1. The General Ledger Setting Up the General Ledger
SECTION 7.1
Setting Up the General Ledger
Accounts used by a business are kept on separate pages or cards in a book or file called a ledger. It is important for a number of reasons:
This creates a record of the impact of business transactions on each account used by a business.
Helps managers easily find the current balance of a specific account.
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2. The General Ledger Setting Up the General Ledger
SECTION 7.1
Setting Up the General Ledger
Posting is the process of transferring information from the journal to individual ledger accounts. It is the process by which random transactions become organized in a manner according to accounts.
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3. The General Ledger Setting Up the General Ledger
SECTION 7.1
Setting Up the General Ledger
All transactions must be moved to a permanent record organized by account number called a general ledger. This information is continually used by managers. It provides up-to-date balances for each account, including accounts payable and receivable:
In a computerized system, electronic files are still referred to as a ledger, or the ledger accounts.
Managers use ledgers to obtain summarized information.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

4. The General Ledger The Fourth Step in the Accounting Cycle: Posting
SECTION 7.1
The Fourth Step in the Accounting Cycle: Posting
Information in a journal entry is posted to the general ledger to provide a clear picture of how a business transaction changes an account’s balance.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

5. The General Ledger The Four-Column Ledger Account Form
SECTION 7.1
The Four-Column Ledger Account Form
In a manual accounting system, information about specific accounts is recorded in ledger account forms:
The forms are defined by the number of columns into which a dollar amount goes.
Debit and credit amounts are posted from journal entries to the first two amount columns.
The new account balance is entered in one of the last two amount columns.
The type of account determines which balance column to use.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

6. The General Ledger The Four-Column Ledger Account Form
SECTION 7.1
The Four-Column Ledger Account Form
The four-column ledger account form has spaces to enter the account name, the account number, the date, a description of the entry, and the posting reference.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

7. The Posting Process Posting Transactions
SECTION 7.2
Posting Transactions
Journal entries do not show a clear picture of how a business transaction changes an account’s balance. Posting shows the final impact on an account, which is why a ledger is sometimes called a book of final entry:
Posting intervals are determined by the size of the business, and whether the accounting system is computerized or manual.
The posting process always remains the same.
The process is always performed from left to right.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

8. The Posting Process Posting to the Roadrunner General Ledger
SECTION 7.2
Posting to the Roadrunner General Ledger
There are six steps required for posting journal entries to a ledger:
1. Enter the date of the journal entry in the Date column.
2. The Description column is usually left blank, but can be used to write in the source document.
3. Enter journal letter and page number in Post. Ref. column.
4. Enter the debit amount in the Debit column.
5. Compute the new account balance.
6. Enter the account number in the general journal Post. Ref. column.
7. Repeat steps 1-6 for the credit part of the journal entry.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

9. The Posting Process SECTION 7.2
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

10. The Posting Process Computing a New Account Balance
SECTION 7.2
Computing a New Account Balance
A new account balance is computed each time a transaction is posted to an account. When the existing account balance is a debit, and
the amount posted is a debit, ADD the amounts.
the amount posted is a credit, SUBTRACT the amounts.
When the existing account balance is a credit, and
the amount posted is a debit, SUBTRACT the amounts.
the amount posted is a credit, ADD the amounts.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

11. The Posting Process Computing a New Account Balance
SECTION 7.2
Computing a New Account Balance
A ledger account with several postings.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

12. The Posting Process Computing a New Account Balance
SECTION 7.2
Computing a New Account Balance
A ledger account with a zero balance.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

13. Preparing a Trial Balance
SECTION 7.3
The Fifth Step in the Accounting Cycle: The Trial Balance
In order for an accounting system to work efficiently, it is important to remember the necessary steps to keep it in balance:
Calculating the balance.
Finding any errors that may have occurred.
Using general rules and guidelines to narrow down where and why the mistake was made.
Correcting the mistake.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

14. Preparing a Trial Balance
SECTION 7.3
The Fifth Step in the Accounting Cycle: The Trial Balance
Once the journal entries have been properly posted to the ledger, the sum of the debits should equal the sum of the credits. The final figures should be the same; this is called proving the ledger.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

15. Preparing a Trial Balance
SECTION 7.3
The Fifth Step in the Accounting Cycle: The Trial Balance
To prove the ledger, accountants prepare a list of all the account names and their current balances. This list is called the trial balance.
If the totals are equal, the trial balance is in balance. If they are not, try adding the columns up again. If there is still a mistake, it must be corrected.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

16. Preparing a Trial Balance
SECTION 7.3
Finding an Error
If there is an error, one possibility may be that two numbers were reversed when recording the information from the journal, called a transposition error.
One way to help check for these kinds of errors is if the difference between the credits and the debits is divisible by 9. An example of this is if $469 was written as $496.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

17. Preparing a Trial Balance
SECTION 7.3
Finding an Error
Moving a decimal point by mistake is called a slide error. An example is if you were to write $25,000 instead of $2,500.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

18. Preparing a Trial Balance
SECTION 7.3
Correcting Entries
If a mistake is made, it will have to be corrected with a correcting entry. These are made after the journal entry has been posted, and should never be erased. The proper procedure is:
To post the entry in the ledger the same as any other entry.
Use the words correcting entry in the description column.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

19. Preparing a Trial Balance
SECTION 7.3
Correcting Entries
Making a correcting entry to the general journal.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.

20. Preparing a Trial Balance
SECTION 7.3
Correcting Entries
Posting correcting entries to ledger accounts.
Glencoe Accounting Unit 2 Chapter 7 Copyright © by The McGraw-Hill Companies, Inc. All rights reserved.