1. Accounting Practices 501 Chapter 3
Introduction to the General Ledger
Cathy Saenger, Senior Lecturer,
Eastern Institute of Technology © Pearson 2011

2. General Ledger
What we have done so far can be compared to “sorting the laundry”
We start with a laundry basket full of transactions
Ch3A - Intro to Gen Ledger

3. General Ledger
What we have done so far can be compared to “sorting the laundry”
One heap of cash receipts (Cash Receipts Journal)
One heap of other stuff (General Journal)
One heap of credit sales (Sales Journal)
One heap of cash payments (Cash Payments Journal)
One heap of credit purchases (Purchases Journal)
Through the source documents we sort the transactions into their different journals
Ch3A - Intro to Gen Ledger

4. General Ledger
What we have done so far can be compared to “sorting the laundry”
off you go to BANK!
off you go to RENT!
off you go to SALES!
off you go to CAPITAL!
off you go to POWER!
off you go to ACCOUNTS RECEIVABLE!
Through the journals we sort the transactions into their different accounts
Ch3A - Intro to Gen Ledger

5. General Ledger
What we have done so far can be compared to “sorting the laundry”
off you go to BANK!
off you go to RENT!
off you go to SALES!
off you go to CAPITAL!
off you go to POWER!
off you go to ACCOUNTS RECEIVABLE!
We now put it all neatly away in the General Ledger (storing the information)
Ch3A - Intro to Gen Ledger

6. General Ledger
What we have done so far can be compared to “sorting the laundry”
off you go to BANK!
off you go to RENT!
off you go to SALES!
off you go to CAPITAL!
off you go to POWER!
off you go to ACCOUNTS RECEIVABLE!
Let’s look at some examples of posting from the General Journal to the General Ledger
Ch3A - Intro to Gen Ledger

7. Ch3A - Intro to Gen Ledger
General Journal (page 1)
Date
Account Titles
Ref no
Debit
Credit 1
Bank
200,000
Funds Introduced
200,000
Being entry required to record capital contribution
Jun 1 : Owner starts business with $200,000 from his personal account
Each item from the General Journal is posted to the General Ledger where the information of each individual account is stored
Ch3A - Intro to Gen Ledger

8. Chart of Accounts
An index of all accounts, using the same headings as in the accounting equations.
Example:
Account no
Account name
1000
Assets
Current assets
1100
ASB cheque account
1120
Accounts receivable control
2000
Liabilities
Current liabilities
2200
Accounts payable control
2400
Accrued expenses

9. Ch3A - Intro to Gen Ledger
General Journal (page 1)
Date
Account Titles
Ref no
Debit
Credit 1
Bank
200,000
Funds Introduced
200,000
Being entry required to record capital contribution
Jun 1 : Owner starts business with $200,000 from his personal account
A E D = L + C + I Dr Dr Dr Cr Cr Cr + Cr + Dr - Dr - Cr
Remember this?
Ch3A - Intro to Gen Ledger

10. Ledger account format T form Debit side Credit side Three-column Date
Particulars
Ref
Amount
Date
Particulars
Ref
Debit
Credit
Balance

11. Ch3A - Intro to Gen Ledger
General Journal (page 1)
Date
Account Titles
Ref no
Debit
Credit 1
Bank
200,000
Funds Introduced
200,000
Being entry required to record capital contribution
General Ledger
Date
Details
Ref no Dr Cr
Balance
BANK (acct no 1100) 1
Funds Introduced
GJ1
200,000
200,000 Dr
Funds Introduced (acct no 3150) 1
Bank
GJ1
200,000
200,000 Cr
Ch3A - Intro to Gen Ledger

12. Ch3A - Intro to Gen Ledger
General Journal (page 1)
Date
Account Titles
Ref no
Debit
Credit 1
Bank
1100
200,000
Funds Introduced
3150
200,000
Being entry required to record capital contribution
General Ledger
Date
Details
Ref no Dr Cr
Balance
BANK (acct no 1100) 1
Funds Introduced
GJ1
200,000
200,000 Dr
Funds Introduced (acct no 3150) 1
Bank
GJ1
200,000
200,000 Cr
Ch3A - Intro to Gen Ledger

13. Ch3A - Intro to Gen Ledger
Trial Balance
The Trial Balance is now demonstrated, but it should be prepared after all postings have been done
The Trial Balance gives a summary of the balances and would indicate whether Debits = Credits
Ch3A - Intro to Gen Ledger

14. Ch3A - Intro to Gen Ledger
General Ledger
Date
Details
Ref no Dr Cr
Balance
BANK (acct no 1100) 1
Funds Introduced
GJ1
200,000
200,000 Dr
Funds Introduced (acct no 3150) 1
Bank
GJ1
200,000
200,000 Cr
Trial Balance as at … Dr Cr
Bank
200,000
Funds Introduced
200,000
Ch3A - Intro to Gen Ledger

15. Ch3A - Intro to Gen Ledger
General Ledger
Date
Details
Ref no Dr Cr
Balance
BANK (acct no 1100) 1
Funds Introduced
GJ1
200,000
200,000 Dr
Funds Introduced (acct no 3150) 1
Bank
GJ1
200,000
200,000 Cr
Trial Balance as at … Dr Cr
Bank
200,000
Funds Introduced
200,000
Ch3A - Intro to Gen Ledger

16. Ch3A - Intro to Gen Ledger
Let’s try another transaction, where GST is accounted for
Ch3A - Intro to Gen Ledger

17. Ch3A - Intro to Gen Ledger
General Journal (page 1)
Date
Account Titles
Ref no
Debit
Credit 2
Vehicles
18,000
GST Paid
2,700
Bank
20,700
Being entry required to record truck purchased
Jun 2 : Purchase a truck for $20,700 cash
We have already done a transaction where the Bank account was involved. An amount ($200,000) has therefore already been posted to the Bank account
Ch3A - Intro to Gen Ledger

18. Ch3A - Intro to Gen Ledger
General Journal (page 1)
Date
Account Titles
Ref no
Debit
Credit 2
Vehicles
1710
18,000
GST Paid
2330
2,700
Bank
1100
20,700
Being entry required to record truck purchased
General Ledger
Date
Details
Ref no Dr Cr
Balance
BANK (acct no 1100) 1
Funds Introduced
GJ1
200,000
200,000 Dr 2
Vehicles
20,700
179,300 Dr
GJ1
VEHICLES (acct no 1710) 2
Bank
GJ1
18,000
18,000 Dr
GST PAID (acct no 2330) 2
Bank
GJ1
2, 700
2, 700 Dr
Ch3A - Intro to Gen Ledger

19. Ch3A - Intro to Gen Ledger
Trial Balance as at … Dr Cr
Bank
179,300
Funds Introduced
200,000
Vehicles
18,000
GST Paid
2,700
$200,000
$200,000
Our Trial Balance would now be as follows:
Ch3A - Intro to Gen Ledger

20. Ch3A - Intro to Gen Ledger
Trial Balance as at … Dr Cr
Bank
179,300
Funds Introduced
200,000
Vehicles
18,000
GST Paid
2,700
$200,000
$200,000 Dr Cr
Yay, we balance!
Ch3A - Intro to Gen Ledger