Journal and ledger are immensely important in the business and financial world. They are said to be the second and third steps of the accounting cycle. They are the two pillars that create the bases for creating final accounts. Many people use these terminologies interchangeably. But there is an obvious difference between them. So, In this article, we will get to understand the complete difference between journal and ledger with the help of the following set of concepts.
Definition Of Journal
A journal refers to a subsidiary book of accounting where the detailed description of monetary transactions of an organization are recorded for the first time, whenever they arise. In journals, all the transactions get recorded in a sequential manner, so that they can be mentioned or accessed in the future. It is known as the first step of the accounting process and can also be called as the book of original entry.
A journal provides complete detail of two accounts that are influenced by each transaction, one is debited account and the other is a credited account. In the journal, the narration(a brief description of the transaction) is very compulsory it is because without narration the entry may lose its value. Some of the features of the journal are::
- Single Entry- It implies the journal entry with only one debit and corresponding credit.
- Chronology- It implies that the journal entry gets recorded in an orderly manner.
- Compound Entry- It implies that a single entry can have two or more than two accounts, as well as a journal, can also have more than one related transaction.
Definition Of Ledger
On the other hand, a ledger is a principal book of the account in which the financial transactions are transferred from the journal and then are classified into separate accounts so that they can be easily accessed. They can also be known as the book of the final entry because they assist a business entity in preparing accounting statements like trial balance. Some of the features of the ledger are as follows.
- Two Sides- Each ledger has two accounts, i.e one is a credit and the other is a debit account. The debit entries are recorded on the left side of the ledger, while credit entries are recorded on the right side of the ledger.
- Transaction- It implies that each transaction may influence two or more than two ledger accounts because the transaction is related to a specific expense, asset, or person.
Difference Between Journal And Ledger(Table)
| Basis For Difference | Journal | Ledger |
| Definition | It refers to the subsidiary book of account in which all the transactions are recorded as and when they arise. | It refers to the principal book of account, and its purpose is to transfer all the transactions from the journal and then classify them into separate accounts. |
| Also Known as | It is also known as the book of original entries. | It is also known as the book of the second entry. |
| Record | Chronological record | Analytical Record |
| Recording Order | All the transactions are recorded in a sequential manner. | Transactions are recorded account-wise. |
| Narration | Necessary | Not Compulsory. |
| Trial Balance | Cannot help in preparing the trial balance directly. | They help to prepare the trial balance. |
Key Differences Between Journal And Ledger
While comparing journal vs ledger, we have included some of the key differences between them. They are as follows.
- A journal refers to a subsidiary book of accounting where the detailed description of monetary transactions of an organization are recorded for the first time, whenever they arise. On the other hand, a ledger is a principal book of the account in which the financial transactions are transferred from the journal and then are classified into separate accounts so that they can be easily accessed.
- The journal refers to a subsidiary book, while the ledger is a principal book of account.
- The journal can also be known as the book of original entries. On the other hand, the ledger can be known as the book of the second entry.
- In the journal, the transactions get recorded in a chronological manner. On the other hand, in the ledger, the transaction gets recorded in analytical manner/order.
- In the journal, the narration(a brief description of the transaction) is very compulsory in order to support the entry. On the other hand, in the ledger, the narration is not that compulsory.
Conclusion
So, we can finally conclude, that despite significant differences between journals and ledgers both play a very crucial role in accounting. It involves a series of accounting processes – the transactions are first recorded in the journal, classified into separate accounts, and are finally posted in the ledger accounts.
