Journal vs Ledger in Accounting: Key Differences Explained

As an accounting student, you will learn about the journal and ledger, their meaning, and their purposes in professional accounting and bookkeeping. Furthermore, a journal and a ledger are different in relation to accounting; however, they are interconnected. Let us learn about the categorization of the two types of accounting record keeping and the main differences between them.

What is Journal?

A Journal is a book of accounting that records all monetary transactions based on accounting standards. With journal accounting, bookkeepers keep the records in chronological order; thus establishing the transaction history. It is the first step in the accounting process because journal entries are later transferred to ledgers for record-keeping and classification.

What is Ledger?

A ledger is another book, a principal book of account, where transaction records are transferred from a journal entry. Furthermore, it is through the ledger bookkeeping that final accounts can be classified after the transaction histories are transferred. It further helps businesses prepare their account statements, like the trial balance or financial statement.

Journal vs Ledger: Key Differences

The demand for a journal and a ledger in the accounting process helps businesses and professionals in the long run. Below are the main differences between a journal and a ledger. They reflect the overall integration of the two content topics and their integration in accounting, both for students who are beginners and working professionals.

Features	Journal	Ledger
Order	The journal transactions are recorded from the day of their occurrence in chronological order	The transactions from the journal are under the respective accounts, which are related
Explanation	A detailed narration of the transaction is in every journal entry	There is no detailed narration for every transaction in the ledger accounts
Result	It does not reveal the outcomes of a transaction	It does help in revealing the outcome of transactions, thus you can learn the history of transactions
Trial Balance	It cannot contribute to preparing the trial balance directly	The ledger directly helps in preparing the trial balance
Financial Statements	No direct role in the financial statements preparation, like the balance sheet or profit and loss account	The balances identified in the ledger accounts help in the creation of financial statements, like the balance sheet or profit and loss account
Opening Balance	Do not have an opening balance It focuses on current transactions Day-to-day basis activity	Some ledger accounts will have an opening balance, which is basically the closing balance of the previous year

 

Purpose of a Journal

There are some significant purposes of a journal in accounting, such as serving as documented evidence. For every transaction, the journal serves as a collection of its history, including amounts, account details, cash credit, and dates of transactions. For a detailed day-to-day accounting record of all financial transactions, journal entries are the best strategy.

Purpose of a Ledger

A ledger fulfills the purpose of classifying transactions in journal entries like rent, sales, and cash by individual accounts. It helps track balances more easily as journal entries are grouped. Business finance can be effectively maintained with a ledger. Furthermore, a ledger helps in determining the running balance of each account. Through the ledger, financial statements can be prepared effectively.

Wrapping Up!

In conclusion, both a journal and a ledger are integral parts of accounting. As a student of accountancy, you should learn about the financial ledger, keeping journal entries, and other. Additionally, the topics are significant in preparing for financial statements and learning about the transaction history of accounts.

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Frequently Asked Questions (FAQs) on the difference between a journal and a ledger

Is it necessary to prepare a journal before a ledger?

It is important to prepare journal entries before the transaction details are transferred to the ledger. It confirms accuracy and establishes proper documentation.

Why is a ledger called the book of final entry?

A ledger is known as the book of the final entry because it helps businesses organize and summarize all the account entries in the journal.

Can a business maintain only a ledger without a journal?

A business can't maintain only a ledger without any journal entries. Businesses need to integrate traceability, especially in cases of double-entry bookkeeping, where data is yet to be entered into the ledger.

Who typically prepares the journal and the ledger?

Usually, journals and ledgers are both prepared by both accountants and bookkeepers. First, they prepare the journal, then they transfer the entries into the ledger.

Which comes first in the accounting cycle: journal or ledger?

In the accounting cycle, journaling comes first, then comes the ledger. Trial balance follows that, and then comes the financial statements.