture of accounting A little while ago i made a video 

on the accounting cycle which basically shows us how 

financial accounting works if you missed it i'll drop a link 

in the description but as you can see here we post the general ledger in step three 

right after identifying transactions and preparing journal entries 

and it's these three steps that we're going to focus on today 

I’ve got two example transactions for you and we're going to 

prepare the journal entries and post them to the general ledger 

in two different ways

Now let's take a step back for a moment and pretend that you make delicious tasty cheeses for a living

Mmmm now wouldn't that be the best!


Your business is called Let it Brie and it's been in your family for generations


Back in the day when your grandparents were running the business 

they would have looked after Let it Brie’s books using actual books 

because that's what ledgers were at the time 

books that you'd regularly record transactions in

Your grandparents were literally bookkeeping and they would have kept 

several different ledgers a cash book 

one for receivables inventory 

fixed assets maybe one for payables 

and so on and then they had the precious 

the general ledger which is where they stored a complete record of 

the businesses accounts and journal entries all of these smaller books 

are called subledgers they support the general ledger by providing 

extra detail for certain accounts more on that soon 

Back then your grandparents would have filled out all these ledges by hand 

but today the books are gone now we've got computers 

we still hold on to some of the old words like bookkeeping and ledger 

but their definitions have changed slightly 

now you can think of a ledger as a database that you regularly 

record transactions in and the general ledger is a database 

that stores a complete record of all your accounts and journal entries 

Time for those examples but first I’d quickly just like to say 

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Example 1

Manual Journal Entries Let it Brie’s general ledger looks 

something like this it's a collection of all your 

accounts and journal entries you have your assets your liabilities 

your equity your revenue and your expense accounts 

and as usual debits are on the left and credits are on the right

It's the end of June and you've got a transaction to record for the last month 

you've been using electricity to power your cheese making machines 

but the electricity company hasn't sent you a bill yet 

which is completely fine but remember that in accrual accounting 

we record our expenses as we incur them and you're pretty darn sure that you'll 

are about $400 for June

so let's record this transaction using double entry  accounting

First things first we'll debit overhead expenses to record a $400 cost


in your income statement and then we'll credit accrued expenses 

by $400 to recognise a liability in your balance sheet 

we'll add a description and a date June 30th because that's 

the date that we're going to record the transaction in your general ledger 

This type of transaction is called an accrued expense 

because you've used the electricity in the past but you haven't received 

an invoice or made the payment yet if you'd like to learn more about that 

I’ve made a whole video covering accrued expenses which i'll link to 

down in the bottom But what we're looking at here 

is a journal entry and that means that this is a record of a financial transaction 

and this is a manual journal entry because we're posting it ourselves 

if we pop back to our diagram we can see that we're posting this transaction 

directly into a general ledger kind of like this 

we're skipping past all of the subledgers because you don't 

have one for accrued expenses

So let's post this shall we?

You already have an overhead expenses account with 

an $18,000 debit balance on the left hand side 

This is your beginning balance which you've brought forward and you 

also have an accrued expenses account with a $16,500 credit balance 

on the right hand side

These are called T accounts because they look like T’s

When we post this manual journal entry into your general ledger you debit 

the left hand side of your overhead expenses account by $400 

and you credit the right hand side of accrued expenses by $400 

so your ending balance in your overhead expenses account 

is now $18,400 which you’ll carry forward into the next month 

and your accrued expenses have increased to $6,900 

This is what we mean by posting a journal and now 

we can see how it affects your general ledger as a whole 

Your overhead expense and accrued expense accounts 

have been updated to reflect the transaction 

Example 2 and this time we're going to use a subledger 

and an automatic journal entry An account with a subledger 

is often called a control account

Take accounts payable for example

this is a control account held in your general ledger 

and right now it has a balance of $3,000 But what's that $3,000 made up of? 

We can't really tell by looking at the general ledger 

it just doesn't give us enough detail If we want to know who your business 

owes money to then we need to look at the accounts payable subledger 

You can think of this as a mini-database that supports the 

main accounts payable account in the general ledger 

These two things are separate but they interact with each other 

and the totals always have to match

In the accounts payable subledger we can see that Let it Brie 

owes money to three different suppliers and if we look a little closer 

we can see exactly which invoices make up the balances 

Pretty handy hey!

Now let's take a closer  look at Dairy Lane

You've been buying milk from them for a while now and they're kind enough to let you pay ‘On Account’

which means that you don't have to pay for your milk right away

Each time you buy some you're handed an invoice and you're given 30 days in order to make the  payment

At the moment you owe Dairy Lane a total of $1,700 which is split across 

three different invoices and today you decide to  

pay the oldest one

Invoice 1485 which is for $1,000

This payment is going to hit two places

your accounts payable subledger and your cash book 

In your accounts payable subledger the $1,000 payment is allocated 

against invoice 1485 so this balance is cleared down to zero 

and now you're left with two open invoices which add up to $700 

and your accounts payable subledger now totals to $2,000 but how does 

this affect your general ledger? Specifically your cash account and your 

accounts payable control account remember these have to 

match their subledgers

Well these days accounting software is pretty smart and often when you make payments like this it'll trigger 

an automatic journal entry in the background

What would that look like?

In this case the journal would debit accounts payable by $1,000 

to reduce your liabilities and credit cash by $1,000 

to reduce your assets as well This automatic journal entry 

will debit the left-hand side of your account's payable account 

reducing the balance down to two $2,000 and credit the right-hand side of 

your cash account bringing the balance down to $149,000 

If we look again at your general ledger we can see that it's been updated 

Your accounts payable control account now has a balance of $2,000


which matches the subledger

Great stuff!

Automatic journal entries like this can really save you a lot of time

Think of all that extra cheese your grandparents could have made if they didn't have to do this by hand

As usual i've made a cheat sheet which summarises the general ledger 

and basically everything we just went through 

If you'd like to grab a copy then head down into the description 

and you can find a link there And if you've got any questions or 

suggestions for topics then please let me know down in the comments 

or message me on instagram I do check and I do respond


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Why not? Stay safe and I’ll see you soon