ACCA Applied Knowledge · Financial Accounting
General Ledger Accounts and Journal Entries for ACCA Financial Accounting
The general ledger is the main record of a business, made up of accounts that hold every transaction. You record each transaction twice, as a debit and an equal credit. To solve questions, identify the two accounts, decide which is debited, post the entries, balance off, and use journals for non-routine items.
What this chapter covers
This chapter is the base of Financial Accounting. It shows how a transaction becomes a record. You learn double entry, the books of prime entry, the ledger accounts that hold the balances, and the journal for items that do not fit the daily books. You also learn to separate capital from revenue items and to adjust for accruals and prepayments.
The skills here are used in almost every later chapter. Trial balances, error correction, bank reconciliations, depreciation, irrecoverable debts, inventory and the preparation of financial statements all depend on posting correctly and balancing accounts. If double entry is weak, those chapters feel harder than they are.
In the exam, this content appears in Section A as short objective questions, such as which account is debited, what a journal looks like, or what the closing balance is. It also supports the 15-mark accounts preparation question in Section B, where adjustments must be posted before the statements are drawn up.
Every Financial Accounting exam question, whether a single two-mark objective test question or a long multi-task question, rests on knowing which account is debited and which is credited. Section A has 35 two-mark questions, and many are quick ledger or journal questions where one wrong side loses the whole mark. Fast, automatic double entry also saves time for harder questions in later chapters. This chapter is worth the effort because errors here carry through everything else you build on it.
General ledger accounts and journal entries: topics in the order to study them
- 1Double-Entry Bookkeeping PrinciplesEverything else uses the rule that each transaction has equal debits and credits, so learn it first.
- 2Ledger Accounts and the Books of Prime EntryOnce you know the rule, learn where transactions are first recorded and which accounts they reach.
- 3Writing Up Ledger Accounts and Balancing OffNow you practise posting entries and finding balances, which turns theory into a working skill.
- 4Journal EntriesJournals use the same debit and credit logic for non-routine items, so they come after you can post confidently.
- 5Capital and Revenue Transactions in the LedgerThis decides which account an item goes to, so it follows the journal and feeds into the adjustments.
- 6Accruals, Prepayments and Ledger AdjustmentsThis is the hardest topic here because it combines posting, balancing and period-end judgement, so do it last.
How to prepare General ledger accounts and journal entries
Aim for accuracy first, then speed. Short daily practice on a phone works better than one long session.
- Learn the five account types: assets, liabilities, capital, income and expenses. For each, know whether an increase is a debit or a credit.
- Practise two-line entries for common transactions: credit purchases, cash sales, paying expenses, drawings and receipts from customers. Say the debit and credit aloud.
- Write T-accounts by hand with a date or narrative on each line, then balance them off. Check that the carried down and brought down balances are on the correct sides.
- Write journals from a short description. Include the debit, the credit and a narrative. Check that total debits equal total credits.
- Sort items into capital and revenue. Then post accruals and prepayments, and check the expense charged to profit or loss for the period.
- Finish with timed objective questions. For multiple response, read the number you must select. For number entry, check the sign and the units before you submit.
Common mistakes in General ledger accounts and journal entries
Putting the debit and credit on the wrong sides
Fix: Think about the account type, not just cash. For each account, decide whether the transaction increases or decreases it, then use the type rule.
Balancing off with the balance carried down on the wrong side
Fix: Total the larger side. Put the balancing figure on the smaller side as carried down. Then bring it down on the opposite side. Both totals must match.
Treating a capital item as an expense, or the reverse
Fix: Ask whether the cost gives a benefit over several periods as an asset or covers this period's running costs. Include delivery and installation costs in the cost of an asset where they are needed to bring it into use.
Adding a prepayment to the expense instead of deducting it
Fix: Ask what part of the payment belongs to the next period. Deduct that from the expense. For accruals, add the amount owed.
Journals that do not balance or have no clear narrative
Fix: Total the debits and credits every time. Add a short narrative that explains the transaction.
Ignoring opening balances in the accrual or prepayment account
Fix: Write the full expense account. Put in the opening balance, cash paid and the closing balance, and then find the profit or loss charge as the balancing figure.
Last-day revision: General ledger accounts and journal entries
- Every transaction has at least one debit and one credit of equal value.
- Debit increases assets and expenses. Credit increases liabilities, capital and income.
- Debit decreases liabilities, capital and income. Credit decreases assets and expenses.
- Books of prime entry are where transactions are first recorded, before posting to the ledger.
- To balance an account, total the larger side, put the difference on the smaller side, then bring it down on the opposite side.
- A debit balance on an asset or expense account is normal. A credit balance on a liability or income account is normal.
- A journal shows the debit, the credit and a narrative. It is used for non-routine items.
- Capital expenditure buys or improves non-current assets. Revenue expenditure covers day-to-day running costs.
- An accrual is an expense incurred but not yet paid. Add it to the expense and show a liability.
- A prepayment is an expense paid in advance. Deduct it from the expense and show a current asset.
- Expense for the period = cash paid + closing accrual - opening accrual + opening prepayment - closing prepayment.
- Check the question wording: debit or credit, increase or decrease, and which account.
General ledger accounts and journal entries practice questions
- Hartley Ltd paid $12,000 to install a new air-conditioning system in its factory, but the accounts clerk debited the amount to the repairs a…
- Which of the following is a book of prime entry rather than part of the general ledger?
- Caldwell Ltd sold a van for $9,000 cash. The van cost $20,000 and accumulated depreciation was $12,500. Which statement about the ledger ent…
- A sales ledger account for customer Brandt shows: opening balance $5,200 debit; credit sales $9,800; cash received $8,000; sales returns $1,…
- The purchase day book for a month shows net goods $20,000 and sales tax $3,000 (recoverable), total $23,000, all on credit. What is the corr…
- Tandy Co's office equipment account had an opening debit balance of $60,000. During the year, equipment costing $15,000 was purchased on cre…
- Kiwi Co's rent expense account for the year to 31 December shows: opening prepayment $2,000 (debit); payments made in the year of $14,400; a…
- A business buys goods on credit from a supplier for $4,000 and later returns goods costing $500 to the supplier. Which entry records the ret…
General ledger accounts and journal entries in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
General ledger accounts and journal entries: frequently asked questions
What is the difference between a ledger account and a journal entry?
A ledger account holds all the transactions for one item, such as sales or rent, and shows a balance. A journal entry is an instruction that shows which accounts to debit and credit for one transaction. The journal is mainly used for items that do not go through the normal daily books.
How do I decide which account to debit and which to credit?
First identify the two accounts involved. Then decide whether each one increases or decreases. Debit increases in assets and expenses, and debit decreases in liabilities, capital and income. The credit goes the opposite way. Check that the debit total equals the credit total.
How do I balance off a ledger account?
Add up both sides and find the larger total. Write the difference on the smaller side as the balance carried down, so both totals are equal. Then bring the balance down on the opposite side, which is the opening figure for the next period.
Are journal entries tested in the objective test or only in the long questions?
Journals can appear in Section A as objective test questions, for example asking you to pick the correct debit and credit. The same skills also support the Section B accounts preparation question, where adjustments must be recorded correctly. Practise both the short and the extended forms.