Journal vs Ledger Differences
The key difference between Journal and Ledger is that Journal is the first step of the accounting cycle where all the accounting transactions are analyzed and recorded as the journal entries, whereas, ledger is the extension of the journal where journal entries are recorded by the company in its general ledger account on the basis of which the financial statements of the company is prepared.
Both are the most important concepts in financial accounting. 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.
In the ledger, the accountant creates a “T” format and then puts the journal in the right order. 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, the ledger is also so very important.
Journal vs Ledger Infographics
Key Differences
- Journal is called the original book of entry because the transaction is recorded first in the journal. Ledger, on the other hand, 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, meaning the entry is recorded as per the happenstance 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.
- In a journal, the narration is a must because otherwise, the entry would lose its value. In the ledger, the narration 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
| Basis for Comparison | Journal | Ledger |
| 1. Meaning | Journal is the first entry of financial transactions that is rightly summarized and recorded as per the double-entry system. | Ledger is recorded from the journal in a “T” format and is the source of trial balance, income statement, and balance sheet. |
| 2. Which is more important? | Journal is more important than ledger because if it is done wrong, ledger can’t be done right. | Ledger is dependent upon the correctness of a journal because if the journal is recorded right, the ledger will follow along. |
| 3. Format | The format of a journal is simple and we include date, particulars, ledger folio, debit amount and credit amount. | The format of the ledger is “T” format where we use date, particulars, and amount on each side. |
| 4. Label | Journal is called “book of original entry”. | Ledger is called “book of second entry”. |
| 5. An act of recording | The act of journaling is called journalizing. | The act of ledger is called posting. |
| 6. How is the entry recorded? | In a journal, the entry is recorded as per the date of the transaction. | In the ledger, the entry is recorded account-wise. |
| 7. Narration | Narration is a must to understand the nature of the entry. | The narration is optional. |
| 8. Necessity of balancing | Balancing is not required in the journal. | Balancing is mandatory in a ledger. |
Conclusion
Understanding the journal and ledger is of utter importance. If you can understand them well, the rest of the accounting would seem very easy to you because you would be able to connect why an account is being debited and what another is being credited.
However, if we compare, we would see that journal is more important than ledger; because if there is an error in the journal, it would be very difficult to find out since it is the book of original entry. Ledger is also important because it is the source of all other financial statements.
Journal vs Ledger Video
Recommended Articles
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