Module : – Posting to the Legder(6)

Lesson 1 General Ledger

Posting refers to the process of transferring entries in the journal into the
accounts in the ledger. Posting to the ledger is the classifying phase of accounting.
An accounting ledger refers to a book that consists of all accounts used by the
company, the debits and credits under each account, and the resulting balances. While
the journal is referred to as Books of Original Entry, the ledger is known as Books of
Final Entry.

The general ledger would look like this:

Account Name
Account Number

Date Date Partictulars F

Particulars F Debit Credit
yyyy yyyy
Brief Page mm Dd Brief Pag Amount
mm dd Amount
explanation ref explanation Ref

Or it may look like this:

Account Name Account Number

Date
Particulars Ref Debit Credit Balance
yyyy
mm dd Brief explanation ref. amount amount
Brief explanation ref. amount amount

Lesson 2 . Posting the transactions

Let us illustrate how accounting ledgers and the posting process work using the
transactions we had in the previous module.
 Let us start from the first transaction of Electronic Repair Services owned by Mr.
Kobi and we will use the chart of accounts presented in Module 3.

J1

Date PR
Particulars Debit Credit
2020
Dec 1 Cash 1000 100,000.00
Kobi, Capital 3000 100,000.00

Now, go to the ledger and find the accounts. Post the amounts debited and credited to
the appropriate side. Debits go to the left and credits to the right. After posting the
amounts, the cash and capital account would look like:

Cash 1000

Date
Particulars Ref Debit Credit Balance
2020
12 01 Investment J1 100,000 100,000

Kobi, Capital 3000

Date
Particulars Ref Debit Credit Balance
2020
12 01 Investment J1 100,000 100,000

First, we posted the entry to Cash. Cash in the journal entry was debited so we
placed the amount on the debit column of the account in the ledger, the reference J1
means from Journal page 1. After posting, the PR column in the journal will be filled up
by the corresponding account number of the account posted. In this example its account
number 1000 for cash. For Mr. Kobi, Capital, it was credited so the amount is placed on
the credit column copied from page 1 of the journal with an account number 3000. And
that's it. Posting is simply transferring the amounts from the journal to the respective
accounts in the ledger.

Let’s try to post the second transaction on the same month of 2020.

5 Taxes and Licenses 5050 3,750.00

Cash 1000 3,750.00

After posting the ledger account of cash and taxes licenses would look like these:

Cash 1000
Date
Particulars Ref Debit Credit Balance
2020
12 01 Investment J1 100,000 100,000
05 Permit J1 3,750 96,250

Taxes and Licenses 5050

Date
Particulars Ref Debit Credit Balance
2020
12 05 Permits J1 3,750 3,750

What have you noticed after posting the second transaction? If i asked you the
balance of cash, can you easily identify it? Which book will you can you easily find it?
Post all the other entries and we will be able to get the balances of all the accounts.

Now try to post the rest of the transactions in module 5.

Lesson 3. The Subsidiary ledger.

We now learned that ledgers are used to classify the transactions in the journal.
The above ledger is what we call the General Ledger, it contains accounts that are broad
in nature found in the chart of accounts such as Cash, Capital, Accounts Receivable etc.
There is another type of ledger which we call the subsidiary ledger. It is consist of
accounts within the broad accounts.
 For example, Accounts Receivable is a broad account also known as controlling
account, which is made up of subsidiary accounts of Customer A, Customer B and so
forth.

The purpose of subsidiary ledger is the same with the general

ledger, to classify. But this time with a specific detail such as the subsidiary
ledger of customer A. Because it is necessary to track down the amount due of each
customer. The general ledger and subsidiary ledger look exactly the same, the difference
would be instead of account name, we use the customer’s name, instead of account
number, we use customer code.

Example, the general ledger of Accounts Receivable has a balance of P15,000.

Which includes the subsidiary ledger account of customer A P3,000, customer B P10,000
and customer C P2,000. If customer A, wants to pay his amount owed to the company
but forget to bring his billing statement? By how much you will ask customer A to pay?
Which ledger will you look into?

Do you think using subsidiary ledger is worthwhile?

Lesson 4. The Trial Balance

After posting into the ledger, we enter now to the fourth step in the accounting
process – preparing a trial balance.
A trial balance simply shows a list of the general ledger accounts and their
balances. Its purpose is to test the equality between total debits and total credits.
It shows a summary of how much Cash, Accounts Receivable, Supplies, etc. the
company has after the posting process. The account names are listed as arranged in the
chart of accounts and the balances are placed either on the debit or credit column. If an
account has no balance, we skip such name in the trial balance.

To illustrate, using the 15 transactions in module 4. The trial balance would look
like this:
 Again, the purpose of the trial balance is to test the equality between total
debits and total credits after the posting process. This trial balance is called
an unadjusted trial balance (since adjustments are not yet included which will be
discussed in the next module).

There are two other types of trial balance: the adjusted trial balance which is
prepared after adjusting entries are prepared and posted, and the post-closing trial
balance which is prepared after closing entries. These two are prepared in later steps of
the accounting process.

Lesson 5. Locating error in Trial Balance

Equal doesn’t always mean correct. Trial balance does not guarantee that the
records are accurate even if the total of debits and total of credits are equal. There are
instances when this happens such as:
1) a transaction was not recorded or not posted (no debit and no credit)
2) a transaction was recorded but not posted.

3) when a transaction was recorded or posted twice (total debits and total credits are
both overstated by the same amount)
4) when an account was recorded instead of another account of the same
classification; for example, Supplies was debited instead of Equipment (the total
debits would still be correct since they are both asset accounts).
5) An erroneous amount is debited and credited, for example a P2,500 rental payment
was recorded as debit to rent expense and credit to cash for P5,200.

But what if the total debits and credits are not equal in the trial balance? Then
error(s) must have been committed which should be located before we can proceed to
the next step of the accounting process.

The errors may be due to the following:

1. Posting from the journal to the ledger on the wrong side (cash debit was
posted to cash credit)
2. Posting a wrong amount (cash debit P40,000 was posted to cash debit
P400,000)
3. Ledger footing (either side) is wrong.
4. Wrong balances were copied in the trial balance.

How to locate those errors?

The following will give you a clue to the kind of error committed in the
preparation of trial balance

1. A difference of 10 would indicate probably an error in addition. Add the debit

and credit column of trial balance again.
2. If the difference is divisible by two, then the error probably is in posting to
the wrong side.
3. If the difference is divisible by 9 or a multiple of 9, the error probably is in
transposition that is the order of the digits are interchanged, say an amount
of P29,650 was copied as P29,560. Or an error in transplacement, that is the
decimal point is misplaced, say the amount of P29,650 was copied as
P296,500.

Indeed, you must exercise care from the very step of the accounting process to
avoid waste of time and effort looking for errors.
 But with the use of technology, error from nonequal of debit and credit never
occurs, but again it doesn’t guarantee that it is free from error, because again
equal doesn’t mean always correct.

Summary.

Ledger is the book of the final entry. We have two types of ledger, the general
ledger and the subsidiary ledger. The general ledger is used for accounts listed in the
chart of accounts, while subsidiary ledger are used to support some accounts under
the general ledger account. If the general ledger account has a subsidiary ledger, such
account is also called as Controlling account. The accounts in the subsidiary ledgers hold
more specific information about the accounts that make up the general ledger.

Unadjusted Trial balance is prepared once posting is done, its purpose is to test
the equality of total debits and total credits of all the accounts. Error has been made
when the debit is not equal to credit, thus due care from the onset of the accounting
process is highly required.

Debit Credit

+ Asset -
- Liabilities +

_ Income/Revenues/Fees +
- Capital +

+ Expenses -

+ Withdrawals/ Drawings -