The ledger is an extension of the journal where journal entries are marked by the company and its general ledger account based on which of the financial statements the company has prepared. Because accounting also creates the trial balance, income statement, and balance sheet from looking at the ledger.
The ledger is just as important as the journal. The journal is often considered more important than the ledger because if it is done wrong, the ledger cannot be done correctly. The ledger is dependent on the correctness of a journal. As long as the journal is recorded accurately, the ledger will follow.
Balancing is mandatory for the ledger but not required in the journal. In the journal, the narration is a necessary part of understanding the nature of the entry. However, in the ledger, the narrative is optional. In the journal, the entry is recorded as per the date of the transaction, but in the ledger, the entry is recorded account wise. Both accounts payable and accounts receiveable need to keep a list of all the financial transactions they make — paying bills for the business and bringing in the capital for the company.
Keeping accurate accounting records for all money coming into and flowing out of the business is crucial when it comes to filing and paying taxes. 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. 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? Balancing Need not to be balanced. Must be balanced. The Journal is a subsidiary day book, where monetary transactions are recorded for the first time, whenever they arise.
It is not possible to prepare an income statement at the end of a period from journal to no profit or loss. The income statement is prepared with the ledger balances at the end of a period to know the net profit or loss. The balance sheet cannot be prepared directly from the journal. The balance sheet is prepared with the help of ledger balances. Transactions are recorded in the journal in the light of the voucher. Journal is the source of preparation of ledger. There is no debit side or credit side in money columns in it for writing debit.
Each account in ledger has two sides. But in statement form, there are three money columns for writing debit and credit amount and also for balance. For Accounting Practice. Have an account? Sign In Now. Sign In For the sake of quality, our forum is currently "Restricted" to invitation-only. Remember Me! Don't have account, Sign Up Here.
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