Difference Between Journal and Ledger

Double entry system of bookkeeping says that every transaction affects two accounts. There is a proper procedure for recording each financial transaction in this system, called as accounting process.The process starts from journal followed by ledger, trial balance, and final accounts. Journal and Ledger are the two pillars which create the base for preparing final accounts. The Journal is a book where all the transactions are recorded immediately when they take place which is then classified and transferred into concerned account known as Ledger.

Journal is also known as book of primary entry, which records transactions in chronological order. On the other hand, Legder, or otherwise known as principal book implies a set of accounts in which similar transactions, relating to person, asset, revenue, liability or expense are tracked. In this article, we have compiled all the important differences between Journal and Ledger in accounting, in tabular form.

Content: Journal Vs Ledger

1. Comparison Chart
2. Definition
3. Key Differences
4. Conclusion

Comparison Chart

Basis for Comparison	Journal	Ledger
Meaning	The book in which all the transactions are recorded, as and when they arise is known as Journal.	The book which enables to transfer all the transactions into separate accounts is known as Ledger.
What is it?	It is a subsidiary book.	It is a principal book.
Also known as	Book of original entry.	Book of second entry.
Record	Chronological record	Analytical record
Process	The process of recording transactions into Journal is known as Journalizing.	The process of transferring entries from the journal to ledger is known as Posting.
How transactions are recorded?	Sequentially	Account-wise
Debit and Credit	Columns	Sides
Narration	Must	Not necessary.
Balancing	Need not to be balanced.	Must be balanced.

Definition of Journal

The Journal is a subsidiary day book, 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 in 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.

A short note is given in support of each entry, which gives a brief description of the transaction, known as Narration. The complete process of recording the entries in the journal is known as Journalizing. It has five columns which are Date, Particulars, Ledger Folio, Debit, and Credit. A journal can be:

• Single Entry: Entry having one debit and a corresponding credit.
• Compound Entry: Entry having one debit and more than one credit or entry having more than one debit for a single debit or two or more debit and two or more credits. In the case of compound entry, it should be kept in mind that the total of debit and credit will tally.

Definition of 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.

While posting entries in the ledger, individual accounts should be opened for each account. The format of a ledger account is ‘T’ shaped having two sides debit and credit. When the transaction is recorded on the debit side the word ‘To’ is added, however, if the transaction is to be recorded on the credit side, then the word ‘By’ is used in the particular column along with the account name.

At the end of the financial year, the ledger account is balanced. For this purpose, first of all, the totals of the two sides is determined, after that, you need to calculate the difference between the two sides. If the amount on the debit side is more than the credit side, then there is a debit balance, but if the credit side is higher than the debit side, then there is a credit balance. Suppose if an account has a debit balance, then you have to write “By Balance c/d” on the credit side with the difference amount. In this way both the sides will tally.

Now, at the beginning of the new period, you have to transfer the opening balance to the opposite side (i.e. On the debit side as per our example) as “To Balance b/d”. Here c/d refers to carried down, and b/d means brought down.

Conclusion

In the beginning, we talked about the procedure of recording a transaction. It involves a series of actions like they are first recorded in the journal, from there they are classified and grouped into separate accounts and posted into the ledger, which is then transferred to trial balance and at the end the final accounts are prepared.These steps provide a base to prepare the financial accounts of a company. If any of the above steps is missing, then it would be hard to prepare the final accounts.