Ledger journal relationship

Relationship between Journal and Ledger in Accounting Process

ledger journal relationship

Answer to Relationship between Journal and ledger AccountsTransactions are first journalized and then posted to ledger accounts. Here we detail about the ledger, its relationship with journal and posting rules. An accounting system typically contains a large number of accounts. Collectively. When it comes to tracking a business's finances, a “double-entry system” that uses both a “general ledger” and a “general journal”, is arguably.

Ledger: Relationship with Journal and Posting Rules

The Journal is a book where all the financial transactions are recorded for the first time. The Journal is a subsidiary book, whereas Ledger is a principal book. The Journal is known as the book of original entry, but Ledger is a book of second entry.

  • Relationship between Journal and Ledger in Accounting Process
  • Difference Between Journal and Ledger
  • Relation between journal and ledger

In journal, transactions are recorded in chronological order, whereas in ledger, transactions are recorded in analytical order. In the journal, the transactions are recorded sequentially.

Conversely, in the ledger, the transactions are recorded on the basis of accounts.

ledger journal relationship

Debit and Credit are columns in the journal, but in the ledger, they are two opposite sides. In the journal, narration must be written to support the entry. On the other hand, in the ledger, there is no requirement of narration. Ledger accounts must be balanced, but journal need not be balanced.

Conclusion In the beginning, we talked about the procedure of recording a transaction. These steps provide a base to prepare the financial accounts of a company. If any of the above steps is missing, then it would be hard to prepare the final accounts. Journal, being the book of original entry, is more reliable as compared to ledger. A journal is not useful in answering a question such as, what is the balance of cash at a certain date?

This question is answered by referring to the ledger, which summarize the cumulative effect of recorded transactions in separate accounts. This is accomplished by transferring or posting information from the journal into appropriate accounts in the ledger. Posting is a process of transferring debits and credits from the Journal and other books of original entry to other respective accounts in the Ledger. The aim of posting is to make a classified and summarized record of business transactions in appropriate accounts.

ledger journal relationship

Separate accounts should be opened in the ledger for posting the different transactions recorded in the book of original entry. All the transactions pertaining to one account should be posted in the same account.

Ledger: Relationship with Journal and Posting Rules

Two aspects of the business transaction—debit aspect and credit aspect—should be posted on the debit side and credit side of the account respectively. Rules regarding posting of cash book are given below: Debit side total is posted on the debit side and credit side total is posted on the credit side of the discount account.

It is shown on the asset side of the Balance Sheet. Transaction recorded in the Petty Cash Book is posted on the debit side of the accounts opened for the purpose. Balance of Petty Cash Book is not posted anywhere.

In Purchases Books, credit purchases of goods in which the enterprise deals are recorded. Accounts of all those persons who have supplied goods are to be opened and credited with the amount of purchases made from them. Total of purchases book is to be posted on the debit side of purchases account.

This is illustrated below: Purchases Return Book also called Returns Outward Book, records returns of purchase made to suppliers.

Personal accounts of all those persons to whom goods have been returned are debited and total of purchase returns book is credited to purchases returns account as illustrated below.

Difference Between Journal and Ledger (with Comparison Chart) - Key Differences

Sales Book records all credit sales. While posting Sales Book to ledger, personal accounts of the customers are opened and debited by the amount of sales made to them. Total of Sales Book is credited to Sales Account. In bills receivable book, bills received by the enterprise are recorded. While posting bills receivable book, personal accounts of the persons giving the bills are credited. This is illustrated below. The enterprise may accept so many bills in the business. Acceptances given are recorded in Bills Payable Book.

When we journalese a transaction we write out in the journal as to which account is to be debited and which account is to be credited. The same information is transferred to Ledger in the two concerned accounts.