Posting Journal Entries to General Ledger Accounts

1. Posting Journal Entries to General Ledger Accounts Chapter 7

2. The General Ledger • Posting – the process of transferring information from the journal to individual general ledger accounts • General Ledger – a permanent record organized by account number to keep balances in each account Pg 164

3. Four-Column Ledger Account Form • In a manual accounting system, information about specific accounts is recorded in a Ledger Account Form Pg 165

4. Opening A General Ledger Account • Write the account name at the top of the ledger account form • Write the account number on the ledger account form • This procedure is performed each time a ledger page is needed for a new account pg166

5. Starting a New page for an Existing Account • Write the account name at the top of the ledger account form. • Write the account number on the ledger account form. • Enter the complete date (year, month, and day) in the Date column. • Write the word Balance in the Description Column. • Place a check mark in the Post Reference column to show the amount entered on this line is not being posted from a journal. • Enter the balance in the appropriate Balance Column. pg166

6. When to Post • Posting can happen any time as dictated by the business’ policy. It is recommended that businesses that use a manual system to record transactions post daily. With an electronic accounting system, transactions are automatically posted once they are entered into the journal. Pg 168

7. The Posting Process • Enter the date of the journal entry in the Date column of the account debited. (use the date of the journal entry not the date on which posting was done • The Description column on the ledger account is usually left blank • Enter the location of the journal entry in the Post Reference column. Ex G1 means General Ledger Page 1 • Enter the debit amount in the Debit column of the ledger account • Compute and record the new balance • Return to the journal and add the account number of the account you just posted to to the Posted Reference column of the journal • Repeat the process for each account listed in the journal Pg 169 *This is Step 4 of the Accounting Cycle*

8. Computing a New Account Balance • Debits are added to debits • Credits are added to credits • If the transaction has both a debit and a credit they are subtracted and the difference is put into whichever column started highest. • For our purposes, there are no negative account balances

9. Step by Step Pg 169

10. Showing a Zero Balance in a Ledger Account • Draw a line across the center of the column where the normal balance would appear. Pg 174

11. Journal After Posting Pg 171

12. Complete General Ledger Pg 172

13. The Trial Balance Pg 177 • Proving the ledger – the process of adding all debit account balances for a debit total and adding all the credit account balances for a credit total and comparing the debit and credit totals to make sure they are the same • Trial Balance – the formal way of proving the ledger; it’s a list of all account names and their current balances • If a trial balance is “out of balance” there is an error on the Journal, Ledger, or Trial Balance Sheet and must be found and corrected on any/all documents affected.

14. Completed Trial Balance Pg 178

15. Finding Errors A Trial Balance Sheet that is “in balance” is not necessarily free of errors. It simply means that debits and credits were posted equally. Finding Errors • Add the debit and credit columns again • Find the difference between the debit and credit columns. If the difference is 10, 100, 1000 and so on you probably make and addition error • If the difference is divisible by 9 then you probably made a transposition error which means you flipped 2 numbers 29 instead of 92 *Slide Errors are when you moved the decimal place while transferring numbers. Ex 1800 was put in as 180 or 18000. • Check that you did not leave out any accounts. Check to see if any existing account currently have the balance of the amount of difference • One of the balances could be recorded in the wrong column. Divide the difference by 2 and look for a balance of that amount that may be in the wrong column (debit or credit) • If you have not found the error, recompute the balance in ledger account • Lastly, check that the amounts in the general ledger transactions match those of the journal and that they are in the correct columns. Pg 178

16. Correcting Errors • Never erase an error • Three types of errors • Error in journal entry that is not posted*Draw a line through the error and write the correction above it • Error in posting to the ledger when the journal entry is correct*Draw a line through the error and write the correction above it • Error in a journal entry that is posted*make a Correcting Entry to undo the account that was wrongly affected and then enter the account that should have been affected Pg 179

17. Correcting Entries • On November 15 the accountant for Roadrunner found an error in a journal entry make on November 2. A $100 check to pay the electricity bill was journalized and posted to the Maintenance Expense account by mistake. Pg 180