Accounting101

BAF3M-U3-L03 · BAF3M

Posting to the general ledger

70 minutesUnit 3: Journals, ledgers, and the trial balancePrerequisite: From source document to general journalCurriculum: Fundamental Accounting Practices — The Accounting Cycle for a Service Business

Learning goals

  • Post journal debits and credits to the correct ledger side.
  • Maintain a running balance or balance a T-account.
  • Create reciprocal journal-ledger references.
  • Trace a reported balance back to its entries.

Prerequisite check

Journalize: owner invests $12,000; business buys $3,000 equipment cash; business earns $2,400 on account; business collects $1,500. Keep the entries for the worked example.

Vocabulary

  • General ledger: the complete set of general accounts used by the business.
  • Posting: transferring each journal amount and reference to its ledger account.
  • Running balance: account balance recalculated after each posting.
  • Ledger account: a record of one account's debits, credits, and balance.
  • Cross-reference: journal-to-ledger and ledger-to-journal links that support tracing.
  • Balance: difference between the two sides of an account, shown on its normal side unless exceptional facts create an opposite balance.

Core idea

The journal answers “What happened in order?” The ledger answers “What is the history and balance of this account?” Posting changes organization, not the accounting decision or amount.

Why this treatment makes sense

Managers need the balance of Cash or Accounts Receivable without rereading every transaction. Sorting by account produces that information. References make the sorting reversible so a reviewer can return to the source trail.

A repeatable method

For every journal line:

  1. Locate the exact ledger account.
  2. Copy the date and amount to the same side—debit to debit, credit to credit.
  3. Add the journal page/reference in the ledger.
  4. Recalculate the running balance.
  5. Put the ledger account number into the journal PR.
  6. Tick or review every journal line once—never skip or post twice.

Worked example

The four prerequisite entries are:

  1. Dr Cash $12,000; Cr Owner, Capital $12,000.
  2. Dr Equipment $3,000; Cr Cash $3,000.
  3. Dr Accounts Receivable $2,400; Cr Service Revenue $2,400.
  4. Dr Cash $1,500; Cr Accounts Receivable $1,500.

Running-balance ledger extract:

Account, Date, Debit, Credit, Balance working table
AccountDateDebitCreditBalance
CashMay 1$12,000—$12,000 Dr
CashMay 2—$3,0009,000 Dr
CashMay 121,500—10,500 Dr
Accounts ReceivableMay 52,400—2,400 Dr
Accounts ReceivableMay 12—1,500900 Dr
EquipmentMay 23,000—3,000 Dr
Owner, CapitalMay 1—12,00012,000 Cr
Service RevenueMay 5—2,4002,400 Cr

Debit balances = $10,500 + $900 + $3,000 = $14,400. Credit balances = $12,000 + $2,400 = $14,400.

Trace check: the May 12 $1,500 debit to Cash and credit to Accounts Receivable must point back to the same journal entry. Collection changed the asset mix but not revenue.

Journal, ledger, and statement connection

The journal provides the posting instructions. The ledger's ending balances feed the trial balance. Those balances later move through adjustments to the statements. A missing posting can make the trial balance unequal; posting both sides to wrong accounts can leave it equal but make statements wrong.

Common mistakes

  • Posting a journal debit to the credit side.
  • Posting one line twice or skipping the other line.
  • Writing the account name in the journal PR instead of the account number required by the form.
  • Changing the amount while posting to “make the account look right.”
  • Treating the running balance as another transaction.
  • Failing to trace an unusual balance back to evidence.

Guided practice

Post these entries and find balances:

  • Dr Cash $8,000 / Cr Capital $8,000
  • Dr Supplies $750 / Cr Accounts Payable $750
  • Dr Rent Expense $900 / Cr Cash $900
  • Dr Accounts Payable $300 / Cr Cash $300
  • Dr Cash $2,100 / Cr Service Revenue $2,100

Independent practice

Journalize and post:

  1. Start with $15,000 owner cash.
  2. Buy equipment for $4,500 cash.
  3. Earn $3,200 on account.
  4. Pay $650 utilities.
  5. Collect $2,000 from customers.
  6. Owner withdraws $500.

Prepare a list of ending ledger balances and prove debit-credit equality.

Self-check and solutions

Guided practice: Cash = $8,000 − $900 − $300 + $2,100 = $8,900 Dr; Supplies $750 Dr; Accounts Payable $450 Cr; Capital $8,000 Cr; Rent Expense $900 Dr; Service Revenue $2,100 Cr. Debits $10,550 = credits $10,550.

Independent practice: Cash = $15,000 − $4,500 − $650 + $2,000 − $500 = $11,350 Dr; Equipment $4,500 Dr; Accounts Receivable = $3,200 − $2,000 = $1,200 Dr; Utilities Expense $650 Dr; Drawings $500 Dr; Capital $15,000 Cr; Service Revenue $3,200 Cr. Debits $18,200 = credits $18,200.

Retrieval practice

Explain the different jobs of journal, ledger, and source document. List the six posting actions without notes.

Exam-style application

The journal is correct and Cash agrees with its supporting evidence, but Accounts Receivable is $700 too high and trial-balance debits exceed credits by $700. A $700 customer collection appears in the journal. Diagnose one likely posting error and state how to verify it.

Answer outline: The Cash debit may have posted, while the Accounts Receivable credit was omitted. That would leave A/R $700 too high but would also make trial-balance debits $700 too high. Trace both journal lines through PRs, inspect the A/R ledger, and post the missing credit through the authorized correction method. If the trial balance is equal, investigate other possibilities such as posting the credit to another debit-balance account.

Lesson summary

Posting sorts journal lines into accounts without changing sides or amounts. Accurate one-time posting and reciprocal references create the ledger balances and the traceable bridge to reports.