Journal & Ledger
Journal |
Ledger |
1. It is a book keeping of prime entries | 1. It is a book keeping of final entries |
2. When transaction started it is recorded in Journal entries | 2. When transaction is recorded in Journal entries it is also recorded in Ledger entries |
3. Transactions posted in Journal are grouped by order of their occurrence | 3. Transactions posted in Ledger are grouped by their concerned accounts |
4. You can write brief or small description of entries | 4. in Ledger brief description is not necessary. |
5. Debit and credit amounts are recorded in adjacent columns | 5. Debit and credit amounts are not recorded in adjacent columns |
6. Journal has two columns Credit and Debit | 6. Ledger has also two columns Credit and Debit |
7. Journal is not balanced always i.e. negative amount are not necessarily equals to positive amounts | 7. Ledger is always balanced i.e. negative amount are equals to positive amounts |
Definitions of most commonly used accounting terms
Debit:
Debit amounts are those entries which come on the left-hand side of an account record in double entry book keeping. It has decreasing effect on capital, liability, or revenue account or increasing effect on asset or expense account.
Credit:
Credit amounts are those entries which come on the right-hand side of an account record. It has decreasing effect on asset or expense account, or increasing effect on capital, liability, or revenue account.
Revenue:
These are the amounts any business earns by selling their products or services or by investing. e.g. Sales
Expenses:
These are the costs of doing some business, mainly expenses are those things which we used and had to pay to run our business e.g. Selling Expenses etc
Assets:
Any item of economic value owned by an individual or corporation, especially that which could be converted into cash anytime later e.g. securities etc.
Liabilities:
These are necessities that legally bind an individual or company to settle a debt, claim or potential loss. When one is liable for a debt, they are responsible for paying the debt e.g. accounts Payable or Salaries Payable etc
Owner's Equity:
Owner's equity is equal to the total reported asset amounts minus the total reported liability amounts.
Owner's Equity = Total Assets - Total Liabilities