Journal vs Ledger Differences

Both are essential concepts in financial accountingFinancial AccountingFinancial accounting refers to bookkeeping, i.e., identifying, classifying, summarizing and recording all the financial transactions in the Income Statement, Balance Sheet and Cash Flow Statement. It even includes the analysis of these financial statements.read more. If you don’t know the journal and ledger, you wouldn’t be able to decipher the real meaning of each transaction

Journal is the first form of transaction. In the journal, the accountant debits and credits the right account and records the transaction in the books of accounts for the very first time using the double-entry system.

The accountant creates a “T” format in the ledger and then puts the journal in the right order. So we can say that ledger is an extension of a journal. But since we create the trial balance, income statement, and balance sheet from looking at the ledger, it is also so vital.

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Journal vs Ledger Infographics

Key Differences

  • Journal is called the original book of entry because the transaction is recorded first in the journal. On the other hand, the ledger is called the second book of entry because the transaction in the ledger is transferred from journal to ledger.In a journal, the entry is recorded sequentially, i.e., as per the fate of the transaction. In the ledger, the entry is recorded account-wise.The act of recording into the journal is called journaling. The act of recording into the ledger is called posting.The narration is a must in a journal because otherwise, the entry would lose its value. In the ledger, the description is optional.In a journal, there is no need for balancing. In the ledger, balancing is a must at the end of the period.

Comparative Table

Conclusion

Understanding the journal and ledger is of utter importance. If you can follow both well, the rest of the accounting would seem very easy to you because you would be able to connect why account debits and other credits.

However, if we compare, we would see that the journal is more critical than the ledger; if there is an error in the journal, it would be tough to find out since it is the book of original entryBook Of Original EntryThe book of original entries, or the first entry book, is where the entire journal entries are recorded with all the supporting documents & transactions details. It provides existence & accuracy of the financial transactions posted, recorded or transferred in the individual ledgers.read more. Ledger is also crucial because it is the source of all other financial statementsFinancial StatementsFinancial statements are written reports prepared by a company’s management to present the company’s financial affairs over a given period (quarter, six monthly or yearly). These statements, which include the Balance Sheet, Income Statement, Cash Flows, and Shareholders Equity Statement, must be prepared in accordance with prescribed and standardized accounting standards to ensure uniformity in reporting at all levels.read more.

Journal vs. Ledger Video

This article has been a guide to Journal vs. Ledger. Here we discuss the top differences between them and infographics and a comparison table. You may also have a look at the following articles for gaining further knowledge in Basic Accounting –

  • Journal Entry FormatSubsidiary Ledger DefinitionGeneral Ledger vs Trial BalanceIFRS vs Indian GAAP