You examine the ledger to review how business transactions affect each account.
In this chapter you will learn how to post journal entries to the general ledger and how to prepare a trial balance – Steps 4 & 5 in the accounting cycle.
Notice the four amount columns: the debit column, the credit column, the debit balance column, and the credit balance column. The first two amount columns are used to enter debit and credit amounts posted from the journal entries. The last two are used to enter the new account balance after a journal entry is posted. The balance accounts show the current account balance. (normal account balance)
Before journal entries can be posted, a general ledger account is opened for each account that appears in the chart of accounts. The number of steps required to open an account depends on whether or not the account has a zero balance.
Posting brings the records of the business up-to-date. If the business did not post its transactions, the balances in ledger accounts would not be current.
Posting is the process of transferring information from the general journal to individual general ledger accounts.
Roadrunner’s first transaction affects two accounts: Cash in Bank and Maria Sanchez, Capital. The information in the journal entry is transferred item by item from the journal to each of the accounts affected.
Posting made to the general ledger from the general journal are illustrated on pages 160 - 162. Study the illustration to check you understanding f the posting process. (give them 3 minutes)
On the four-column ledger account form, each time you post to an account, you also compute a new account balance.
For example, on October 11, Roadrunner sold a phone on account to Green Company. On October 14 Green Company paid for the account in full with a $200 check. When the October 14 journal entry is posted, Accounts receivable – Green Company has a zero balance.
To present accurate financial statements, the accounts must be in balance. The purpose of a trial balance is to prove that the general ledge is in balance.
Most trial balance errors can be located easily and quickly. When total debits do not equal total credits, follow these steps:
Anyone who works in accounting understands the saying “to err is human…” when mistakes are made in accounting, one rule applies: Never erase an error.
When an error in a journal entry is discovered after the posting, make a correcting entry to fix the error
Posting Journal Entries to General Ledger Accounts Chapter 7
One world ranch on which you might work is the King Ranch in Texas. Accounting for an operation like King Ranch means keeping track of the number of calves born each year or the pounds of cotton produced.
What do you think?
What are some general ledger account that might be used by King Ranch?
Imagine that you are an accounting clerk for Ace Hardware. The store manager has asked you to prepare the trial balance for the month. The totals on the trial balance are not equal and you cannot find the error. You also realize the trial balance is due at the end of the day. You are frustrated and consider changing one of the account balances just to get the trial balance to balance.
When preparing a trail balance, be sure to list all the general ledger accounts, in the order in which they appear in the ledger and on the chart of accounts. List even those accounts with a zero balance. Every account is listed to avoid omitting an account (and its balance) from the trial balance.
Add the debit and credit column again, you may have added incorrectly
Find the difference between the debit and credit column. (this is the amount you are out of balance).If the amount is 10, 100, 1000 and so on, you probably made an addition error. Add the columns again.
Check if the amount you are out of balance is evenly divided by 9. If the difference between the columns is evenly divisible by 9, you may have made a transposition or slide error
A transposition error occurs when two digits with an amount are accidently reversed
A slide error occurs when a decimal point is moved by mistake.