Accounting: The Language of Business - Vol. 2 (Intermediate: Part 27)

There's just no accounting for happiness, or the way it turns up like a prodigal who comes back to the dust at your feet having squandered a fortune far away.

Jane Kenyon

Review of the Accounting Cycle (Part D)

by

Charles Lamson

Step 3: Post to the General Ledger

The next step in the accounting cycle (after Step 2 from part 26) is to post the journal entries to the general ledger. The general ledger contains all accounts maintained by the company with each account reflecting its increases, decreases, and balance. Each account is maintained in a single location for management analysis. An account has a debit balance if debits exceed credits, and a credit balance when credits are greater than debits. The account has a zero balance if debits equal credits.

Posting is the process of transferring information contained in journal entries to the individual ledger accounts. Each general ledger account has a column for the date, explanation, reference, debit, credit, and balance. The reference is the general journal page number.

The typical general ledger account has three money columns with the account balance determined after each journal entry is posted. The reference column, which contains the general journal page number, is completed when the event is posted from the journal to the ledger. For example, Exhibit 4.8 illustrates Plush Service Corporation's posting of the journal entry to the general ledger for the common stock issued on January 2, 2018. The balance in the cash account, No. 100, increases by $80,000 to $118,000. The balance in the common stock account, number 300, also increases by $80,000 to $140,000. The reference column in the general ledger indicates the entry is from page J1 of the general journal, from part 26. 

EXHIBIT 4.8 Posting a Transaction from the General Journal to the General Ledger

In Example 4.3, we post the journal entries made in Example 4.2 from part 26.

EXAMPLE 4.3 Posting Journal Entries to the General Ledger

PROBLEM: consider the transactions and beginning balances for Plush Service Corporation from Example 4.1 from part 25. Post the journal entries from Example 4.2 from part 26 to the general ledger.

Solution: 

                              

The T-Account

Typically, the formal general ledger accounts are not used when presenting illustrations in this volume. Rather, a simplified version of the ledger accounts is used, known as T-accounts with three major parts:

1. The account title,

2. A left (debit) side, and

3. A right (credit) side.

Exhibit 4.9 presents a sample t-account.

We will use the t-account rather than formal general ledger accounts for the next several posts.

EXHIBIT 4.9 T-Account 

*GORDON, RAEDY, SANNELLA, 2019, INTERMEDIATE ACCOUNTING, 2ND ED., PP. 101-104*

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