Key Differences

Difference Between Journal and Ledger

Last updated on July 26, 2018 by Surbhi S

D
ouble entry system of bookkeeping says that every transaction affects
two accounts. There is a proper procedure for recording each financial
transaction in this system, called as accounting process.The process
starts from journal followed by ledger, trial balance, and final accounts.
Journal and Ledger are the two pillars which create the base for
preparing final accounts. The Journal is a book where all the
transactions are recorded immediately when they take place which is
then classified and transferred into concerned account known
as Ledger.

Journal is also known as book of primary entry, which records

transactions in chronological order. On the other hand, Legder, or
otherwise known as principal book implies a set of accounts in which
similar transactions, relating to person, asset, revenue, liability or
expense are tracked. In this article, we have compiled all the important
differences between Journal and Ledger in accounting, in tabular
form.
Content: Journal Vs Ledger

1. Comparison Chart
 2. Definition
3. Key Differences
4. Conclusion
Comparison Chart
BASIS FOR
JOURNAL LEDGER
COMPARISON

Meaning The book in The book

which all the which enables
transactions are to transfer all
recorded, as and the
when they arise transactions
is known as into separate
Journal. accounts is
known as
Ledger.

What is it? It is a subsidiary It is a principal

book. book.

Also known as Book of original Book of second

entry. entry.

Record Chronological Analytical

record record

Process The process of The process of

recording transferring
transactions into entries from
Journal is known the journal to
as Journalizing. ledger is
known as
Posting.

How Sequentially Account-wise

transactions
are recorded?
 BASIS FOR
JOURNAL LEDGER
COMPARISON

Debit and Columns Sides

Credit

Narration Must Not necessary.

Balancing Need not to be Must be

balanced. balanced.

Definition of Journal

The Journal is a subsidiary day book, where monetary transactions

are recorded for the first time, whenever they arise. In this, the
transactions are regularly recorded in an orderly manner, so that they
can be referred in future. It highlights the two accounts which are
affected by the occurrence of the transaction, one of which is debited
and the other is credited with an equal amount.

A short note is given in support of each entry, which gives a brief

description of the transaction, known as Narration. The complete
process of recording the entries in the journal is known as
Journalizing. It has five columns which are Date, Particulars, Ledger
Folio, Debit, and Credit. A journal can be:

 Single Entry: Entry having one debit and a corresponding credit.

 Compound Entry: Entry having one debit and more than one
credit or entry having more than one debit for a single debit or
two or more debit and two or more credits. In the case of
compound entry, it should be kept in mind that the total of debit
and credit will tally.
Definition of Ledger

Ledger is a principal book which comprises a set of accounts, where

the transactions are transferred from the Journal. Once the
transactions are entered in the journal, then they are classified and
posted into separate accounts. The set of real, personal and nominal
accounts where account wise description is recorded, it is known as
Ledger.

While posting entries in the ledger, individual accounts should be

opened for each account. The format of a ledger account is ‘T’ shaped
having two sides debit and credit. When the transaction is recorded on
the debit side the word ‘To’ is added, however, if the transaction is to
be recorded on the credit side, then the word ‘By’ is used in the
particular column along with the account name.

At the end of the financial year, the ledger account is balanced. For
this purpose, first of all, the totals of the two sides is determined, after
that, you need to calculate the difference between the two sides. If the
amount on the debit side is more than the credit side, then there is a
debit balance, but if the credit side is higher than the debit side, then
there is a credit balance. Suppose if an account has a debit balance,
then you have to write “By Balance c/d” on the credit side with the
difference amount. In this way both the sides will tally.

Now, at the beginning of the new period, you have to transfer the
opening balance to the opposite side (i.e. On the debit side as per our
example) as “To Balance b/d”. Here c/d refers to carried down, and
b/d means brought down.
Key Differences Between Journal and Ledger

The difference between journal and ledger can be drawn clearly on

the following grounds:

1. The Journal is a book where all the financial transactions are

recorded for the first time. When the transactions are entered in
the journal, then they are posted into individual accounts known
as Ledger.
 2. The Journal is a subsidiary book, whereas Ledger is a principal
book.
3. The Journal is known as the book of original entry, but Ledger is
a book of second entry.
4. In journal, transactions are recorded in chronological order,
whereas in ledger, transactions are recorded in analytical order.
5. In the journal, the transactions are recorded sequentially.
Conversely, in the ledger, the transactions are recorded on the
basis of accounts.
6. Debit and Credit are columns in the journal, but in the ledger,
they are two opposite sides.
7. In the journal, narration must be written to support the entry. On
the other hand, in the ledger, there is no requirement of
narration.
8. Ledger accounts must be balanced, but journal need not be
balanced.
Conclusion

In the beginning, we talked about the procedure of recording a

transaction. It involves a series of actions like they are first recorded in
the journal, from there they are classified and grouped into separate
accounts and posted into the ledger, which is then transferred to trial
balance and at the end the final accounts are prepared.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.

You Might Also Like:

Difference Between Cash Book and Cash

Account Difference Between Error of Omission and

 Error of Commission Difference

Between Debit and Credit in Accounting Difference

Between Cash book and Passbook Difference

Between Single Entry System and Double Entry

System Difference Between Bin Card and Stores

Ledger
Comments
1. Riki Ahmed says

June 17, 2016 at 11:31 pm

Thank you.

Reply
2. Akshaya Gopalan says

December 10, 2016 at 7:28 am

Very clear and understandable. Thank you

Reply
3. Jagdish Rajpurohit says

January 19, 2017 at 9:37 pm

 Very easy to understand. My sincere thanks to the team, thank you
very much.

Reply
4. psingh says

July 22, 2017 at 5:42 pm

great comparison chart you have written that describe the best way to
learn difference between journal and ledger

Reply
5. Abhijith TJ says

December 2, 2017 at 10:10 pm

Thank you………..very clear……..i am very happy…….

Reply
6. Duke says

December 25, 2017 at 5:34 pm

Thank you so much

Reply
7. Steve says

March 31, 2018 at 1:38 pm

How can I subscribe to these lessons ?

Reply
o Surbhi S says

March 31, 2018 at 3:29 pm

 You can subscribe to our youtube
channel: https://www.youtube.com/channel/UCbr1DdpSQ2GBXByIVb
P3KWA

Reply
8. Suhail Qaderi says

December 17, 2018 at 11:04 pm

thanks alot it was very clear and thanks again : )

Reply
9. Femi says

January 2, 2019 at 3:37 am

Thanks

Reply
10. Saboor Hussain Awan says

February 7, 2019 at 10:52 am

Thank you.

Reply
11. Nav says

March 9, 2019 at 5:35 pm

great simple explanation.

Reply
12. Tenkhosi says

June 2, 2019 at 3:40 am

Helpful, thank you

 Reply
13. Accounts Definition says

September 13, 2020 at 8:42 am

Very well described article on differences between Journal and

Ledger. The helpful article described in simple understandable words.

Reply
14. thomas says

February 12, 2021 at 7:14 pm

Thanks for enlightenment.

very helpful and simple to understand..

Reply
15. Martha says

August 20, 2022 at 5:18 pm

Very easy to understand

Reply
Leave a Reply

Your email address will not be published. Required fields are marked *

Comment *

Name *

Email *

Website

Save my name, email, and website in this browser for the next time I
comment.
 TOP 5 DIFFERENCES

 Difference Between PERT and CPM

 Difference Between Micro and Macro Economics
 Difference Between Developed Countries and Developing Countries
 Difference Between Management and Administration
 Difference Between Qualitative and Quantitative Research
RELATED DIFFERENCES

 Difference Between Void Agreement and Void Contract

 Difference Between Cost Centre and Cost Unit
 Difference Between Liquidity and Solvency
 Difference Between Degree and Diploma
 Difference Between Reflection and Refraction

NEW ADDITIONS

 Difference Between Stock Dividend and Stock Split

 Difference Between FOB and CIF Contracts
 Difference Between Verification and Valuation
 Difference Between Transfer and Promotion
 Difference Between Provision and Contingent Liability
 Difference Between Intraday and Delivery Trading
 Difference Between Bearer Cheque and Order Cheque
 Difference Between Full-Service Broker and Discount Broker
 Difference Between Pamphlet and Brochure
 Difference Between Contract and Quasi Contract

Copyright © 2022 · Key Differences · Contact Us · About Us · Privacy

 Key Differences

Difference Between Debit and Credit in Accounting

Last updated on March 26, 2022 by Surbhi S

“Luca Pacioli” is the father of

accounting. He discovered the concept of a double-entry system of
book-keeping. As per this system, each business transaction affects
two sides of an account, i.e. debit, and credit. While debit indicates
the destination, credit implies the source of monetary benefit.

As per the Double Entry System: For each debit or credit entry, there
is always a corresponding and equal credit or debit entry. The debit
and credit entries are made in the ledger accounts to record the
changes in value because of business transactions.

So we could say that every accounting transaction involves at least

one debit and its corresponding credit. The sum of the debits and sum
of the credits for each transaction and the total of all transactions are
always equal. We call this process of equalling as balancing.
In an accounting entry, the source account of a transaction is credited.
Whereas the destination account is debited. Debit represents the left-
hand side of the account. Whereas credit reflects the right-hand side
of the account. It is important to understand them because they are
the base of the entire accounting system.

Also Read: Difference Between Single Entry system and Double

Entry System

Important: The debit and credit rules for increase and decrease of
accounts, in accounting terminology is different from banking
terminology. In short, banks refer to the terms debit and credit in
account differently.
Golden Rules of Accounting
ACCOUNT
DEBIT CREDIT
TYPE

Personal The Receiver The Giver

Account

Real Account What comes in What goes out

Nominal All losses (and All incomes

Account expenses) (and gains).

In this post, we will discuss the difference between debit and credit in
accounting
Content: Debit Vs Credit in Accounting

1. Comparison Chart
2. Basic Concept
3. What is Debit?
4. What is Credit?
5. Key Differences
6. Meaning of an Account
 7. Conclusion
Comparison Chart
BASIS FOR
DEBIT CREDIT
COMPARISON

Meaning Debit is an Credit is an

entry that is entry that is
passed when passed when
there is an there is a
increase in decrease in
assets or assets or an
decrease in increase in
liabilities and liabilities and
owner's equity. owner's equity.

Reflects which Left-hand side Right-hand side

side of Account

Act of Debiting Crediting

recording entry

Assets Increase Decrease

Liabilities Decrease Increase

Capital Decrease Increase

Income Decrease Increase

Expense Increase Decrease

Stock Increase Decrease

Basic Concept

In accounting terminology, the individual who receives the benefit is

debited as he is placed under an obligation. On the contrary, the one
who provides or gives a benefit is credited because he is entitled to a
return of the obligation.

One can use the basic accounting equation i.e. assets = liability +
capital, and the rules for debit and credit to check the accuracy of the
recorded transactions.

The terms ‘debit’ and ‘credit’ reflects the left-hand side and right-
hand side of an account respectively. Now, how could you identify
the left and right sides of the account?

Well, you should always remember that if there lies an open book in
front of you and it is you who look at the book and not the book looks
at you. Hence, your left-hand side will be the left side and your right-
hand side will be the right side. And the left side will be the debit side,
whereas the right side will be the credit side. Also, we use
abbreviations like Dr. for debit and Cr. for credit.

Further, all the accounts indicate entries of increase as well as

decrease. There are some accounts in which an increase is entered
on the left side i.e. the debit side while the decrease is entered on the
right side, i.e. the credit side. But, there are some accounts in which
we record the increase on the right side which is the credit one.
Whereas we record the decrease on the left side which is the debit
one.

So, we could say that debits and credits do not by themselves reflects
the increases or decreases. Hence, we need to refer to the specific
account to determine if the debit or credit show an increase or
decrease.
Types of Account

There are five major types of accounts that indicate debit and credit
with regard to increases or decreases:
Asset Account

Liability Account

Owner’s Equity (Capital) Account

Revenue Account
Expense Account

Note: The word ‘normal balance’ implies the positive balance of an

account, i.e. the total of the increases to the account is more than the
total of decreases.
Points to Remember

More precisely, we could draw the following inferences:

 Debit is the left side of the account, while credit is the right side
of the account.
 Since the accounts must always balance, for every transaction
there is going to be a debit made to one or more accounts and a
credit made to one or more accounts.
 The Sum of all debits made in each day’s transactions must tally
the sum of credits in such transactions. And after a number of
transactions, the sum of all accounts with debit balance will tally
the sum of all accounts with a credit balance.
 There will be a debit in case of an increase in assets and
expenses. So they have debit balances. Whereas an increase
in liability, owner’s equity i.e. capital and revenue or incomes are
credited. So they have credit balances.
What is Debit?

The word ‘debit’ comes from the Italian term ‘debito‘, which comes
from Latin term ‘debita‘. It implies ‘owed to the proprietor’. It shows
‘what we are going to receive’. So, it is the destination that enjoys the
benefit of the transaction.
In the particulars column of the debit side, we enter the account’s
name from which the benefit is received. The word ‘To‘ is affixed to
the name of the account recorded on the credit side.

On the debit side of an account, we usually enter the uses or

applications of business funds. For example:

1. Purchase of fixed assets

2. Payment of expenses like rent, salary, electricity bill and so on.
3. Services provided during the course of business.

We post such transactions on the left-hand side of the account. This

means these items are debited.

Debits increase balances in:

 Asset account
 Expense account

But it decreases balances in:

 Liability account
 Revenue account, i.e.incomes or gains account
 Capital account.

So, asset and expense accounts have a debit balance. This means
that the total debits are more than the total credits in each account.

Also Read: Difference Between Journal and Ledger

What is Credit?

The word ‘credit’ comes from the Italian term ‘credito‘ which originates
from Latin word ‘credo‘. It refers ‘to trust’ or ‘belief’ (in the proprietor or
owed by the proprietor). Hence, it implies ‘what we will have to pay. It
indicates the source which sacrifices for the benefit.
In the particulars column on the credit side, we enter the account’s
name to which benefit is given. Also, we affix the word ‘By‘ to the
name of the account recorded on the credit side.

The verb ‘to credit’ means to post an entry on the right side of an
account. It reflects the sources of funds to:

1. Meet the expenses of the business

2. Acquire assets
3. Pay off debts or liabilities.

Therefore, we enter these transactions on the right-hand side of the

account, which means that these items are credited.

Credits increase the balance in:

 Liability accounts
 Revenue accounts and
 Capital accounts.

However, it decreases balances in:

 Asset accounts and

 Expense accounts.

Thus, revenue accounts, i.e. incomes and gains accounts, and liability
accounts have a credit balance. The credit balance is when the total
credits are more than the total debits in each account.

Also Read: Difference Between Accounting and Accountancy

Key Differences Between Debit and Credit in Accounting

1. An entry made in an account on the left side is the debit entry or

debit. Whereas, when an entry made is on the right side of the
account is credit entry or credit.
2. The act of recording entries on the left side is known as debiting
the account. As against, the act of recording the entries on the
credit side of the account is called crediting the account.
 3. Personal Account

 In case of a new account party whose account is debited

becomes the debtor of the business.
 If the party whose account is debited is already a debtor,
then a new debit reflects an increase in the sum due from
him.
 If the party whose account is debited is a creditor, the new
debit represents a decrease in the amount due from the
person by the amount of debit. Or the party may become a
debtor if the amount of debit exceeds the amount of credit.
 In the case of a new account, the party whose account is
credited becomes a creditor of the business.
 If the party whose account is credited is already a creditor,
then new credit reflects an increase in the sum owed to him
with the amount of fresh credit.
 If the party whose account is credited is a debtor, new
credit represents a reduction in the amount which the
debtor has to pay from the amount of credit. Or the party
may turn out as a creditor, if the amount of credit exceeds
the amount of debit.
4. Real Account
 The value of an asset that is being debited has increased
or the firm has purchased more of that asset.
 The value of an asset that is being credited has decreased
or the firm has disposed of a part or the entire asset.
5. Nominal Account
 There has been an increase in expense or loss by the
amount debited. Or there is a reduction in the income or
profit by the amount debited.
 There has been an increase in the income or profit by the
amount credited. Or there has been a reduction in the
expense or loss by the amount credited.
Meaning of an Account

An account is like a summary or history of a particular type of

transaction for a business. It is a ledger record, in a condensed form.
It contains all the transactions that happened with a particular party or
thing. Suppose a firm deals with customers and suppliers, the firm will
create separate accounts of both the parties in their books.

It has eight columns and comprises of two sides, i.e. left side and the
right side which represents the debit and credit sides respectively. The
debit and credit sides are commonly represented by Dr. and Cr.

Conclusion

Debit and Credit are the two sides of the same coin. One must note
that debit entries of each transaction must tally its credit entries.

You Might Also Like:

Difference Between Debit Note and Credit

Note Difference Between Journal and

Ledger Difference Between Cash Book and Cash

Account Difference Between Single Entry System

and Double Entry System Difference Between Error

of Omission and Error of Commission Difference

Between Manual and Computerized Accounting
 Comments
1. cueen bello says

May 22, 2015 at 12:23 pm

it really helps me for my demo teaching tomorrow. thankyou so much

Reply
2. SM Alamgir says

May 16, 2019 at 3:03 pm

It really helped me to understand debit and credit transactions.

Reply
3. Girish says

November 22, 2020 at 7:35 pm

Really helpful

Reply
4. Maina Carol says

January 21, 2021 at 1:03 am

Now differentiation between the two is well understood. I can now be

able to apply.

Thank you

Reply
Leave a Reply

Your email address will not be published. Required fields are marked *

Comment *

Name *
 Email *

Website

Save my name, email, and website in this browser for the next time I
comment.
TOP 5 DIFFERENCES

 Difference Between PERT and CPM

 Difference Between Micro and Macro Economics
 Difference Between Developed Countries and Developing Countries
 Difference Between Management and Administration
 Difference Between Qualitative and Quantitative Research
RELATED DIFFERENCES

 Difference Between Common Law and Statutory Law

 Difference Between Physical Change and Chemical Change
 Difference Between Horizontal and Vertical Analysis
 Difference Between Discovery and Invention
 Difference Between Bank Rate and MSF Rate

NEW ADDITIONS

 Difference Between Stock Dividend and Stock Split

 Difference Between FOB and CIF Contracts
 Difference Between Verification and Valuation
 Difference Between Transfer and Promotion
 Difference Between Provision and Contingent Liability
 Difference Between Intraday and Delivery Trading
 Difference Between Bearer Cheque and Order Cheque
 Difference Between Full-Service Broker and Discount Broker
 Difference Between Pamphlet and Brochure
 Difference Between Contract and Quasi Contract
Copyright © 2022 · Key Differences · Contact Us · About Us · Privacy