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CHAPTER EIGHT The General Ledger McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-3 1.

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Presentation on theme: "CHAPTER EIGHT The General Ledger McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-3 1."— Presentation transcript:

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3 CHAPTER EIGHT The General Ledger

4 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Post entries from a general journal to general ledger accounts. 2. Set up and arrange the general ledger accounts. 3. Complete the Balance columns of the general ledger accounts. 4. Correct errors in the general ledger. 5. Prepare a trial balance from the general ledger accounts. THE GENERAL LEDGER Objectives:

5 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-4 Posting to the Ledger The year, month, and day are entered in the Date column. The description column is for special notations you may want to enter.

6 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-5 Posting to the Ledger (continued) The Posting Reference column is used to refer back to the original entry. A “J3” entry would indicate that the information came from the journal on page 3.

7 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-6 Posting to the Ledger (continued) If a debit appears in the journal, it will appear as a debit in the ledger. If a credit appears in the journal, it will appear as a credit in the ledger. A running balance appears in the ledger.

8 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-7 Posting to the Ledger (continued) The number of the ledger account will appear in the Post Reference column in the journal.

9 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-8 Setting Up and Using Accounts in the General Ledger To make posting as simple as possible, a separate ledger sheet is used for each account. All the accounts together make up the general ledger.

10 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved. 8-9 Completing the Balance Columns of the Accounts As each entry is posted from the journal, the ledger account balance is computed and recorded in either the Debit Balance or the Credit Balance column.

11 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Correcting Errors in the Ledger If an amount is incorrectly posted or posted to the wrong account, the error is corrected by drawing a single line through the incorrect data and writing the correct information above it.

12 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Correcting Errors in the Ledger (continued) If the error involves a journal entry that was incorrectly recorded and posted to the wrong account, then another entry is required to correct the error.

13 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Proving the Ledger The trial balance tests the accuracy of the entries in the ledger. Account numbers are recorded in the first column of the trial balance for identification and reference purposes.

14 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Accounting Terminology Balance ledger form General ledger Ledger Posting Posting reference

15 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary The facts about a business’ transactions are sorted and grouped by transferring the information in the journal to the ledger. This is called posting.

16 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary (continued) An account must be provided in the ledger for each financial item in the business. In the posting process, posting references are recorded to permit easy tracing of an entry from the journal to the ledger or from the ledger to the journal.

17 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary (continued) Ledger accounts are arranged in an easy-to-follow order for preparing financial statements. Balance sheet accounts are first and income statement accounts follow.

18 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Chapter Summary (continued) After all postings for a month have been completed, a trial balance is taken to prove the accuracy of the ledger.

19 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved An account should be provided for every financial item in the business. 2. The process of transferring information from the journal to the ledger is called posting. 3. Income accounts are generally listed first in the general ledger. Topic Quiz Answer the following true/false questions: TRUE FALSE TRUE

20 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved Investigating on the Internet Sources of information about ledgers and accounts can be accessed at some web locations of businesses. As a research assignment, access a website and report those sources of information that might concern the use of ledgers and posting in business.

21 McGraw-Hill/Irwin Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved (Return to Topic Quiz) 3. Income accounts are generally listed first in the general ledger. FALSE Balance sheet accounts appear first in the general ledger followed by income accounts.


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