A method, system and drilling apparatus for directional drilling are disclosed. A drill bit is located at a downhole end of a drill string in a borehole. A length of the borehole between a surface location and the drill bit at the downhole end of a drill string is determined and an azimuth angle and inclination of the drill bit is obtained. The length of the borehole may be determined by recording an arrival time at a downhole location of an acoustic pulse travelling from a surface location to the downhole location and determines the travel time and borehole length therefrom. A downhole processor determines a position and orientation of the drill bit from the determined length, azimuth angle and inclination and alters a steering parameter of the drill bit using the determined position and orientation of the drill bit to obtain a selected trajectory for drilling the borehole.