Accounting ledger vs Journal

Accounting ledger vs Journal


What is an Accounting Ledger ?

Ledger is a principal book which comprises a set of accounts, where the transactions are transferred from the Journal. Once the transactions are entered in the journal, then they are classified and posted into separate accounts. The set of real, personal and nominal accounts where account wise description is recorded, it is known as Ledger.

There are three main types of accounting ledgers to be aware of:

  1. General ledger

  2. Sales ledger

  3. Purchase ledger

Types of ledger accounts

There are several different types of accounts that would be included as part of the ledger:

  • Asset accounts: prepaid expenses, cash, accounts receivable, assets, and cash

  • Liability accounts: lines of credit, accounts payable, debt, and notes payable

  • Revenue accounts

  • Expense accounts

  • Equity accounts

  • Profit and loss accounts

What is a Journal ?

The Journal is a subsidiary daybook, where monetary transactions are recorded for the first time, whenever they arise. In this, the transactions are regularly recorded in an orderly manner, so that they can be referred to in the future. It highlights the two accounts which are affected by the occurrence of the transaction, one of which is debited and the other is credited with an equal amount.

Journal entry, or simply entry, refers to making a record in a journal. Many accounting jobs involve keeping journals or making entries. For the same reason, such jobs are known as data entry jobs.

While making a journal entry for a transaction following set of information is recorded:

  • Date at which transaction took place
  • The account to be debited and the monetary value to be debited in the same
  • The account to be credited and the monetary value to be credited in the same
  • A reference to the source document that initiated such entry for example invoice or credit note
  • A reference of the ledger in which entry is posted. Usually a separate coloumn is maintained with the name “folio”
  • A short description of the transaction that hints at what the transaction was about also called as narration or narrative or note.

Types of Journal in Accounting

  1. Purchase journal
  2. Sales journal
  3. Cash receipts journal
  4. Cash payment/disbursement journal
  5. Purchase return journal
  6. Sales return journal
  7. Journal proper/General journal

 Difference between Accounting ledger and Journal

Financial transactions are originally documented in an accounting journal, often known as the book of original entry. Within the accounting ledger book, the details are then summarized in a T format.

You can show debits on one side and credits on the other with a T-shaped ledger entry. The information is transferred from the ledger to the trial balance, and then to the balance sheet and income statement.

Another difference to be aware of is that journal transactions are recorded in chronological order, while ledger transactions are organized by account type. Ledger accounts must be balanced according to the double-entry method of bookkeeping.

Key Differences Between Journal and Ledger

The difference between journal and ledger can be drawn clearly on the following grounds:

  1. The Journal is a book where all the financial transactions are recorded for the first time. When the transactions are entered in the journal, then they are posted into individual accounts known as Ledger.
  2. The Journal is a subsidiary book, whereas Ledger is a principal book.
  3. The Journal is known as the book of original entry, but Ledger is a book of second entry.
  4. In journal, transactions are recorded in chronological order, whereas in ledger, transactions are recorded in analytical order.
  5. In the journal, the transactions are recorded sequentially. Conversely, in the ledger, the transactions are recorded on the basis of accounts.
  6. Debit and Credit are columns in the journal, but in the ledger, they are two opposite sides.
  7. In the journal, narration must be written to support the entry. On the other hand, in the ledger, there is no requirement of narration.
  8. Ledger accounts must be balanced, but journal need not be balanced.

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