Posting to a General Ledger
Chart of Accounts Review
The General Ledger is a record off all financial transactions that a business makes, or all money coming in and going out, listed by account.
Accounts are divided by financial statement.
Account numbers not only give you another way to reference account information, they are also used to organize accounts within the General Ledger.
For instance, in your textbook all Asset accounts start with "1", liability accounts with "2", and owner's equity accounts with "3".
Sample Chart of Accounts (COA)
Balance Sheet Accounts
Income Statement Accounts
120 Petty Cash
130 AR Thing 1
131 AR Thing 2
132 AR Mary Poppins
140 Office Supplies
145 Sales Supplies
210 Homer Simpson Homes
220 Winnie the Pooh Water
510 Advertising Expense
515 Automobile Expense
530 Catering Expense
540 Rent Expense
550 Salary Expense
570 Utility Expense
(300) Owner's Equity
310 My Money, Capital
320 My Money, Drawing
Posting to the General Ledger
Every financial transaction is recorded in the journal chronologically. At the end of each month, after the journal is prooved and ruled, the information is then transfered, or posted, to the General Ledger. This makes it easier to see what is happening in each account, and to keep track of account balances.
Steps for Posting a Journal Entry to the General Ledger:
First, locate the correct General Ledger page. Then:
- Write the transaction date on the Ledger page.
- Write the Journal page number in the Post Ref. column of the Ledger.
- Write the Debit or Credit amount.
- Record the current Debit or Credit balance for the account.
- Write the General Ledger Account number on the Journal sheet in the Post Ref. column for the transaction. This indicate that you have completed posting that entry.
Journal Page 2 DATE ACCOUNT TITLE DOC.
CASH DEBIT CREDIT DEBIT CREDIT 2010
My Money, Capital R1 310 a 4000.00 a 4000.00 a 1 Office Supplies C1 140 50.00 a a a 50.00 1 Sales Supplies M1 145 125.00 a a a a a AP Homer Simpson Homes a 210 a 125.00 #F2C1B0 a a 7 √ T1 √ a a 200.00 200.00 a 9 AR Thing 2 S1 131 350.00 a 350.00 a a 15 AP Homer Simpson Homes C2 210 125.00 a a a 125.00 15 Rent Expense C3 540 400.00 a a 400.00 a 30 Totals a √ 1050.00 4125.00 550.00 4600.00 175.00 1 1 1 1 (√) (√) (410) (110) (110)
When posting to the General Ledger:
After every entry on the journal page is posted, put a check in parenthesis (check) at the bottom of the General Debit column and the General Credit column to indicate you have completed the posting.
When you finish posting each special amount column, write the account number in parentheses (110) at the bottom of the column to indicate that you have finished posting the totals.
Computing General Ledger Account Balances
Rule of thumb:
Debits are added to Debit balances. Result – Debit.
Credits are added to Credit balances. Result – Credit.
Debits are subtracted from Credit balances. Result – Credit.
Credits are subtracted from Debit balances. Result – Debit.