Relationship between journal and Ledger

Journal

Relationship between journal and Ledger: Every transaction impacts two accounts, according to the double entry accounting method. In this system, there is a specific technique for documenting each financial transaction, which is known as the accounting process. The diary is the first step, followed by the ledger, trial balance, and final accounts. The two pillars that provide the foundation for final accounting are the journal and the ledger. The Journal is a journal in which all transactions are promptly recorded and categorised before being moved to the appropriate account, known as the Ledger.

A journal, also known as a main entry book, is a book that keeps track of transactions in chronological order. On the other hand, a ledger, sometimes known as a primary book, refers to a group of accounts that monitor comparable activities involving a person, asset, income, obligation, or cost. In this post, we have tabulated all of the significant accounting differences between Journal and Ledger.

The Journal is a separate day journal where monetary transactions are initially documented as they occur. The transactions are organised and documented in this way so that they may be referred to in the future. It draws attention to the two accounts that are impacted by the transaction, one of which is debited and the other is credited with the same amount.

Each record is accompanied by a short remark called Narration, which provides a brief explanation of the transaction. Journalizing refers to the whole act of recording entries in a journal. Date, Particulars, Ledger Folio, Debit, and Credit are the five columns. A diary may be anything:

Single Entry: An entry with just one debit and one credit.

Compound Entry: An entry with one debit and multiple credits, or several debits for a single debit, or two or more debits and two or more credits. When using compound entry, keep in mind that the sum of debit and credit will equal one.

Ledger

Relationship between journal and Ledger: The ledger is a main book that has a collection of accounts into which the transactions from the journal are moved. The transactions are categorised and placed into distinct accounts once they are recorded in the diary. The ledger is a collection of actual, personal, and notional accounts in which account-by-account descriptions are kept.

Individual accounts should be formed for each account when publishing entries in the ledger. A ledger account is fashioned like a T, with two sides of debit and credit. The term ‘To’ is inserted when the transaction is recorded on the debit side; however, if the transaction is recorded on the credit side, the word ‘By’ is used in the specific column along with the account name.

The ledger account is balanced at the conclusion of the fiscal year. To do so, you must first find the totals of the two sides, following which you must compute the difference between the two sides. There is a debit balance if the debit side is more than the credit side, but there is a credit balance if the credit side is greater than the debit side. If an account has a debit balance, you must put “By Balance c/d” with the difference amount on the credit side. Both sides will tally in this manner.

Now, at the start of each new month, you must move the starting balance to the opposite side (in our case, to the debit side) as “To Balance b/d.” Carried down is referred to as c/d, and brought down is referred to as b/d.

Relationship between journal and Ledger