POSTING JOURNAL

ENTRIES TO Chapter 7
GENERAL LEDGER
ACCOUNTS
 POSTING JOURNAL ENTRIES TO
GENERAL LEDGER ACCOUNTS
What Youll 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 chapter.
 THE GENERAL LEDGER

What Do You Think?

Why do you think an accounting system uses a general ledger?

It is a permanent record of business information organized by

account number.

What is the benefit of organizing the general ledger by

classification and account number, not alphabetically?

It helps to find the accounts easily

 THE GENERAL LEDGER

Main Idea
The general ledger is a permanent record organized by account
number.

You Will Learn

how to set up the general ledger.
how managers use journals and ledgers.
 THE GENERAL LEDGER

Key Terms
posting
general ledger
ledger account forms
 THE GENERAL LEDGER

Setting Up the General Ledger

Accounts 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.
 THE GENERAL LEDGER

Step 4: Posting
Information in a journal entry is posted to the general ledger to
provide a clear picture of how a business transaction changes
an accounts balance.
 THE GENERAL LEDGER

Setting Up the General Ledger

Posting 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.
 THE GENERAL LEDGER

Setting Up the General Ledger

All 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 GENERAL LEDGER

The Four-Column Ledger Account Form

In a manual accounting system, information about specific
accounts is recorded in ledger account forms:
The forms are defined by the number of columns into which a
dollar amount goes.
Debit and credit amounts are posted from journal entries to
the first two amount columns.
The new account balance is entered in one of the last two
amount columns.
The type of account determines which balance column to use.
 THE GENERAL LEDGER

The Four-Column Ledger Account Form

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.

Why is the Posting Reference column helpful?

It helps trace the transactions back to a particular journal for
reference
 THE GENERAL LEDGER

Accounts in the Ledger

Before journal entries can be posted, a general ledger account
is opened for each account listed on the chart of accounts

Opening a General Ledger Account

Two steps are required
1. Write the account name at the top of the ledger account
form
2. Write the account number on the ledger account form

These two steps are performed each time a ledger page is

needed for a new account
Account Cash in Bank Account No. 101

Post Balance
Date Description Ref. Debit Credit Debit Credit
2

Account Accounts Receivable City News 105

Account No. ____________

Post Balance
Date Description Ref.
Debit Credit Debit Credit

Account Accounts Receivable Green Company Account No. 110

Post Balance
Date Description Ref. Debit Credit Debit Credit

These three General Ledger accounts are the first three asset accounts on
Roadrunners chart of accounts (pg. 79)
 THE GENERAL LEDGER

Starting a new page for an existing account

When a ledger account page is filled, continue posting on the next
page

Sixsteps are required to open a new page:

1. Write the account name at the top of the ledger account form
2. Write the account number on the ledger account form
3. Enter the complete date (year, month, day) in the date column
4. Write the word Balance in the description column
5. Place a check mark in the posting reference column to show
the amount entered on this line is not being posted from a
journal
6. Enter the balance in the appropriate balance column.
Usually asset, expense, and owner withdrawals have debit balances
Liability, owners capital, and revenue accounts have credit balances
 1 2
Account Cash in Bank Account No. 101

Post Balance
Date Description Debit Credit
Ref. Debit Credit
3 20--

5 6
Oct. 31 Balance 4 21 1 2 5 00
 DO THE MATH

Delivery Equipment: $16,000

Delivery Income: $8,000
 7-1

Cash in Bank, $10,000, Debit

Accounts ReceivableMark Cohen, $2,000, Debit
Accounts PayableJenco Industries, $1 ,000, Credit
Tom Torrie, Capital, $35,000, Credit
Admissions Revenue, $0
 THE GENERAL LEDGER

Key Terms
posting
The process of transferring information from the journal to
individual general ledger accounts.
general ledger
A permanent record organized by account number.
ledger account form
The accounting stationery used to record financial
information about specific accounts.
7.2 THE POSTING
PROCESS
 THE POSTING PROCESS

What Do You Think?

Why is posting necessary since the transaction is recorded in
the general journal?

Posting updates account balances into useful information

What Do You Think?

The general journal is the book of original entry. What is the
book of final entry?

The general ledger

 THE POSTING PROCESS

Main Idea
Posting 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 PROCESS

Posting Transactions
Journal entries do not show a clear picture of how a business
transaction changes an accounts balance.

Posting shows the final impact on an account, which is why a

ledger is sometimes called a book of final entr y:
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 PROCESS

Posting to the Roadrunner General Ledger

There 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.
 THE POSTING PROCESS

What Do You Think?

When posting the debit part of the journal entry, what is the
last thing to do before moving on to the credit part of the
journal?
Enter account number of debited account in the Post. Ref.
column of the general journal

When you post transactions, what direction does the process

move?
Left to right

If the Description column on the ledger account is usually left

blank, where would you look to find the source document
reference for the transaction?
Book of original entry, or the general journal
 THE POSTING PROCESS

What Do You Think?

What is the purpose of the notation in the Post. Ref. column for
the general journal

It shows the account to which the entry was posted and

indicates the posting has been completed for that line
 FIGURE 7-6

Have all these journal entries been posted to the general

ledger?
Yes

How can you tell from the general journal form?

The Post. Ref. column contains the account numbers

Nice transactions af fected the Cash in Bank account. What is

the balance of this account? (assume no beginning balance
existed)
$21 ,125
 FIGURE 7-7

What do the first six accounts all have in common?

All accounts are assets and have normal debit balances

All the entries posted in these accounts came from what page
of the general journal?
Page 1

What kind of transaction took place on Oct. 11?

Sale on account

What kind of transaction took place on Oct. 14?

Receipt on account
 THE POSTING PROCESS

Computing a New Account Balance

A 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 PROCESS

Computing a New Account Balance

A ledger account with several postings .

If an additional debit entry of $100 had been posted on Oct. 20,

what would the Oct. 31 balance have been?
$24,600 (25,000+100-500)
 THE POSTING PROCESS

Computing a New Account Balance

A ledger account with a zero balance .

Green Company paid its account due on Oct. 14. Why is the line
drawn in the Debit column of this account?
This account has a normal debit balance
 7-2

Account balances:
Cash in Bank $10,000, Debit
David Serlo, Capital $10,000, Credit
 7.2 REVIEW

Account Cash in Bank Account No. 101

Post Balance
Date Description Debit Credit
Ref. Debit Credit
20--

Oct. 1 Balance 15 5 3 0 00

14 G2 2 4 2 1 00

What is the new balance after the Oct. 14 transaction?

$13,109
7.3 PREPARING A TRIAL
BALANCE
 PREPARING A TRIAL BALANCE

Main Idea
To learn how to create a trial balance and correct mistakes that
are made in the general ledger.

You Will Learn

the steps in preparing a trial balance.
how to find and correct errors in a trial balance.
 PREPARING A TRIAL BALANCE

Key Terms
proving the ledger
trial balance
transposition error
slide error
correcting entry
 PREPARING A TRIAL BALANCE

Step 5: The Trial Balance

In order for an accounting system to work ef ficiently, 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 BALANCE

Step 5: The Trial Balance

Once 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.
 PREPARING A TRIAL BALANCE

Step 5: The Trial Balance

To 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 BALANCE

Finding an Error
If 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

dif ference between the credits and the debits is evenly divisible
by 9. An example of this is if $469 was written as $496.
 PREPARING A TRIAL BALANCE

Finding an Error
Moving a decimal point by mistake is called a slide error. An
example is if you were to write $25,000 instead of $2,500.

Glencoe Accounting Unit 2 Chapter 7 Copyright by The McGraw-

Hill Companies, Inc. All rights reserved.
 PREPARING A TRIAL BALANCE

Correcting Entries
If 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 BALANCE

Correcting Entries in the general journal

Looking at the T account, the $100 to Cash in Bank was correct

but Maintenance Expense was incorrectly debited for $100.

To correct the error, Maintenance Expense is credited $100 and

Utilities Expense is debited $100
 PREPARING A TRIAL BALANCE

Correcting Entries in ledger accounts

Similar to any other posting. In the description column, the
words Correcting Entry are written
 PREPARING A TRIAL BALANCE

Figure 7-11
Since the debit part of the entry was incorrectly posted to
Maintenance Expense originally, is this account debited or
credited in the correcting entry?

Credited

Figure 7-12
What would be the resulting balance after the correcting entry
has been made?

0
 PREPARING A TRIAL BALANCE

Do the Math
Line 1: slide
Line 2: omission
Line 3: transposition
Line 4: transposition
Line 5: no error
Line 6: omission

Problem 7-3
May 20: Debit Of fice Equipment $1 ,500; Credit Computer
Equipment $1 ,500; Memo. 47

Problem 7-4
July 7: Debit Advertising Expense $300; Credit Rent Expense
$300; Memo. 13
 PREPARING A TRIAL BALANCE

Key Terms Review

proving the ledger
Adding all debit balances and all credit balances of ledger
accounts, and then comparing the two totals to see whether
they are equal.
trial balance
A list of all the general ledger account names and balances;
it is prepared to prove the ledger.
transposition error
Error that occurs when two digits within an amount are
accidentally reversed, or transposed.
 PREPARING A TRIAL BALANCE

Key Terms Review

slide error
Error that occurs when a decimal point is moved by mistake.
correcting entry
An entry made to correct an error in a journal entry
discovered after posting.
 REVIEW

Question 1
You have just completed a trial balance and the columns are not
equal. List the steps that you would use to find the error.
 REVIEW

Answer 1
Step 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.
 REVIEW

Answer 1
Step 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.
 REVIEW

Question 2
Is it possible to have amounts in both the Debit and Credit
balance columns of a four -column ledger account?

No, the balance columns exist to show the cumulative ef fect 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.
 REVIEW

Question 3
Revenue: $18,000
Cash in Bank: $25,350
Mi Lee, Capital: $17,450
Salaries Expense: $10,100

What are the totals of the debit and credit columns of the trial
balance?

$35,450