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

Post amounts from a general journal to a general ledger 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 Chapter Now, we’re going to create a LEDGER 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 Chart Source Document (transaction) Journal 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 Formats Basic account form- does not contain balances Balance-Ruled - Contains balance columns

Ledger 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 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: 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 ACCOUNTS We will be preparing these soon!

Preparing a Chart of Accounts: Accounts are arranged in same order as they appear on financial statements 5 divisions: Assets - 100 Liabilities - 200 Owner’s Equity - 300 Revenue - 400 Expenses – 500 Assign 3-digit account number to each account

CHART OF ACCOUNTS Lesson 5-1, page 97

File 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???? 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 Account 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: Writing the account title Cash Writing the account number 110

OPENING AN ACCOUNT IN A GENERAL LEDGER 1 2 1. Write the account title. 2. Write the account number. Lesson 5-1, page 99

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

Posting an Amount from the Debit Column of a General Journal CHAPTER 5-2 Posting an Amount from the Debit Column of a General Journal

A COMPLETED JOURNAL PAGE Lesson 5-1 (GJ) 4/22/2017 A 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 82

Posting 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 To trace the entry from the ledger to the journal page To trace the entry from the journal to the ledger account 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 Posting Date in date column Page number from journal in the post reference column of ledger letter G is abbreviation for General Journal Amount Calculate new balance Ledger account number in post reference column of journal (ALWAYS LAST!!!!!)

Posting 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.

POSTING AN AMOUNT FROM THE DEBIT COLUMN OF A GENERAL JOURNAL Lesson 5-1 (GJ) 4/22/2017 POSTING AN AMOUNT FROM THE DEBIT COLUMN OF A GENERAL JOURNAL 2 1 3 5 4 1. Write the date. 4. Write new account balance. 2. Write journal page number. 5. Write the account number in the Post. Ref. column of the journal. 3. Write the debit amount. Lesson 5-2, page 101

POSTING AN AMOUNT FROM A CREDIT COLUMN OF A GENERAL JOURNAL 2 1 5 3 4 1. Write the date. 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 102

POSTING A DEBIT AMOUNT TO AN ACCOUNT WITH A BALANCE 1. Write the date. 2 2. Write the journal page number. 1 3. Write the debit amount. 3 5 4. Write the new account balance. 5. Write the account number in the Post. Ref. column of the journal. 4 Lesson 5-2, page 103

Posting a DEBIT amount to an account with a CREDIT balance Previous CREDIT Balance $2720.00 CR – Debit column amount - 1360.00 DR = NEW CREDIT balance 1360.00 CR

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: Work, pg 105 On your own, pg 105 App 5-1, 5-2 pg 113

Completed General Ledger Proving Cash, and Making Correct Entries 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, and 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 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

Cash balance in check book=Cash balance in cash account CASH IS PROVED Lesson 5-1 (GJ) 4/22/2017 PROVING CASH Cash balance in check book=Cash balance in cash account CASH IS PROVED ***What might have to be done if 2 amounts did not agree???? Lesson 5-3, page 109

Memorandum 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 ENTRY Lesson 5-3, page 109

JOURNAL ENTRY TO RECORD A CORRECTING ENTRY 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. Miscellaneous Expense Advertising Expense 1. Which accounts are affected? Advertising Expense Miscellaneous Expense 120.00 2. How is each account classified? Advertising Expense is an expense account. Miscellaneous Expense is an expense account. 3. How is each classification changed? 120.00 Lesson 5-3, page 110

JOURNAL ENTRY TO RECORD A CORRECTING ENTRY 2 1 3 4 1. Write the date. 2. Debit Advertising Expense. 3. Credit Miscellaneous Expense. 4. Write the source document number. Lesson 5-3, page 110

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

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