Accounting Chapter 4
Unit 7 Notes
Posting to the Ledger
Mrs. Joudrey
General Journal
A general journal is a chronological (by
date) record of all transactions However it
DOES NOT record the totals for each of
the accounts.
Information from the general journal is
transferred to the general ledger by a
process called POSTING.
Business Transaction Journal Ledger
BALANCE-COLUMN LEDGER
ACCOUNT
We used T-accounts to learn the rules of
debit and credit, but T-accounts are not
very practical in the business world. The
most widely used form of account is the
“BALANCE-COLUMN LEDGER
ACCOUNT” which is sometimes called a
three-column account.
Cash Account
Here is an example to introduce you to
this. I have taken the following T-account
for “cash” and converted it to a balancecolumn ledger account.
Cash Account
Here is what the transactions that were
recorded in the cash T-account would look
like in a balance-column ledger account.
Each account will now have its own chart
like the one below.
Running Balance
A running balance is recorded in the balancecolumn ledger on each line.
The DR./CR. column indicates if the balance on
that line is a debit or credit (this would be
determined with the same logic as you would if
you were using a T-account – think of how you
know if the balance goes on the debit or credit
side of a T-account – same thing applies here).
Note how even though the entries on Nov. 3 and
6 are credits, the balance is still a debit.
Chart of Accounts
Each account in a ledger has a title
(example: cash) and a number (ex. 100).
Accounts are placed in a ledger
numerically (by number).
A list of the account name and number is
called a chart of accounts.
Accounts are numbered in the same order
as they appear on the balance sheet and
income statement.
Chart of Accounts
Assets are 100’s
Liabilities are 200’s
Owner’s Equity is 300’s
Revenues are 400’s
Expenses are 500’s
Posting to a Balance-Column Form
of Ledger Account
This is how you would post a $900 general
journal entry to the cash account in the
balance column-form of ledger account:
Posting to a Balance-Column Form
of Ledger Account
Steps in Posting:
Step 1: Find the account you need to use
in the ledger
Step 2: Record the date (month and year
don’t need to be repeated if they are the
same as the transaction above)
Step 3: Enter the amount in the correct
column (debit or credit)
Steps in Posting:
Step 4: Calculate the new balance – if the amount
you just entered is a debit and the balance is a debit
you will add the numbers (same if they were both
credit), but if the amount you entered is different
from the balance in the account (one is a debit and
one is a credit) you need to subtract. Same
procedure as you did in T-accounts.
Step 5: Complete the ledger posting reference
column – enter the general journal page number
where the amount was posted (example J3 if you
entered the posting on the third page of the general
journal)
Steps in Posting:
Step 6: Complete the journal posting
reference column – copy the account
number (example cash is 100) from the
ledger account into the posting reference
(P.R.) column of the general journal. This
number indicates that the amount in the
general journal has been posted to the
ledger in that account (example account
100)
Posting References
Numbers in the P.R. (posting reference)
columns serve an important purpose. They
are cross references that link particular
journal entries to corresponding posting to
the ledger.
A journal page number in the ledger
account indicates where more information
about the transaction can be found.
Posting References
The ledger account number in a journal P.R.
column indicates that the amount has actually
been posted (that is why we NEVER record this
before we have actually posted the amount to
that account). This is how you or someone else
will be able to tell where you left off in your
postings.
These numbers also help auditors. An audit is a
check of accounting records and procedures by
an accountant.
Activity
Record the following general journal
entries into your general ledger as
practice: (note – previous balance in the
cash account was $4000 DR. )
Write Forwarded in the particulars column.
Activity
Answers:
Answers:
Opening the Books
The Opening Entry is prepared when a business
first begins operation.
Let’s say on September 1, K. Schmidt invested
$4 000 of his own money, bought a $20 000
truck, and $5 000 of equipment and borrowed
$15 000 from a bank to start a painting business.
Please complete the following:
Step 1 – figure out the owner’s equity (using
balance sheet equation)
Step 2 – enter these amounts into a general
journal.
Answer
Opening Ledger Accounts
We used to complete a general ledger
using separate T-accounts for each
account, now we will use balance column
ledger accounts for that purpose.
To Open a New Ledger Account:
Write the name of the account
Write the account number
Write the date
Write “opening entry” in the particulars column.
(ONLY FOR THE OPENING OF A BUSINESS)
Write J# (write the letter J and the page
number that relates to where you got this entry
from the general journal). Example: write J5 if
this entry was recorded on page 5 of the
general journal.
To Open a New Ledger Account:
Record the amount in the correct debit or
credit column (think of T-accounts)
Enter the balance in the balance column
Depending on the balance, write Dr. or Cr. In
the Dr./Cr. Column
Enter the ledger account number in the posting
reference column of the general journal.
Example: if you just posed the cash amount
write 100 (since this is the number for cash) in
the P.R. column in the general journal.
Insert the account in numerical sequence.
Create opening entries for these
accounts:
Answers:
Answers:
Forwarding Procedures
Once an account page is full you will need to
record the balance at the end of the page on the
top of the new page.
To do this you will record the same heading
information (account name and number) then
you will write the same date as the one from the
previous page and write the word “Forwarded” in
the particulars column on the last line of the
previous page (the one that is full) and on the
first line of the new page (next to the date).
Place a check mark in the P.R. column
Note: the particulars column is seldom used
aside from those two instances.
Note: the particulars column is seldom used
aside from those two instances.
Reviewing the Trial Balance
We are going to create the trial balances
the same, but now if there is a column
called Acc. No. you are going to record the
account number for each item on the trial
balance.
Example:
Dealing with Errors
Transposition Error
Numbers recorded in the wrong order.
To find the error:
Re-add the columns to make sure there
has been a mistake
Figure out what the difference would be
(example if debits are 2075 and credits are
2165) from the trial balance (difference
here is $90)
Dealing with Errors
Is the difference easily divisible by 9? If
this is correct (as in our example 90/9=10)
then the numbers could be recorded out of
sequence and also have a difference of 1.
Check each number for a reversal (two
numbers written in the wrong order –
example 89 written as 98) – also notice
these numbers have a difference of 1 9-8
=1
Correcting Journal Entries
Suppose this entry has been made:
But the amount should have been $500
not $50.
Correcting Journal Entries
You first have to cancel the entry (opposite
of how you had posted it)
Correcting Journal Entries
Then you must re-enter the transaction the
way it should have been done
Assignment
Please complete questions 9-18 on page
131 