Unit 2
The Basic Accounting Cycle
Chapter 3
Business Transactions and the Accounting Equation
Chapter 4
Transactions That Affect Assets, Liabilities, and Owner’s Capital
Chapter 5
Transactions That Affect Revenue, Expenses, and Withdrawals
Chapter 6
Recording Transactions in a General Journal
Chapter 7
Posting Journal Entries to General Ledger Accounts
Chapter 8
The Six-Column Work Sheet
Chapter 9
Financial Statements for a Sole Proprietorship
Chapter 10 Completing the Accounting Cycle for a Sole Proprietorship
Chapter 11 Cash Control and Banking Activities
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
0
Chapter 7
Posting 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
chapter.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
1
SECTION 7.1
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
2
Chapter 7, Section 1
The General Ledger
What Do You Think?
Why do you think an accounting system uses a
general ledger?
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
3
SECTION 7.1
The General Ledger
Key Terms
 posting
 general ledger
 ledger account forms
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
4
SECTION 7.1
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
5
SECTION 7.1
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
6
SECTION 7.1
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
7
SECTION 7.1
The General Ledger
The Fourth Step in the
Accounting Cycle: Posting
Information 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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
8
SECTION 7.1
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
9
SECTION 7.1
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
10
SECTION 7.1
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
11
Chapter 7, Section 2
The Posting Process
What Do You Think?
Why is posting necessary since the transaction is
recorded in the general journal?
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
12
SECTION 7.2
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.
13
SECTION 7.2
The Posting Process
Posting Transactions
Journal 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.
14
SECTION 7.2
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.
15
SECTION 7.2
The Posting Process
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
16
• Lets look at pages 171- 173 in our text book for another
example.
17
SECTION 7.2
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.
18
SECTION 7.2
The Posting Process
Computing a New Account Balance
A ledger account with several postings.
19
SECTION 7.2
The Posting Process
Computing a New Account Balance
A ledger account with a zero balance.
20
• Lets try Problem 7-2
– Working Papers page 95
21
Chapter 7, Section 3
Preparing a Trial Balance
What Do You Think?
Why must total debits equal total credits?
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
22
SECTION 7.3
Preparing a Trial Balance
Main Idea
To learn how to prove that your accounting system is in
balance. It is the proof that your total debits equal your
total credits.
You Will Learn
 the steps in preparing a trial balance.
 how to find and correct errors in a trial balance.
23
SECTION 7.3
Preparing a Trial Balance
Key Terms
 proving the ledger
 trial balance
 transposition error
 slide error
 correcting entry
24
SECTION 7.3
Preparing a Trial Balance
The Fifth Step in the Accounting Cycle:
The Trial Balance
In 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.
25
SECTION 7.3
Preparing a Trial Balance
The Fifth Step in the Accounting Cycle:
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.
Check out the example on page 178 of your text
book.
26
SECTION 7.3
Preparing a Trial Balance
The Fifth Step in the Accounting Cycle:
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.
27
SECTION 7.3
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
difference between the credits and the debits is divisible
by 9. An example of this is if $469 was written as $496.
28
SECTION 7.3
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.
29
SECTION 7.3
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
30
• 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.
Maintenance Expense
Debit
+
100
Credit
-
Cash in Bank
Debit
+
Credit
100
31
SECTION 7.3
Preparing a Trial Balance
Correcting Entries
Making a correcting entry to the general journal.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
32
SECTION 7.3
Preparing a Trial Balance
Correcting Entries
Posting correcting entries to ledger accounts.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
33
• Let’s try Problem 7-3!
– Working Papers page 96
34
SECTION 7.3
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
35
SECTION 7.3
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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
36
CHAPTER 7
Chapter 7 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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
37
CHAPTER 7
Chapter 7 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.
(continued)
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
38
CHAPTER 7
Chapter 7 Review
Answer 1
Step 5: Check to see whether any of the general
ledger accounts has a balance equal to onehalf 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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
39
CHAPTER 7
Chapter 7 Review
Question 2
Is it possible to have amounts in both the Debit and
Credit balance columns of a four-column ledger
account?
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
40
CHAPTER 7
Chapter 7 Review
Answer 2
No, 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.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
41
Resources
Glencoe Accounting Online Learning Center
English Glossary
Spanish Glossary
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.
42