CH 7 POSTING

1
CH 7 POSTING

• We now have the ledger and the journal.
• We are now ready to use these two books formally.

2
The Balance Column Account

• So far we have used the simple two sided ledger
  account (T-account) to show debits and credits.
• However, the most common and more useful ledger
  account is the balance column account.
• It has three columns
• One for debits
• One for credits
• One for the balance

3
Opening an account

• Occurs when no existing account exists
• 1. Obtain an unused account page
• 2. Write the name of the new account at the top
  of the page. This is known as the account title
  (it will be written on the back of the page as
  well).
• 3. Write the account number
• 4. Insert the new account in its proper place in
  the ledger.
• Insert fig 7.1

4
Formal Posting

• Posting is the process of transferring
  information form the journal to the ledger.
• Every individual amount recorded in the journal
  must be posted separately
• There are 6 steps (first five ledger, last step
  journal)
• 1. Turn to the proper account ledger
• 2. Record the date. Use the next unused line in
  the account

5
Formal Posting (cont)

• 3. Record the page number of the journal in the
  Posting Reference (PR) column of the account.
  Write the letter J (for Journal) in front of this
  number.
• 4. Record the amount. Debits in debit columns and
  credits in credit columns.
• 5. Calculate and enter the new account balance in
  the balance column.
• 6. Record the account number to which the posting
  was made. Enter this in the posting reference
  column on the same line as the amount being
  posted.
• Insert fig 7.2 and 7.3

6
Cross Referencing

• The recording of the journal page number in the
  account and the recording of the account number
  in the journal.
• Reasons for this
• 1. Entries in accounts can easily be traced back
  to their source in the general journal
• 2. Entries in the journal can be followed through
  to the accounts where they have been posted
• 3. If the posting process is interrupted, it is
  easy to tell where to begin again. Journal
  amounts that have been posted will have the
  account number entered.
• See page 214 215 for a graphic representation.

7
Correcting Errors in the Books

• Real accountants use pen.
• They write neatly.
• They write small.
• They do not erase.
• Why not erase?
• It arouses suspicion of auditors, official
  examiners,

8
So how do they make corrections?

• Errors found write away are easily fixed with a
  pen stroke
• Insert fig 7.7 and 7.8

9
Errors found later

• Some errors are not found until much later and
  thus fixing them would cause a great deal of
  stroked corrections.
• So instead we create a correcting journal entry.
• A correcting journal entry cancels the effect of
  an error.
• Ex) 752.00 is debited to equipment instead of
  supplies.
• To correct
• Debit supplies 752.00
• Credit Equipment 752
• AND
• Write a brief explanation of the transaction in
  the particulars column
• To correct posting error made on January 17th.

10
The two accounts will appear like this

• Insert fig 7.10

11
Forwarding Procedure

• Forwarding is the process of continuing an
  account, or a journal, on a new page by carrying
  forward the date and the balance from the
  completed page.
• Insert fig 7.11

12
The Accounting Cycle

• We have now completed the first four steps of the
  accounting cycle
• Insert fig 7.12

13
7.2 Trial Balance out of Balance

• Sometimes the trial balance will not balance.
• It is your job to find the errors so that it
  will.
• Skill at this is important to an accountant.

14
Steps to finding errors

• First you figure out the difference between the
  debit and credit side of the trial balance.
• Then
• 1. Look to see if the trial balance difference is
  a multiple of 10. 10 cents, 1 dollar,
• If this is the case an error in addition is
  probably the issue
• 2. Check both the ledger and the journal to see
  if the trial balance difference is equal to an
  amount entered in either. If the amount is found
  make sure you have handled it correctly.
• 3. Divide the trial balance difference by 2.
  Check the trial balance and ledger accounts for
  this divided amount. If an equivalent amount is
  found check it carefully. Especially check to
  make sure that a credited amount has not been
  recorded as a debit and vice versa.
• 4. If the trial balance is a multiple of 9, it is
  likely a transposition error (35.60 is written
  instead of 36.50) or a decimal point error
  (1.19 is written instead of 119.00).