Ledger vs Journal
Definition
The journal is the chronological record where transactions are first entered; the ledger organises those entries by account. The journal answers "what happened and when," the ledger answers "what is the balance of this account."
Related Terms in Core Accounting
Accrued Income
Revenue that has been earned but not yet invoiced or received, recorded as an asset so it appears in the period it was earned. It is the mirror image of accrued expenses.
Provision
A liability of uncertain timing or amount recognised when a business has a present obligation that will probably require settlement, such as warranty costs or expected bad debts. It is estimated and reviewed each period.
Reserve
An appropriation of retained earnings set aside within equity for a purpose such as future expansion or to strengthen the balance sheet. Unlike a provision, a reserve is part of equity, not a liability.
Capital vs Revenue Expenditure
Capital expenditure buys or improves long-lived assets and is capitalised and depreciated; revenue expenditure covers day-to-day running costs and is expensed in the period. The split affects both profit and the balance sheet.
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