Understanding Accounting Journals and Ledgers: Key Differences Explained

accounting journal

An accounting journal is a book of original entries. It keeps a record of all financial transactions of the business. These entries help in creating a general ledger and, finally, the financial statements of a business. A compound journal entry includes more than two lines of entries.

Earlier, accountants record the financial transactions manually into the journal and then post them to a general ledger. Accountants maintain many journals for accounting records, including:

  • General journal
  • Purchases and sales journal
  • Cash receipts journal
  • Cash disbursement journal

Nowadays, you can use accounting software for posting adjusting entries and financial transactions in a general journal.

This article covers:

How To Do Accounting Journal Entry?

You have to record the information of your financial transactions to create an accounting journal for each accounting period. You can collect the data of financial transactions through:

  • Invoices
  • Purchase orders
  • Receipts
  • Cash register tapes
  • Other data sources

After analyzing the transactions, the journal’s data comes in chronological order. The term for listing the transaction in the journal is ‘journal entry.’ This information then records in the general ledger.

Businesses usually use a double-entry method of bookkeeping to record journal entries. There are two columns for each transaction, i.e., credit and debit.


If you are purchasing machinery by utilizing cash, you will decrease the cash account and increase the assets account when recording the transactions.

Date Account title and descriptionDebit Credit 
2-01-21Office Equipment $5000
Cash $5000

The steps for completing journal entries of a business are:

  • To identify the financial transactions that affect your business.
  • Analyze the accounting equation to observe its change (increase or decrease).
  • Record the changes in journal entries by using credits and debits. Follow the proper method of making journal entries.

Some businesses may use a single-entry bookkeeping method where there is only one account for all the entries.

Do Journal Entries Have To Balance?

There is no concept of balancing in a journal, but every transaction affects at least two accounts if you use the double-entry bookkeeping method. So you make sure that both debits and credits are in balance.

Debits or credits of a journal entry give you important information about the transactions and tell what you have and what you sell. The debits and credits should be equal for each journal entry. If the entries are not balanced, you can not make a one-line journal entry.

What Is The Difference Between a Journal And a Ledger?

Journals and ledgers record financial transactions. The other name of the journal is “book of first entry.’ It records the transactions in chronological order. 

It does not start with an opening balance; instead, it contains current transactions. It carries the details of the financial transactions of a business.

On the other hand, the ledger is a principal book with accounts that store the summary of financial information. 

This table shows the comparison between a journal and a ledger:

A Journal A Ledger
It is a book to record all the financial transactions of a business.It stores financial information to make financial statements.
It is a book of original entries.It is a book of secondary entries.
Its purpose is to prepare a ledger.Its purpose is to make a trial balance and final accounts.
Journals entries follow chronological order.Entries are made account-wise.
There are separate columns for debit and credit.It follows a T format where the left side is of debit, and the right one is of credit.
It requires narration.It does not require narration.
There is no need for balancing.Balancing of accounts is compulsory.

A journal formulates the basis of accounting as it records accurate financial information to give an insight into the actual financial status of a business to both internal and external users.

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