Q5: In accounting, what are journals and ledgers?

A:

As we discussed in ACCT11059 Accounting, Learning & Online Communication, accounting uses two types of books: journals and ledgers. A journal contains the daily transactions of a firm, such as its sales to customers, purchases from suppliers and many other types of transactions and economic events of a firm that keep happening in a constant stream each day. These are entered into a firm’s journals as they occur each day. The English word journal comes from the French word ‘jour’ (or day) which was derived from the original Latin word diurnalis, meaning daily. Also, the word ‘journalist’ has been used for those who write for newspapers since the late 1600s, referring originally to those who wrote for newspapers which were published daily.

So, the journal is a great long list of transactions recorded as they occur each day. The ledger contains these same transactions but arranged not in the order in which they occur each day but into individual accounts, such as various types of assets, liabilities, equity, revenue and expenses. The word ledger means originally something that lies down or is laid down, having been adapted from the Dutch word logger. It originally referred to a book that usually stayed in one place because it was heavy and difficult to move and was also constantly being used. So, a ledger basically means a book lying permanently in one place. The ledgers are at the heart of a firm’s accounting system. It is where a firm’s key accounting information lies. Thus, in this sense, ledger now refers to the data that lies permanently in one place in our computer.