What Is the Difference between a Journal and Ledger?

Malcolm Tatum
Malcolm Tatum

A journal and ledger are two types of books that are routinely used in the process of accounting. Considered key to what is known as double entry accounting, each of these books serves specific purposes within the overall process of keeping accurate financial records. While many of the transactions posted in both these books are the same, there are key differences in the purpose and function of each of these accounting books.

In many countries, businesses are required by law to maintain expense ledgers so that the government can prevent and detect illegal activities such as money laundering or corporate embezzlement.
In many countries, businesses are required by law to maintain expense ledgers so that the government can prevent and detect illegal activities such as money laundering or corporate embezzlement.

One of the most basic differences between the journal and ledger is when they are employed in the accounting process. The journal serves as the accounting book in which a transaction is first entered into the accounting system, with the transaction often referred to as the original entry. Later in the process, that same transaction will be posted as an entry into the ledger, where that entry will be positioned in relation to other entries for purposes of evaluation and analysis.

Entries to accounts in a ledger must be balanced at all times.
Entries to accounts in a ledger must be balanced at all times.

Another important difference between the journal and ledger is the order of the entries within the records. Journals are always arranged in chronological order, making it very easy to identify which transactions are associated with a given business day, week, or other billing period. By contrast, the arrangement of entries within a ledger have more to do with grouping like transactions together into specific accounts for purposes of assessing the data for internal financial and accounting purposes.

The different purposes of the journal and ledger also mean that each book is structured differently. A journal will often include a brief description of the transaction, including a date, and the placement of the transaction amount in a debit or credit column. There is no attempt to balance the transactions recorded in a journal. By contrast, entries to accounts in the ledger must be balanced at all times.

There is some difference of opinion regarding the use of both the journal and the ledger. One school of thought holds that by keeping both accounting books, the opportunity to identify posting errors is enhanced, a factor that can come in very handy when and as accounts in the ledger are not balancing. In addition, the journal is often more readily accepted as evidence into a court of law, owing to the straightforward process used to record transactions in chronological order. A different approach holds that keeping a journal is optional, while maintaining a ledger is crucial to the task of tracking the company’s financial transactions, including in terms of arranging accounts so that taxes may be calculated and paid accurately.

A journal serves as an accounting book in which a transaction is first entered into a company's accounting system.
A journal serves as an accounting book in which a transaction is first entered into a company's accounting system.
Malcolm Tatum
Malcolm Tatum

After many years in the teleconferencing industry, Michael decided to embrace his passion for trivia, research, and writing by becoming a full-time freelance writer. Since then, he has contributed articles to a variety of print and online publications, including wiseGEEK, and his work has also appeared in poetry collections, devotional anthologies, and several newspapers. Malcolm’s other interests include collecting vinyl records, minor league baseball, and cycling.

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