Difference between Journal and Ledger - Journal Vs Ledger
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Difference between Journal and Ledger - Journal Vs Ledger

15 Mar,2021

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5 minutes read

Every business or company needs to keep a track of the money transaction that is taking place for the buying and selling of goods. The money transfer within a company may be the day-to-day transfer of funds or the monthly transactions. The main difference between Journal vs Ledger is that the Journal keeps a track of buying and selling of products by making daily entries. 

The difference between Journal and Ledger is that it also helps to compare and predict the sales of the company on a daily basis. Journal is also known as the book of original entry where the source and the mode of payment are recorded. A Ledger on the other hand is known as the book of second entry whereby the entries from the ledger are transferred to the journal and helps to prepare the income statement of the company.

Let us now take a quick look at the chief highlights of the Journal vs Ledger

Journal:

  • A Journal records the daily monetary transactions of the company in an organized manner.
  • Each Journal entry consists of a record of the money that has been debited or credited by the company.
  • A journal contains a small description of each entry.
  • A Journal consists of a single entry or multiple entries.

Ledger:

  • The record of transactions of the Journal is transferred to the Ledger.
  • The Ledger consists of both parts of an entry that is debit and credit.
  • The Debit side transactions are denoted by the word “To”  while the Credit side transactions are denoted by the word “By”.
  • A Ledger helps to track the assets and liabilities of the company thus assisting in the financial accounting process.

Significance of Journals and Ledgers in the Financial Accounting system

The Journals and Ledgers help to keep a track of the financial accounting of a company. Given below is the significance of Journal vs Ledger  for a company

Significance
Journals
Ledgers

1

Transactions are recorded on a daily basis

Ledgers help in maintaining classified accounts

2

There is a date entry for each transaction 

Ledgers help in preparing the trial balance of the company

3

Each Journal entry is accompanied by a valid reason for the money transaction.

All financial transactions are incorporated in the Ledger for the final bookkeeping

4

A journal consists of a double-entry system so there is a minimum scope of making mistakes in the entry.

All account information of a company can be obtained by the analysis of entries of the Ledger

5

Accountants can keep a record of the opening and closing entries in a journal.

Accountants can keep a track of the financial condition of the company with the help of Ledgers.

6

All the entries of the journals are recorded as against the bill for transaction.

Ledger accounts can be referred to for taking business decisions of a company.

Difference between Journal and Ledger for a company:

All business transactions that take place in a particular company are first entered in the journal. This accounting information is then posted in the Ledger for permanent recording and classification. The Journals and Ledgers are key to maintaining the accounting information and records of a company for financial analysis.

Take a look at the main difference between the Journal vs Ledger

S.No
Features of Journals
Features of Ledgers

1

Journals help in recording the day to day accounts of a company

Accounts from the Journal are transferred to the Ledger after the information is classified.

2

Transactions are recorded in the journals in a random manner without classification

Only classified transactions are recorded in the Ledgers.

3

Each entry of a Journal is explained by mentioning the source and mode of transaction.

Ledger entries are not accompanied by any details of the transaction.

4

All the account information in the journals are arranged in the chronological order

Ledger entries are not made in chronological order.

5

All transaction details of a company are first entered in the Journal and then transferred in the Ledger.

The Ledger contains records of financial income and expenditure of a company

6

Preparations of balance sheets and income statements cannot be prepared from the Journal.

Ledgers help in the preparation of the financial statement of the company.

7

The profit or loss statement of a company cannot be determined with the help of Journals.

Ledger helps in the financial accounting of a company with the available data and thus determines the profit or loss.

8

A company cannot prepare the Trial balance with the help of a Journal.

Ledgers help in the preparation of the Trial balance of a company.

9

When transaction details are recorded in the Journal, the process is called Journalizing

When the transaction details are recorded in a Ledger, the process is called Posting

10

The journal consists of raw accounting entries like daily vouchers, bills, and payments

The Ledger consists of accounting items like assets, liabilities, revenue, capital, and expenses.

11

The Journal is a subsidiary book for maintaining the daily accounts of a company.

Ledger is the secondary book of a company and helps in the preparation of the balance sheets.

12

Narration is essential in Journals

Narration is not mandatory in Ledgers

Why are Journals and Ledgers important for a company?

Journals and Ledger help to maintain transparency in the financial accounting of a company. Important transaction details are recorded and maintained with the help of Journals and Ledgers. Journals and Ledgers are an indicator of the money debited by or credited to the company along with its source. Journals and Ledgers also determine the profit or loss statement of the company and indicate financial liabilities (if any). It is also necessary for tracking the financial operations and helps in the smooth functioning of a company.

Conclusion:

Journals and Ledgers help in recording the financial transactions of a company. The main difference between Journal and Ledger is that Journals include the day-to-day record of a company’s financial transactions while Ledgers contain the yearly record of all the monetary dealings. Data from the journals are entered in the Ledgers for financial accounting and preparation of the company’s balance sheet. Both Journals and Ledgers are required by an organization’s smooth functioning and maintenance of financial affairs.

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