1. BAF3M1 POSTING Chapter 7, Section 7.1

2. Recall:  We used T-accounts to emphasize accounting theory  Accountants use the General Journal to record transactions (the process known as journalizing).  As you will realize, in using the General Journal, it is difficult for us to derive the final dollar balances in each account (i.e. Cash, Accounts receivable...Accounts payable, Bank Loan...Capital, Drawings, Revenue, Expenses...)

3. The Ledger  Therefore, to easily calculate the dollar balances of each account, accountants use a ledger with three columns: 1) ________________ amounts 2) ________________ amounts 3) _______________________  Example: ACCOUNT A/R – K. Bennett No. 112 Date 2009 ParticularsPRDRCRDr/CrBAL Feb10J5 5000 DR 5000 18J9 1000 DR 4000 21J10 500 DR 3500

4. Six Steps in Posting For each individual amount in the journal, you must perform these steps: 5 steps in the ledger— 1) Turn to proper account in the ledger 2) Record the date. 3) Record the page number of the journal (where the transaction is journalized) in the posting reference (PR) column of the account. Ex. J1, J10, J25 4) Record the amount. Debit amounts entered in Debit columns; Credit amounted in Credit columns. 5) Calculate and enter the new account balance in the Balance column. Indicate whether it’s a debit or credit balance in the DR/CR column. + 1 step in the journal— 6) Record the account number to which the posting was made. Enter this in the P.R. column of the journal, on the same line as the amount posted.

5. Cross Referencing  Cross-referencing is the ________________ of the _______________ __________ _____________in the ______________ ____________and the recording of the ledger account number in the journal (Steps 3 and 6)  Reasons for cross-referencing:  Entries in ledger can be ______________ __________ to the journal, vice-versa. If posting process is interrupted, you can easily begin again because you know what journal amounts have been posted.

6. Forwarding  When an account page is full, the account must be continued on a new page. Forwarding is the process of ______________ ____ _____________, or a journal, on a new page by carrying forward the __________and the ________________ from the completed page. ACCOUNT A/R – K. Bennett No. 112 Date 2009 ParticularsPRDRCRDr/CrBAL Feb10J5 5000 DR 5000 18J9 1000 DR 4000 21ForwardedJ10 500 DR 3500 ACCOUNT A/R – K. Bennett No. 112 Date 2009 ParticularsPRDRCRDr/CrBAL Feb21Forwarded DR 3500 This account page is full New account page

7. BAF3M1 POSTING Chapter 7, Section 7.2

8. Errors found immediately  _________________ _____________ through the error (figures, letters) with a ______________ __________ and write in the correct ones immediately _____________.  _______________ beside the error. DateParticularsPRDRCR 2009 April 1Bank$500 D. Howard A/R – L. James CK $500 Payment from D. Howard

9. Errors found later  Most types of errors are corrected by means of an accounting entry (_________________ __________). Example: On April 18, the accounting clerk noticed that an invoice for $800 was debited to the wrong account. DateParticularsPRDRCR 2009 April 9 Supplies$800 Bank$800 Purchased equipment with cash Initial entry

10. Correcting a journal entry Note: Corrections made to journal entries must be corrected in the ledger as well DateParticularsPRDRCR 2009 April 9 Supplies$800 Bank$800 Purchased equipment with cash DateParticularsPRDRCR 2009 April 24 Equipment$800 Supplies$800 To correct the entry on April 9 Correcting entry Initial entry

11. Trial balance out of balance  4 tests for detecting a single error First calculate the trial balance difference (Debits and Credits) 1) If the difference is a multiple of 10 (100, 0.10, 1.00,...), an error in addition has likely been made. 2) Check both the ledger and the journal to see if the trial balance difference is equal to an amount entered in the ledger or the journal. 3) Divide the difference by two. Search for a) the trial balance, and b) the ledger for this divided amount. Look to see if a D/R amount was credited, vice-versa.

12. 4) If the difference is a multiple of 9 (9, 18, 27, 81,...), it is likely that a transposition error or a decimal point error has occurred. ______________________ ____________– a mistake caused by changing the order of digits. Example: $28.50 is posted as $25.80. __________________ ____________ ___________- $2.99 is recorded as $299.00. Note: These types of errors always produce a difference that is exactly divisible by 9.