Question

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

Answer 1

General journal, general ledger, trial balance and financial statements are part of books of accounts

All the above elements are combined termed as books of accounts.

Purpose of general journal

1. this is the book or system maintained by the organisation to record all the transactions done by the organization.

2. In this book we get information about each and every transaction rather than depend on the nature of transaction.

3. In this books all the information are recorded in the form of journal entries.

4. The main purpose of the general journal is to record all the transaction done by management in the form of journal entries.

General ledger

1. This is the books maintained by the organisation for the purpose of the recording all the journal entries in specific accounts based on the nature.

2. All the journal entries in the general journal will classified in general ledger based on the nature of journal.

3. The main purpose of the general ledger is classification of the journal entries in the general journal.

4. In this ledger we get the balances of each account.

Trial balance

This is the statement of balances which are came out in the general ledger

In the trail balance we get all the balances of accounts from general ledger on the debit and credit basis.

Financial statements

The financial statements are prepared from the trail balance.

Financial statements involves

Balance sheet - Statements of assets and liabilities

Profit and loss account - all indirect expense and indirect income of organisation.

Trading account- all direct expenses and direct income of the organisation ( primarily applicable only to manufacturing company)

Statement of cash flow - this shows the flow of cash in the organisation.

Flow into each other

All the events in the organisation will get recorded in the general journal and those journal entries will be classified into accounts in the general ledger and those balance are taken and trial balance is prepared from that trail balance the financial statements are prepared

This if the flow of information between the general journal and general ledger and trail Balance and financial statements.

These are all the information required to solve the given question.

I hope, all the above mentioned points and explanations are useful and helpful to you.

Thank you.