Transcript Unit #7 - Posting to the Ledger

Unit 7 – Posting to the Ledger
Posting to the Ledger
Business Transactions
Journal
(Journalizing)
Ledger
(Posting)
** The General Journal does not provide the balance for each account. This
information is found in the accounts in the general ledger.
*** Transfer information from the journal to the ledger by a process called posting.
Balance-Column Ledger Account
“three-column account”
• The most widely used form of account that
provides a running balance on each line.
• “T-accounts introduced in Chapter 2, ideal for
learning rules, but not very practical for use in
business.
Ex: Cash T-Account
Cash
Nov. 1
3
5
2 000
75
100
2 175
Balance
1 825
Nov. 3
6
150
200
350
Ex: Three-Column Account
General Ledger
Account
Cash
Date
Particulars P.R.
20_
Nov.
1
3
3
5
6
No. 100
J1
J1
J1
J2
J3
Debit
200000
7500
10000
Journal Page number is shown.
Each entry has its own line.
Credit
DR.
CR.
DR.
DR.
15000 DR.
DR.
20000 DR.
Balance
200000
207500
192500
202500
182500
Indicates whether the account balance
is a debit or a credit.
Chart of Accounts
• Is a list of the names and account numbers of all of the
accounts in a ledger.
• Each account in a ledger
– Has a title and a number
– Placed in numerical sequence – located quickly
• Use
– Which accounts to journalize
– Locating accounts
• Accounts in ledger numbered in the same order as they
appear on the balance sheet and income statement.
Rainbow Painting Contractors
Chart of Accounts
Assets
100
101
102
131
141
142
Cash
Accounts Recievable/A.Baker
Accounts Recievable/L.Carter
Painting Supplies
Equipment
Truck
Liabilities
200
201
221
Accounts Payable/International Paints
Accounts Payable/Hardware Supply Corp.
Bank Loan
Owner’s Equity
300
301
K. Schmidt, Capital
K. Schmidt, Drawings
Revenue
400
Sales
Expenses
500
501
502
503
Advertising Expense
Rent Expense
Salaries Expense
Utilities Expense
- In large companies with a large number of accounts, a four-digit series of numbers
may be required to cover all of the accounts.
- Ex: Assets (1000-1999)
Liabilities (2000-2999)
- Computer Accounting
- The accounting number becomes a numeric code for finding account names and
information faster.
Steps – Posting to a Balance-Column
Form of Ledger accounts
• See Figure 4.6 – Page 117
Step 1: Locate the account and current balance
Step 2: Record the date
Step 3: Enter the amount
– Debit or credit?
Step 4: Calculate the New Balance
Step 5: Complete the Ledger Posting Reference Column
– Journal Page number from which the amount was posted.
Step 6: Complete the Journal Posting Reference Column
– Copy account number from the ledger account into the P.R.
column of the general journal.
Example.
Example Continued…
Example Continued…
Posting References
• Numbers in posting reference columns serve an
important purpose.
• Cross-references that link particular journal
entries to corresponding postings to the ledger
accounts.
• Journal Page in Ledger – Where to find more info
about transaction.
• Ledger Acct. # in Journal – indicates that the
amount has been posted, and tells accounting
clerk where they left off in posting to the ledger.
Audits
• An audit is a systematic check of accounting
records and procedures by an accountant.
• Periodically, all companies have their records
audited.
• Purpose:
– Use the cross-references to check the accuracy of
the journalizing and posting of transactions.
– P.R. numbers allow the transactions to be traced
from the journal to the ledger and vice versa.
Posting Example
• Page 120-121 (Textbook)
Opening Entry
• Records the assets, liabilities, and owner’s equity
when a business first begins operations.
• To ‘open the books’, the general journal is set up
and the business’ assets, liabilities, & owner’s
equity are recorded.
• After the opening entry is journalized, the daily
entries of the business can be recorded.
Example – Page 122
• Compound Entry:
– Has more than one debit or more than one credit.
– All entries, including compound ones, must have
equal debit and credit amounts.
Page 123 – Figure 4.11
Opening Ledger Accounts (first time)
1. Account name (“Cash”)
2. Account number (“100”)
3. Date
4. Opening Entry (in particulars column)
5. P.R. of J1 (General Journal page 1)
6. Amount (in debit or credit)
7. Enter the opening balance
8. DR. or CR. (depending on balance)
9. Ledger account number in P.R. of Journal Entry
10.Insert the account in numerical sequence in the
ledger.
Page 124 – Figures 4.12-13
Forwarding Procedure
• Happens when an account page is filled – a new page must then be
opened using the following procedure:
1)
2)
3)
New Page: Same Header (Same Acct Name & #)
Write Forwarded – Last line of old page in the particulars column
New Page:
-
First line: Date (yr, month, day)
Forwarded (Particulars column)
Balance (Balance column)
Check mark in P.R.
** Particulars column is seldom used. (Exception: Opening Entry and
Forwarded notations)…use P.R. numbers to trace back for more detailed
information.
Review
Trial
Balance
Trial balance – is proof
of the mathematical
accuracy of the ledger.
See Page 125
Trial balance includes
Acct. number column.
Forms of the Trial balance
• Formal Trial balance (previous slide)
• List form Trial balance
(Total list of debits = Total list of credits)
• Machine tape form Trial balance
(Debit balances – Credit balances = 0)
Types of Trial balances
List form
Machine tape form
Rainbow Painting
Contractors
Trial Balance
November 30, 20__
DEBIT
$ 3 515
295
1 200
5 000
20 000
$30 010
Rainbow Painting
Contractors
Trial Balance
November 30, 20__
CREDIT
$ 695
315
15 000
14 000
______
$30 010
0
3 515+
295+
1 200+
5 000+
20 000+
69531515 00014 0000*
Possible Posting Errors
• Not posting an entire transaction
• Not posting either the debit or credit part of a
transaction
• Posting to the correct side but to the wrong
account
• Posting to the wrong side of an account
• Calculating the balance incorrectly
• Transposing figures (posting 86 instead of 68)
How to locate Trial Balance Errors
1) Determine the difference (Debit-Credit)
2) Difference (1,10,100) – (+ or – error?)
3) Acct. in ledger with balance = difference?
(possible omission from trial balance)
4) Divide difference by 2
(amount may have been placed in the wrong
column of the trial balance)
5) Difference divisible by 9?
(Transposition error)
How to locate Trial Balance Errors Cont.
6) If divisible by 9 and the difference is 2 (18/9)
(The numbers that were transposed have a
difference of 2) ex: 57 to 75
7) Amount not posted from journal?
8) Check each balance in each account of ledger
Check P.R. column for unposted items
Re-check each posting.
Examples.
1. Transposition Error (Page 127)
2. Correcting Errors (Page 127)
- Rule out mistake, and re-write. (some want initials)
3. Correcting Journal Entries (Page 128)
-
Cancel entry by performing the opposite transaction
4. Checking for accuracy (Page 128-29)
5. Checking accounts
- Calculator
- Calculator with sub-total method
The Accounting Cycle
• Is the set of accounting procedures performed
in each accounting period.
New Accounting Period Begins
Business Transactions
Journalizing
Journal
Financial Statements
Posting
Trial Balance
Ledger
Proof
Preparing Financial Statements