Accounting Chapter 4 Unit 7 Notes Posting to

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 J 3 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

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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 J 5 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:

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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 9 9889 = 9 and 9/9=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