Analyzing Transactions

1. Analyzing Transactions LO 3 – Posting Journal Entries to Accounts

2. LO 3 Posting Journal Entries to Accounts • The process of transferring the debits and credits from the journal entries to the accounts is called posting.

3. LO 3 Posting Journal Entries to Accounts On December 1, NetSolutions paid a premium of $2,400 for an insurance policy for liability, theft, and fire. The policy covers a one-year period.

4. Accounting Equation Impact Assets = Liabilities + Stockholders’ Equity LO 3 0 Posting Journal Entries to Accounts decrease increase

5. Post.. Post. Balance Balance Date Item Ref. Debit Credit Debit Credit Date Item Ref. Debit Credit Debit Credit Account Prepaid Insurance Account No. 15 Account Prepaid Insurance Account No. 15 2011 Dec. 1 LO 3 Exhibit 4 - Steps in Posting Step 1.The date of the transaction is entered in the Date column of Prepaid Insurance. Dec. 1 Prepaid Insurance 2,400 Cash 2,400 Paid premium on one-year policy. Dec. 1 Prepaid Insurance 2,400 Cash 2,400 Paid premium on one-year policy. 2011 Dec. 1

6. Post. Balance Date Item Ref. Debit Credit Debit Credit Account Prepaid Insurance Account No. 15 LO 3 Exhibit 4 - Steps in Posting Step 2.The amount ($2,400) is entered in the Debit column of Prepaid Insurance. Dec. 1 Prepaid Insurance 2,400 Cash 2,400 Paid premium on one-year policy. 2011 2,400 2,400 Dec. 1

7. Post. Balance Date Item Ref. Debit Credit Debit Credit Account Prepaid Insurance Account No. 15 LO 3 Exhibit 4 - Steps in Posting Step 3.The journal page number (2) is entered in the account’s Post. Ref. column. Dec. 1 Prepaid Insurance 2,400 Cash 2,400 Paid premium on one-year policy. 2011 2 2,400 2,400 Dec. 1

8. Post. Balance Date Item Ref. Debit Credit Debit Credit Account Prepaid Insurance Account No. 15 LO 3 Exhibit 4 - Steps in Posting Step 4.The ledger account number (15) is entered in the journal’s Post. Ref. column. Dec. 1 Prepaid Insurance 2,400 Cash 2,400 Paid premium on one-year policy. 15 2011 2 2,400 2,400 Dec. 1

9. LO 3 Recording and Posting of a Debit and a Credit These steps are repeated to post to the Cash account.