Chapter 5 Posting from a General Journal to a General Ledger.

Chapter 5Chapter 5

Posting from a General Journal to a General Ledger

OBJECTIVES: OBJECTIVES:

Define accounting terms related to posting from a general journal to a general ledger.

Identify accounting concepts and practices related to posting from a general journal to a general ledger.

Prepare a chart of accounts for a service business organized as a proprietorship

Post amounts from a general journal to a general ledger

Prove cash and journalize correcting entries

Preview of the ChapterPreview of the Chapter

Journals alone aren’t practical for businesses– They don’t provide account balances– You’d have to search through PAGES of journals to find total

accounts

Now, we’re going to create a LEDGER – Separate form for EACH account!

Preview– Arrange accounts in general ledger– Prepare chart of accounts– Posting to general ledger

Accounting Flow ChartAccounting Flow Chart

Source Document (transaction)

Journal

Ledger

Account form (ledger) Account form (ledger) Summarizes in one place all

changes to a single item or account.

Includes DR and CR sides Separate form for each account Used to trace specific entries to

where they are recorded in the journal

Two types of Account Two types of Account FormatsFormats

Basic account form- does not contain balances

Balance-Ruled - Contains balance columns

LedgerLedger A group of accounts

– There are different types of ledgers. The General Ledger contains all accounts to

prepare financial statements.

– Account title – name given to account

– Account number – number assigned to an account

• determines its classification and order within the classification.

Preparing a Chart of Accounts – pg 97Preparing a Chart of Accounts – pg 97 List all accounts by name and number

that a business has opened.

They are listed in the same order they appear on financial statements.

Assets are listed in order of liquidity.– How quickly something can be turned into

cash

Other classifications are listed alphabetically.

Chart of accounts:Chart of accounts:

ALL accounts will have an account form in the general ledger

Balance Sheet Accounts: – Assets

• listed by order of LIQUIDITY– Liabilities– Owner’s Equity– Income Summary – used to close accounts such as

expenses and revenue• Temporary account

Income Statement Accounts – Expenses and Revenues – Listed in alphabetical order

Put this in your notes – you will need this LATER

CHART OF ACCOUNTSCHART OF ACCOUNTS

We will be preparing these soon!

Preparing a Chart of Accounts: Preparing a Chart of Accounts:

Accounts are arranged in same order as they appear on financial statements

5 divisions:

1. Assets - 100

2. Liabilities - 200

3. Owner’s Equity - 300

4. Revenue - 400

5. Expenses – 500

Assign 3-digit account number to each account

CHART OF ACCOUNTSCHART OF ACCOUNTS

Lesson 5-1, page 97Lesson 5-1, page 97

File MaintenanceFile Maintenance

The procedure of arranging accounts in the general ledger, assigning numbers, and keeping accounts current.

A new account is assigned the middle, unused # between the numbers of the existing accounts– EX) may record payments for Gasoline in Misc. Expense– Spend a lot on Gasoline create new account– Gasoline Expense 515

If no longer needed accounts are removed from chart of accounts– EX) Buy the building no need for rent expense– Account number 540 is available for use

New account added at end of ledger division next number in sequence is used– Ex ) Add Water Expense account– New account # 570 is assigned

Some companies may need to use more than 3 digits with more accounts

Questions????Questions????

Look at chart of accounts on page 97 What account number would be assigned to a new

account Car Expense? – Where would it be listed???

What account numbers would be assigned to: Automobile Expense Accounts Payable – Trent Supplies Accounts Receivable – Sarasota Day Care

Opening an AccountOpening an Account in the General Ledger in the General Ledger

Definition: Writing the account title and number on the heading of an account

Open and arrange them in same order as chart of accounts

STEPS:

1. Writing the account title Cash

2. Writing the account number 110

OPENING AN ACCOUNT IN A GENERAL LEDGEROPENING AN ACCOUNT IN A GENERAL LEDGER

Lesson 5-1, page 99Lesson 5-1, page 99

1

1. Write the account title.

2. Write the account number.

2

TO DO: Work Together, pg 100On your own, pg 100

CHAPTER 5-2CHAPTER 5-2

Posting an Amount from the Debit Column of a General Journal

A COMPLETED JOURNAL PAGEA COMPLETED JOURNAL PAGE

What would you have to do to determine how much cash the business has midway through the entries?

Lesson 4-4, page 82Lesson 4-4, page 82

PostingPosting Transferring the information from

the journal to the ledger account.

Sorts journal entries so that all DEBITS and CREDITS affecting one account are brought together in ONE place

Purpose of Post Reference Number Purpose of Post Reference Number 1. To trace the entry from the ledger to the journal page2. To trace the entry from the journal to the ledger account3. Accountant can tell which entries are posted and which

still need to be posted

A blank in Post Ref. column indicates that posting still needs to be completed

Posting reference is ALWAYS recorded in the journal as the last step in the posting procedure!!!!

Steps in PostingSteps in Posting

1. Date in date column

2. Page number from journal in the post reference column of ledger

1. letter G is abbreviation for General Journal

3. Amount

4. Calculate new balance

5. Ledger account number in post reference column of journal (ALWAYS LAST!!!!!)

Posting Debits/CreditPosting Debits/Credit

Debits are posted as debits Credits are posted as credits. IF Debit amount exceeds Credit amount Debit

Balance IF Credit amount exceeds Debit amount Credit

Balance In finding a new balance like amounts are added.

– If the balance of the account is a debit and you post a debit, the amount is added.

– If the balance of the account is a credit and you post a debit, the amount is subtracted.

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4

321

POSTING AN AMOUNT FROM THE DEBIT COLUMN OF POSTING AN AMOUNT FROM THE DEBIT COLUMN OF A GENERAL JOURNALA GENERAL JOURNAL

1. Write the date.

2. Write journal page number.

3. Write the debit amount.

4. Write new account balance.

5. Write the account number in the Post. Ref. column of the journal. Lesson 5-2, page 101Lesson 5-2, page 101

1. Write the date.

5

4

3

2. Write the journal page number.3. Write the credit amount.4. Write the new account balance.5. Write the account number in the Post. Ref.

column of the journal.Lesson 5-2, page 102Lesson 5-2, page 102

21

POSTING AN AMOUNT FROM A CREDIT COLUMN OF POSTING AN AMOUNT FROM A CREDIT COLUMN OF A GENERAL JOURNALA GENERAL JOURNAL

POSTING A DEBIT AMOUNT TO AN ACCOUNT WITH A POSTING A DEBIT AMOUNT TO AN ACCOUNT WITH A BALANCEBALANCE

1. Write the date.

2. Write the journal page number.

3. Write the debit amount.

4. Write the new account balance.

5. Write the account number in the Post. Ref. column of the journal.

Lesson 5-2, page 103Lesson 5-2, page 103

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4

321

Posting a DEBIT amount to an account with a CREDIT Posting a DEBIT amount to an account with a CREDIT balancebalance

Previous CREDIT Balance $2720.00 CR

– Debit column amount - 1360.00 DR

= NEW CREDIT balance 1360.00 CR

REVIEW: REVIEW:

What is file maintenance? What is Chart of Accounts? How are accounts listed in the chart of accounts? What are the number classifications of the following

FIVE types of accounts? Why do we post journal entries? $2000 DR, $1500 DR = _______ balance $5000 CR, $2000 DR = __________ balance $900 DR, $200 CR = ____________ balance How do you open a ledger account? What is the LAST step in posting?

TO DO: TO DO:

Work, pg 105 On your own, pg 105

App 5-1, 5-2 pg 113

Chapter 5-3: Completed General Ledger

– Proving Cash, and Making Correct Entries

Page 106-107 – completed general ledger with posting completed

Chapter 5-3: Completed General Ledger, Proving Cash, Chapter 5-3: Completed General Ledger, Proving Cash, and Making Correcting Entriesand Making Correcting Entries

General Ledger with a Posting Completed – PAGE 106-108

QUESTIONS: On what journal pages would you find the supply

accounts entries? Does Accounts payable – Ling Music have a

Debit or Credit balance? How many accounts have Credit Balances? Debit

Balances? Which Transactions took place on August 31?

Proving CashProving Cash This determines that the amount of cash on

hand agrees with the accounting records. Can be proved any time – ALWAYS END OF

MONTH Three places Cash Balance Must Agree

– Checkbook– Cash Account– Ledgers and Journals

PROVING CASHPROVING CASH

Lesson 5-3, page 109Lesson 5-3, page 109

***What might have to be done if 2 amounts did not agree????

Cash balance in check book=Cash balance in cash account CASH IS PROVED

Memorandum for a Correcting EntryMemorandum for a Correcting Entry

Simple errors can be corrected by ruling through item

BUT when error in journal is posted to the ledger incorrect journal entry should be corrected with additional journal entry

Correcting Entry: journal entry made to correct an error in the ledger

If accountin error is discovered memorandum is prepared describing correction to be made

Memo becomes source document for correcting entry

MEMORANDUM FOR A CORRECTING ENTRYMEMORANDUM FOR A CORRECTING ENTRY

Lesson 5-3, page 109Lesson 5-3, page 109

JOURNAL ENTRY TO RECORD A CORRECTING ENTRYJOURNAL ENTRY TO RECORD A CORRECTING ENTRY

Lesson 5-3, page 110Lesson 5-3, page 110

November 13. Discovered that a payment of cash for advertising in October was journalized and posted in error as a debit to Miscellaneous Expense instead of Advertising Expense, $120.00. Memorandum No. 45.

1. Which accounts are affected?

Advertising Expense

Miscellaneous Expense

3. How is each classification changed?

2. How is each account classified?

Advertising Expense is an expense account.

Miscellaneous Expense is an expense account. Miscellaneous Expense

Advertising Expense

120.00

120.00

3. Credit Miscellaneous Expense.

JOURNAL ENTRY TO RECORD A CORRECTING ENTRYJOURNAL ENTRY TO RECORD A CORRECTING ENTRY

1. Write the date.

4. Write the source document number.

2. Debit Advertising Expense.

1 3

4

2

Lesson 5-3, page 110Lesson 5-3, page 110

TO DO: TO DO:

Work Together, pg 111 On your own, pg 111 App 5-3

Ch 5 Summary: Ch 5 Summary:

Ch. 5 Quiz Mastery 5-4 – pg 114 Extra Problem 5-1 Ch. 5 Study Guide