LEDGER AND ITS FEATURES, DIFFERENCE BETWEEN JOURNAL AND LEDGER.

 What is a Ledger?

A Ledger is a principal book of accounts, and its primary purpose is to transfer transactions from a journal and then classify them into separate accounts. Ledger is also known as the book of final entry as it helps businesses prepare accounting statements like the Trial Balance.

All the items from the journal are recorded in Ledger Accounts and this process is known as posting entries from Journal to Ledger Accounts.

What are its features?

The features of a ledger are as follows:

1.Two Sides: Every Ledger has two sides – Debit and Credit. The debit entries come on the left side of a ledger, while the credit entries come on the right side.

2.Transaction: Every transaction impacts two or more ledger accounts, and it is because the transaction is related to a particular person, asset, expense or income.

3.Balancing the ledger: The total debit and credit sides of a ledger must always be the same. But that is not always the case since the debit side could be more than the credit side and vice versa. To balance the ledger, we have to record the difference between the two on the deficient side. When the debit side is more than the credit side, the balance gets recorded on the credit side, known as debit balance. Similarly, when the credit side exceeds the debit side, the balance is recorded on the credit side, known as a credit balance. 

4. A Ledger book is an Accounts book to which various transactions of an enterprise are posted under different Accounts.

5. It follows the double-entry system.

6. It is also known as the Principal book of Account as it is the book of final entry of transactions after the journal or all-purpose books. 

7. In the Ledger, all the types of Accounts relating to assets, liabilities, capital and revenue are maintained. 

8. It is the only record of the business transaction classified into relevant Accounts.

9. It facilitates the preparation of financial statements in future.

What are the differences between Journal and Ledger?

The main differences between Journal and Ledger are as given below:

Journal

Ledger

Definition

Journal is a subsidiary book of account that records transactions.

Ledger is a principal book of account that classifies transactions recorded in a journal.

Order

The journal transactions get recorded in chronological order on the day of their occurrence.

The ledger classifies the transactions from the journal under the respective accounts to which they are related.

Explanation

Each journal entry has a detailed narration of the transaction.

The ledger accounts do not have a detailed narration of each transaction.

Result

The journal does not reveal the total results of a transaction.

The Ledger accounts help reveal the result of transactions for a particular account.

Trial Balance

The journal cannot help prepare the Trial Balance directly.

The ledger helps to prepare the Trial Balance.

Financial Statements

The journal does not have a direct role in the preparation of financial statements like Profit and Loss Account or Balance Sheet.

The balances from different ledger accounts help to prepare financial statements like Profit and Loss Account or Balance Sheet.

Opening Balance

A journal does not have an opening balance, and it is only concerned with the current transactions that occur on a day-to-day basis.

Some ledger accounts have an opening balance, which is the closing balance from the previous year.

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