How to Post Journal Entries to the General Ledger February 26, Vic 5 Comments After journalizing your business transactions, that is, recording them in the general or special journals, the next step is to post those journal entries in the general ledger accounts.
We will also use the sample journal entries made on that article in our discussion about posting entries from general journal to the general ledger here. So check out that post for your reference. What is the general ledger? The general ledger is a primary accounting record used by a business in tracking its individual account balances. While the general journal is where you record accounting transactions in a chronological order, the general ledger is where you post and group those accounting entries per account to easily track its balances.
You cannot easily check the balance of the cash account in the general journal since it records entries according to the date of transactions along with other accounts. But you can easily track it in the general ledger cash account. The general ledger accounts are used in the preparation of the trial balance and the financial statements.
The process of recording a debit or credit in the general ledger is called posting. Aside from using the general ledger, companies may also use a number of subsidiary ledgers or subledgers, such as accounts receivable and accounts payable subledgers. These types of ledgers are usually used by companies who need to keep track of their account balances per customer or per supplier.
All the entries that are posted to these subledgers will transact through the general ledger account. For the purpose of our simple tutorial, we will only discuss about the general ledger. Sample general ledger forms The general ledger includes the name of the account e. Check out the following 2 different samples of a general ledger account.
A general ledger account presented as a T account. A general ledger account presented with a balance column. We will use the second form for posting our sample journal entries to the general ledger here. You can also create the sample forms above using Microsoft Excel. All you need to do is to pick the entries from the general journal and post them in the general ledger per account.
The General Ledger
A T-Account is a visual presentation of the journal entries recorded in a general ledger account. This T format graphically depicts the debits on the left side of the T and the credits on the right side. This system allows accountants and bookkeepers to easily track account balances and spot errors in journal entries. T-Account Debits and Credits Ledger accounts use the T-account format to display the balances in each account.
Each journal entry is transferred from the general journal to the corresponding T-account. The debits are always transferred to the left side and the credits are always transferred to the right side of T-accounts. Since most accounts will be affected by multiple journal entries and transactions, there are usually several numbers in both the debit and credit columns.
Account balances are always calculated at the bottom of each T-account. Notice that these are account balances—not column balances. The total difference between the debit and credit columns will be displayed on the bottom of the corresponding side. In other words, an account with a credit balance will have a total on the bottom of the right side of the account. As a refresher of the accounting equation, all asset accounts have debit balances and liability and equity accounts have credit balances.
All contra accounts have opposite balances. Since so many transactions are posted at once, it can be difficult post them all. In order to keep track of transactions, I like to number each journal entry as its debit and credit is added to the T-accounts. This way you can trace each balance back to the journal entry in the general journal if you have any questions later in the accounting cycle.
T-Account Format Explained The standard T-account structure starts with the heading including the account name. This section usually forms the top of the T.
The left column is always the debit column while the right column is always the credit column. You can see that in the posting examples in the next section.
How to Post Journal Entries to T-Accounts or Ledger Accounts Once journal entries are made in the general journal or subsidiary journals, they must be posted and transferred to the T-accounts or ledger accounts. This is the second step in the accounting cycle.
The purpose of journalizing is to record the change in the accounting equation caused by a business event. Ledger accounts categorize these changes or debits and credits into specific accounts, so management can have useful information for budgeting and performance purposes. Since management uses these ledger accounts, journal entries are posted to the ledger accounts regularly.
Most companies have computerized accounting systems that update ledger accounts as soon as the journal entries are input into the accounting software. Manual accounting systems are usually posted weekly or monthly. Just like journalizing, posting entries is done throughout each accounting period.
Posting journal entries to ledger accounts. Made easy!
When you post, you will not change your journal entries. If you debit an account in a journal entry, you will debit the same account in posting. If you credit an account in a journal entry, you will credit the same account in posting.
After transactions are journalized, they can be posted either to a T-account or a general ledger. Remember — a ledger is a listing of all transactions in a single account, allowing you to know the balance of each account. The ledger for an account is typically used in practice instead of a T-account but T-accounts are often used for demonstration because they are quicker and sometimes easier to understand.
The general ledger is a compilation of the ledgers for each account for a business.
Below is an example of what the T-Accounts would look like for a company. In contrast to the two-sided T-account, the three-column ledger card format has columns for debit, credit, balance, and item description. The three-column form ledger card has the advantage of showing the balance of the account after each item has been posted. It is very important for you to understand the debit and credit rules for each account type or you may not calculate the balance correctly.
Posting Journal Entries to Ledger Account and Trial
These types of ledgers are usually used by companies who need to keep track of their account balances per customer or per supplier. All the entries that are posted to these subledgers will transact through the general ledger account. For the purpose of our simple tutorial, we will only discuss about the general ledger. Sample general ledger forms The general ledger includes the name of the account e.
Check out the following 2 different samples of a general ledger account. A general ledger account presented as a T account.
How to Post Journal Entries to the General Ledger
A general ledger account presented with a balance column. The information that has already been recorded in the journal is just transferred to the relevant ledger accounts in the general ledger. For the purpose of posting to general ledger, we can divide a journal entry into two parts — a debit part and a credit part. Both the parts essentially contain one or more accounts.
The amount of the account or accounts in the debit part of the entry is written on the debit side of the respective account and the amount of the account or accounts in the credit part of the entry is written on the credit side of the respective account in the general ledger. To have a better understanding of the posting process and to illustrate the format of ledger accounts, we need to take a transaction, prepare a journal entry and then transfer it to the relevant ledger accounts.