Journal records transactions in chronological order as the first entry. Ledger classifies these transactions under individual accounts (Cash, Sales, Purchases, etc.) and shows their balances. Trial balance lists the debit and credit balances of ledger accounts to check arithmetical accuracy. If mistakes occur, errors are rectified by proper entries; if trial balance does not agree, a suspense account may be used temporarily.
Journal is the book of original entry. It helps in systematic recording and provides a clear debit-credit record for posting.
Cash A/c Dr. 1,00,000
To Capital A/c 1,00,000
Purchases A/c Dr. 20,000
To Ramesh’s A/c 20,000
Rent A/c Dr. 2,000
To Cash A/c 2,000
Ledger is the principal book of accounts containing separate accounts for each item.
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Trial balance is prepared mainly to ensure arithmetical accuracy of the ledger and to support preparation of final accounts. Its main objectives are: (i) to check that total debit balances equal total credit balances, which indicates that posting and casting are arithmetically correct; (ii) to provide a summary of ledger balances at one place so that accounts can be reviewed quickly; (iii) to act as a base document for preparing Trading Account, Profit & Loss Account and Balance Sheet; and (iv) to help in locating errors because disagreement in totals signals mistakes in recording/posting/balancing.
Journal and ledger are two basic books of accounts, but they serve different purposes. Journal is the book of original entry where transactions are recorded first in chronological order with debit and credit accounts and narration. Ledger is the principal book where journal entries are posted account-wise, so all transactions relating to a particular account are collected in one place and the balance of each account can be determined. In short: journal answers what happened and when (date-wise), while ledger answers how much in each account (account-wise) and forms the basis for trial balance and final accounts.
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Journal records transactions in chronological order as the first entry. Ledger classifies these transactions under individual accounts (Cash, Sales, Purchases, etc.) and shows their balances. Trial balance lists the debit and credit balances of ledger accounts to check arithmetical accuracy. If mistakes occur, errors are rectified by proper entries; if trial balance does not agree, a suspense account may be used temporarily.
Journal is the book of original entry. It helps in systematic recording and provides a clear debit-credit record for posting.
Cash A/c Dr. 1,00,000
To Capital A/c 1,00,000
Purchases A/c Dr. 20,000
To Ramesh’s A/c 20,000
Rent A/c Dr. 2,000
To Cash A/c 2,000
Ledger is the principal book of accounts containing separate accounts for each item.
Journal: Rent A/c Dr. To Cash A/c ₹2,000
Trial balance is prepared from ledger balances on a particular date.
(Here totals agree; in exam numericals, balances are given accordingly.)
Errors are mistakes in recording, posting, totaling, balancing or summarising.
Rectification depends on when the error is found.
Correct in the ledger itself.
Pass rectification entries through journal.
Suspense A/c Dr. 900
To Purchases A/c 900
Salaries A/c Dr. 1,500
To Wages A/c 1,500
Suspense account is opened to temporarily place the difference when trial balance does not agree. As errors are found, suspense account is debited/credited and it is closed when all errors are rectified.
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Journal is the book of original entry in which transactions are recorded first in chronological order. Each entry shows the debit and credit accounts, amount, and narration. Journal provides a systematic and dated record of all transactions.
Ledger is the principal book of accounts. It contains separate accounts for each item such as Cash, Purchases, Sales, Rent, Debtors, Creditors, etc. The purpose of ledger is classification—bringing together all transactions of a similar nature in one account so that the balance of that account can be found.
Posting means transferring the journal entry information to ledger accounts. The debit account in the journal is posted on the debit side of that ledger account, and the credit account in the journal is posted on the credit side of that ledger account (with cross-references).
Example: Rent paid ₹2,000 Journal entry: Rent A/c Dr. ₹2,000 To Cash A/c ₹2,000 Posting:
Thus, journal provides the first record and ledger provides account-wise classification for preparing trial balance and final accounts.