Chapter 7, Section 1 Posting Journal Entries to General Ledger Accounts

Introduction Vocabulary  General Ledger –group of accounts used by a business  Ledger Account Form –accounting stationary used to record financial information about specific accounts –Figure 7-2 –Named for the # of amount columns there are –Normal Balance debit or credit

Opening an Account with a Zero Balance 1.Write the account name at the top of the ledger account form 2.Write the account number on top of the ledger form  Figure 7-3

Opening an Account with a Balance 1.Write the account name at the top of the ledger account form 2.Write the account number on the ledger account form 3.Enter the complete date (year, month, and day) in the date column 4.Write the word “Balance” in the Description column 5.Place a check mark in the Posting Reference column to show the amount entered on this line is not being posted from a journal 6.Enter the balance in the appropriate balance column of the ledger account form.  Figure 7-4

Chapter 7, Section 2 The Posting Process

Posting  the process of transferring info from the general journal to individual general ledger accounts –can see + and - to account –shows impact of business transactions on individual accounts

Steps for Posting 1.Enter date of journal entry in the date column of the account debited 2.Leave description blank 3.Post Ref. Column – enter “G” for General Journal and General Journal page number 4.Debit amount in debit column 5.Compute and record the new account balance in the appropriate balance column

Step 5 of Posting - Computing a New Account Balance  When the normal account balance is a debit and –The amount posted is a debit, ADD the amount –The amount posted is a credit, SUBTRACT the amount  When the normal account balance is a credit and –The amount posted is a debit, SUBTRACT the amount –The amount posted is a credit, ADD the amount  Figure 7-8

Steps for Posting 6.Return to journal, in Post Ref. column enter ledger account number –Make sure on same line as debit entry. –Important because – shows journal entry was posted –never write account number until after posted 7.Repeat #1-6 for Credit

Showing a Zero Balance in a Ledger Account  a line should be drawn through the center of the column where the normal balance SHOULD be  Figure 7-9

Chapter 7, Section 3 Preparing a Trial Balance

The Trial Balance  A trial balance is how accountants prove that the accounting system is in balance. Accounts with Debit Balances = Accounts with Credit Balances A.K.A. Debits = Credits  Proving the Ledger –adding all the debit balances –then adding all the credit balances –finally compare the two totals to see if they are equal

Trial Balance  Figure 7-10 If you do not balance you must stop and find your error before continuing!

Finding Errors 1.Re-add the debit and credit columns 2.Find the difference between the debits and the credits, if it is 10, 100, 1000, etc. It is likely to be an addition error. 3.Check to see if amount you are off is evenly divided by 9.  You may have a Transposition Error: occurs when two digits are reverses or transposed  You may have a Slide Error: occurs when a decimal point is moved by mistake ($1800 written as $180)  To find – compare the trial balance against the general ledger to make sure you copied it correct

Finding Errors 4.Did you include all the general ledger accounts in the TB?  Look for an account in the general ledger that the balance is equal to the amount you are out of balance 5.Check to make sure you have recorded all of the account balances in the correct column (DR or CR)  Divide the out-of-balance amount by 2 and check to see if the result matches an account balance  $300/2=$150 do you have an account with a balance of $150 – then check to see if amount is recorded in the wrong column

Finding Errors Still no error found? 6.Recomputed the balance in each of the ledger accounts. 7.Finally, check the general ledger accounts to verify that the correct amounts are posted from the journal entries.  Make sure debit amounts are posted to the debit column and do the same for credits.

Correcting Entries  Three Types of Errors 1.Error in a journal entry that is not posted 2.Error in posting to the ledger when the journal entry is correct  Journal entry correct just posted incorrectly - Same as in the journal, draw a line through the error and write correction directly above. 3.Error in a journal entry that is posted.  Correcting Entry: required ONLY when an error in a journal entry is discovered AFTER posting  p. 168 Figure 7-11 & Figure 7-12