Chapter 7Posting Journal Entries to General Ledger Accounts
What You’ll Learn Describe the steps in the posting process. Post general journal entries. The steps involved in the preparation of a trial
balance. How to find and correct errors in a trial balance. Record correcting entries in the general journal. Define the accounting terms introduced in this
Setting Up the General LedgerAccounts used by a business are kept on separate pages or cards in a book or file called a ledger. It is important for a number of reasons:
This creates a record of the impact of business transactions on each account used by a business.
Helps managers easily find the current balance of a specific account.
Setting Up the General LedgerPosting is the process of transferring information from the journal to individual ledger accounts. It is the process by which random transactions become organized in a manner according to accounts.
Setting Up the General LedgerAll transactions must be moved to a permanent record organized by account number called a general ledger. This information is continually used by managers. It provides up-to-date balances for each account, including accounts payable and receivable:
In a computerized system, electronic files are still referred to as a ledger, or the ledger accounts.
Managers use ledgers to obtain summarized information.
The Fourth Step in the Accounting Cycle: PostingInformation in a journal entry is posted to the general ledger to provide a clear picture of how a business transaction changes an account’s balance.
The four-column ledger account form has spaces to enter the account name, the account number, the date, a description of the entry, and the posting reference.
What Do You Think?Why is posting necessary since the transaction is recorded in the general journal?
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Main IdeaPosting is the process of transferring information from the journal to individual accounts in the ledger.
You Will Learn how to post transactions to the general ledger. how to compute account balances.
The Posting ProcessSECTION 7.2
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Posting TransactionsJournal entries do not show a clear picture of how a business transaction changes an account’s balance. Posting shows the final impact on an account, which is why a ledger is sometimes called a book of final entry:
Posting intervals are determined by the size of the business, and whether the accounting system is computerized or manual.
The posting process always remains the same. The process is always performed from
left to right.
The Posting ProcessSECTION 7.2
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Posting to the Roadrunner General LedgerThere are six steps required for posting journal entries to a ledger:
1. Enter the date of the journal entry in the Date column.2. The Description column is usually left blank, but can be
used to write in the source document.3. Enter journal letter and page number in Post. Ref.
column.4. Enter the debit amount in the Debit column.5. Compute the new account balance.6. Enter the account number in the general journal Post.
Ref. column.7. Repeat steps 1-6 for the credit part of the journal entry.
• Lets look at pages 171- 173 in our text book for another example.
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Computing a New Account BalanceA new account balance is computed each time a transaction is posted to an account. When the existing account balance is a debit, and
the amount posted is a debit, ADD the amounts. the amount posted is a credit, SUBTRACT the
amounts.When the existing account balance is a credit, and
the amount posted is a debit, SUBTRACT the amounts.
the amount posted is a credit, ADD the amounts.
The Posting ProcessSECTION 7.2
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Computing a New Account BalanceA ledger account with several postings.
The Posting ProcessSECTION 7.2
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Computing a New Account BalanceA ledger account with a zero balance.
The Fifth Step in the Accounting Cycle: The Trial BalanceIn order for an accounting system to work efficiently, it is important to remember the necessary steps to keep it in balance:
Calculating the balance. Finding any errors that may have occurred. Using general rules and guidelines to narrow down where and
why the mistake was made. Correcting the mistake.
Preparing a Trial BalanceSECTION 7.3
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The Fifth Step in the Accounting Cycle: The Trial BalanceOnce the journal entries have been properly posted to the ledger, the sum of the debits should equal the sum of the credits. The final figures should be the same; this is called proving the ledger.
Check out the example on page 178 of your text book.
Preparing a Trial BalanceSECTION 7.3
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The Fifth Step in the Accounting Cycle: The Trial BalanceTo prove the ledger, accountants prepare a list of all the account names and their current balances. This list is called the trial balance.
If the totals are equal, the trial balance is in balance. If they are not, try adding the columns up again. If there is still a mistake, it must be corrected.
Preparing a Trial BalanceSECTION 7.3
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Finding an ErrorIf there is an error, one possibility may be that two numbers were reversed when recording the information from the journal, called a transposition error.
One way to help check for these kinds of errors is if the difference between the credits and the debits is divisible by 9. An example of this is if $469 was written as $496.
Correcting EntriesIf a mistake is made, it will have to be corrected with a correcting entry. These are made after the journal entry has been posted, and should never be erased. The proper procedure is:
To post the entry in the ledger the same as any other entry.
Use the words correcting entry in the description column.
Preparing a Trial BalanceSECTION 7.3
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• Here’s what happened:– On November15, Ms. Benack found an
error in a journal entry made on November 2. A $100 check to pay the electricity bill was journalized and posted to the Maintenance Expense account by mistake.
Answer 1Step 1: Check the addition in each column.
Step 2: Find the difference between the amounts in the Debit and Credit columns. If the difference is 10, 100, etc., you probably have made an addition error.
Step 3: If the difference found in Step 2 is divisible by 9, you probably have made a slide or transposition error.
Step 4: Check to see whether any of the general ledger accounts has a balance equal to the difference found in Step 2.
Answer 1Step 5: Check to see whether any of the general
ledger accounts has a balance equal to one-half of the difference. This would indicate that you may have moved a debit balance to the credit side of the trial balance or vice versa.
Step 6: Check the accuracy of the general ledger accounts by recalculating the balances.
Step 7: Check the individual postings from the general journal to the general ledger to make sure you have correctly posted the amounts and posted debits as debits and credits as credits.
Answer 2No, the balance columns exist to show the cumulative effect of debits and credits to an account. If debits exceed credits, the account will have a debit balance, which is entered in the Debit column. If credits exceed debits, the account will have a credit balance, which is entered in the Credit column.
