What is a Journal?
A journal is a subsidiary book of account that records monetary transactions according to accounting standards. These transactions get recorded in chronological order, and it gives details about the accounts that are affected by each transaction. It is known as the first step of the accounting process.
What are its features?
The features of a journal are as follows:
- Chronology: The journal entries get recorded in a date-wise order, and it helps in checking the transactions much more quickly.
- Double Entry System: Journal entries follow a system where every transaction is entered both on the debit and credit sides. It is an example of a dual entry system. One account gets debited and the other gets credited with the same value.
- Daybook: A journal records transactions on a day-to-day basis for consistency and ease.
- Compound Entry: A single entry can have two or more accounts on the same day, and a journal can also have more than one related transaction.
- Explanation: Each transaction includes a short description known as the narration (within brackets). It helps to explain the nature and purpose of the transaction.
What is a Ledger?
A Ledger is a principal book of account, and its primary purpose is to transfer transactions from a journal and then classify it into separate accounts. Ledger is also known as the book of final entry as it helps businesses prepare accounting statements like the Trial Balance.
What are its features?
The features of a ledger are as follows:
- Two Sides: Every Ledger has two sides – Debit and Credit. The debit entries come on the left side of a ledger, while the credit entries come on the right side.
- Transaction: Every transaction impacts two or more ledger accounts, and it is because the transaction is related to a particular person, asset, expense or income.
- Balancing the ledger: The total debit and credit sides of a ledger must always be the same. But that is not always the case since the debit side could be more than the credit side and vice versa. To balance the ledger, we have to record the difference between the two on the deficient side. When the debit side is more than the credit side, the balance gets recorded on the credit side, known as debit balance. Similarly, when the credit side exceeds the debit side, the balance is recorded on the credit side, known as a credit balance.
What are the differences between Journal and Ledger?
The main differences between Journal and Ledger are as given below:
Journal | Ledger |
Definition |
Journal is a subsidiary book of account that records transactions. | Ledger is a principal book of account that classifies transactions recorded in a journal. |
Order |
The journal transactions get recorded in chronological order on the day of their occurrence. | The ledger classifies the transactions from the journal under the respective accounts to which they are related. |
Explanation |
Each journal entry has a detailed narration of the transaction. | The ledger accounts do not have a detailed narration of each transaction. |
Result |
The journal does not reveal the total results of a transaction. | The Ledger accounts help reveal the result of transactions for a particular account. |
Trial Balance |
The journal cannot help prepare the Trial Balance directly. | The ledger helps to prepare the Trial Balance. |
Financial Statements |
The journal does not have a direct role in the preparation of financial statements like Profit and Loss Account or Balance Sheet. | The balances from different ledger accounts help to prepare financial statements like Profit and Loss Account or Balance Sheet. |
Opening Balance |
A journal does not have an opening balance, and it is only concerned with the current transactions that occur on a day-to-day basis. | Some ledger accounts have an opening balance, which is the closing balance from the previous year. |
Conclusion
Although there are significant differences between Journal and Ledger, both have a critical role in accounting. They have a vital role to play when preparing financial statements like Profit and Loss Account or Balance Sheet.
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FAQs
Journal is a subsidiary book of account that records transactions. Ledger is a principal book of account that classifies transactions recorded in a journal. The journal transactions get recorded in chronological order on the day of their occurrence.
What are the features of journal and ledger? ›
Ledger records a transaction only one time keeping debit and credit entries segregated in separate columns. On the other hand, a single transaction may be entered multiple times within a journal that represents both debit and credit.
What is the key difference between the journal and the ledger? ›
The journal consists of raw accounting entries that record business transactions, in sequential order by date. The general ledger is more formalized and tracks five key accounting items: assets, liabilities, owner's capital, revenues, and expenses.
What are the features of a ledger? ›
Features of Ledger Account
In the Ledger, all the types of Accounts relating to assets, liabilities, capital and revenue are maintained. It is the only record of the business transaction classified into relevant Accounts. It facilitates the preparation of financial statements in future.
Which of the following correctly distinguishes between a ledger and a journal? ›
The journal is the book of original entry whereas the ledger is the book of second entry. The journal is the book for analytical record and ledger is the book for chronological record.
What is a journal feature? ›
What is Journal? Journal is an app developed by Apple to help users write journal entries and easily insert pictures, videos and other content. Your entries are stored locally on your iPhone, and you can have backups on iCloud. Journal can suggest Reflections or other moments to write about.
What are the features of a journal entry? ›
What Are the Typical Features of a Journal Entry?
- The date of the transaction records when it occurred.
- Account names and numbers indicate where the transaction will be recorded.
- Amounts reflect what is to be credited and what is to be debited.
- Entries also have a unique reference number and a brief description.
Accounting ledgers and journals are important tools that companies use to record financial information. Professionals in a company's accounting department can use this information to make decisions about how the company operates and spends its money.
What is both a journal and ledger? ›
A cash book o both a journal as well as a ledger. The cash book is a journal because it records the cash transactions from the source document for the first time and then these are posted in the respective ledger accounts. The cash book is a ledger in the sense that it serves the purpose of a cash account also.
What is the difference between a journal and a ledger in Quickbooks? ›
A general journal records every business transaction in chronological order—it is the first point of entry into the company's accounts. The general ledger is the second entry point to record a transaction after it enters the accounting system through the general journal.
A ledger provides a record of each debit and credit transaction across the lifespan of a company. Each transaction within the ledger is also known as a “journal entry.” Businesses use ledgers to get a detailed view of their financial transactions for different periods of time, be that weeks, months, quarters, or years.
What do you mean by journal? ›
A journal is a scholarly publication containing articles written by researchers, professors and other experts. Journals focus on a specific discipline or field of study. Unlike newspapers and magazines, journals are intended for an academic or technical audience, not general readers.
What are the 3 main ledgers? ›
There are three main types of accounting ledgers to be aware of:
- General ledger.
- Sales ledger.
- Purchase ledger.
What are the differences between Journal and Ledger? Journal is a subsidiary book of account that records transactions. Ledger is a principal book of account that classifies transactions recorded in a journal. The journal transactions get recorded in chronological order on the day of their occurrence.
Which comes first ledger or journal? ›
The journal is the first step of the accounting cycle because all transactions are analyzed and recorded as journal entries. The ledger is an extension of the journal where journal entries are marked by the company and its general ledger account based on which of the financial statements the company has prepared.
What are the disadvantages of ledger? ›
Disadvantages of ledger
Ledger depends on the transaction data entered in it. If an error occurs in the transaction data, the entire results will have an error and will thus become undependable. The ledger will take a lot of users' time and energy.
What is the feature of journal proper? ›
A Journal proper in the accounting system is a book of original entry in which all type of miscellaneous credit transactions, which usually do not fit in any other books are recorded. This is why it is also called miscellaneous journal.
What are the benefits of journal and ledger? ›
Recording and tracking uncommon transactions like depreciation, bad debt, and the sale of assets are made easier with journals. Journals and ledgers also help you to capture both the debit and the credit sides of transactions. This is often overlooked when companies do not use books.
What are the features of journaling file system? ›
A journaling file system is a type of file system that keeps track of the changes made to the data on a disk by recording them in a separate log or journal. This way, if a system crash or power failure occurs, the file system can recover the data more easily and avoid corruption or inconsistency.
