Bookkeeping follows a sequence: transactions are first recorded in the journal, posted to ledger accounts, and then summarised in a trial balance. Understanding this flow demystifies how financial statements are built.
This guide explains the journal, ledger and trial balance and how they connect.
What is the accounting cycle?
The journal is the book of original entry where transactions are recorded chronologically with debit and credit. The ledger groups these entries by account. The trial balance lists all ledger balances to check that total debits equal total credits.
From the trial balance, the profit & loss account and balance sheet are prepared.
The three steps
| Step | What it does |
|---|---|
| Journal | Records transactions in date order (book of original entry) |
| Ledger | Classifies entries by account |
| Trial Balance | Lists ledger balances to verify debits = credits |
Frequently asked questions
What comes first, journal or ledger?
The journal comes first (original entry); entries are then posted to the ledger.
What does a trial balance prove?
That total debits equal total credits — a check on arithmetical accuracy, though it does not catch every error.