Unit #7 –Posting to the Ledger Where we are: • Journalize (Using the General Journal) –Done • Post (To Ledger Accounts – which are also known as T- Accounts) – Now • Trial Balance (Can enter on the Worksheet) - Done • Adjustments (On the worksheet) • Complete the Worksheet • Financial Statements (Income Statement - then the Balance Sheet - Done) • Closing Entries (Closing the Temporary Accounts – Drawings, Revenue, Expenses)
Up until now • You have learned: A = L + OE Normal Bal. Dr Cr Cr To Increase Dr Cr Cr To Decrease CrDr Dr (You will Dr/Cr Owners Equity (OE)based its effect on Capital) Notice a Pattern? These Decrease OE Capital (+) Cr These Increase OE Drawings (-) Dr Revenue(+) Cr Expenses (-) Dr This occurs because Capital has normally a Credit Balance
We’ve Learned • How to do a trial balance • All the balances of every account are listed as either a Dr or Cr
1st = Income Statement Revenue–Expenses = Net Income (Loss) 2nd = Balance Sheet Assets, Liabilities, and Owners Equity. Report Form A = L + OE We’ve Learned Financial Statements Beginning Capital + NI – Drawings = Ending Capital Need NI to calculate Ending Capital
Posting to the General Ledger • Up until this point, we used T-Accounts. • This is where all the transactions from the General Journal get “Posted” to each individual account (Cash, Accounts Payable, Sales, Advertising Expense)….and the list goes on depending on your company!
Chart of Accounts The numbers are used for identification. • Since we are going to be “Posting”, we need to reference all of our accounts. • Assets 100-199 • Liabilities 200-299 • Capital (including Drawings) 300-399 • Revenues 400-499 • Expenses 500-599
Chart of Accounts Cont. In order of Liquidity and then Longevity (useful life) • Assets 100-199 • Liabilities 200-299 • Capital 300-399 • Revenues 400-499 • Expenses 500-599 In order of Maturity Will be only 1 account + drawings List Core revenues 1st Alphabetical order
Notice we’re on Page 1. You’ll need this info later! Recall from the General Journal! This stands for Posting Reference. It is to show you which Chart of Account # match up with 101 301
This is the Page # of the General Journal This is your running balance. You update this after every entry General Ledger Notice these! Chart of Account # Opening Entry Opening Entry Dr 500 J1 500 Mar 18 18 19 Bought Mic. J1 100 Dr 400
Forwarding is the process of continuing an account on the next page by carrying forward all relevant information General Ledger Cont. If you were “Forwarding” , you would type that here. Mar 18 Opening Bal. J1 500 Cr 500
General Ledger Cont. Mar 18 Bought a Mic. J1 100 Dr 100
How to spot Potential Errors! • Journalizing Errors • Forget to record transaction • Record entries into wrong accounts • Record entries as incorrect debits or credits • Record the wrong amount or transpose figures (eg. 97 instead of 79) • Analyze transactions incorrectly
Potential Errors Cont. • Posting Errors from Journal to Ledger • Forget to post the entire transaction • Forget to post either the debit or credit side of the transaction • Post entry to the wrong side of the account • Post entry to the wrong account, correct side • Transposition error
Potential Errors Cont. • Ledger to Trial Balance • Calculate account balances incorrectly in the Ledger • Forget to transfer account to the Trial Balance • Record wrong amount on the Trial Balance • Record account on wrong side of the Trial Balance • Transposition error
Finding Errors Does it balance? Prepare Trial Balance No Did you find the mistake? Apply Shortcut Tests No Did you find the mistake? Perform Balancing Steps
Shortcut Tests • Test # 1 • Once the difference is calculated, search the Trial Balance, Ledger and Journal for that amount. • Test # 2 • If the Trial Balance difference is an even amount, divide by 2 and search Ledger & Journal.
Shortcut Tests Cont. • Test # 3 • If the difference is a multiple of 10, there may be an addition or subtraction error. Calculate Trial Balance & Ledger Accounts again. • Test # 4 • If the difference is divisible by 9, the error may be due to a transposition of numbers. Examine Trial Balance, Ledger and Journal.
Balancing Steps • # 1: Re-add the Trial Balance • # 2: Check transfer of account balances from the Ledger to the Trial Balance. • # 3: Re-add account balances in the Ledger – double check Dr/Cr (indicators)
Balancing Steps Cont. • # 4: Check Posting from Journal to Ledger • Incorrect Amounts • Amounts not posted • Amounts posted twice • Amounts posted in wrong column • # 5: Check to see each entry in the Journal balances correctly and is analyzed correctly (Dr/Cr)