How a General Ledger Works With Double-Entry Accounting Along With Examples

Ledger accounts are a way of presenting and grouping transactions relating to a particular account at one place. The book in which ledger accounts are maintained is known by various names such as ledger, ledger book or general ledger. This is posted to the Cash T-account on the credit side beneath the January 14 transaction. Accounts Payable has a debit of $3,500 (payment in full for the Jan. 5 purchase). You notice there is already a credit in Accounts Payable, and the new record is placed directly across from the January 5 record.

• If at any point the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts, an error has occurred.
• While posting, companies must also ensure some criteria, some of which include the ones given above.
• An accounting manager may elect to engage in posting relatively infrequently, such as once a month, or perhaps as frequently as once a day.
• In the case of certain types of accounting errors, it becomes necessary to go back to the general ledger and dig into the detail of each recorded transaction to locate the issue.
• The Subtotal row gives you details about the subtotals for your debits and credits.
• The accounting cycle involves updating, changing and verifying financial transactions during the course of business operations.

However, these transactions only constitute a single part of the accounting cycle. The process of entering all transactions from the journal to the ledger is called ledger posting. Ledger posting examples are transactions related to banks, cash, buildings, land, salaries, inventories, debts, capital, etc. Ledger posting consists of various features, for instance, sales accounts, purchase accounts, and so on.

With Journal Entries

On the general ledger, the financial transaction data is segregated, by type, into accounts for assets, liabilities, equity, expenses, and revenues. Hence, the company’s transactions are posted to individual sub-ledger accounts, as defined by the company’s chart of accounts. The transactions are then closed out or summarized in the general ledger, and a trial balance is generated, which serves as a report of each ledger account’s balance. The general ledger account is therefore used to sort, store and summarize a company’s transactions. These general ledger accounts are arranged in the general ledger with the balance sheet accounts appearing first followed by the income statement accounts. The accounts of the general ledger may be further subdivided into sub-ledgers such as cash, accounts receivable, accounts payable, etc.

Since this figure is on the credit side, this $300 is subtracted from the previous balance of $24,000 to get a new balance of $23,700. The same process occurs for the rest of the entries in the ledger and their balances. Accountants use special forms called journals to keep track of their business transactions. A journal is the first place information is entered into the accounting system. A journal is often referred to as the book of original entry because it is the place the information originally enters into the system.

What is the step-by-step Posting process in Accounting?

Once the journal entries have been made in the general journal, the next step is to post them to their individual t-accounts in the general ledger. As discussed in the previous step, journal entries are used to record a business transaction and subsequently a change in the accounting equation. Once business transactions are entered into your accounting journals, they’re posted to your general ledger. Think of “posting” as “summarizing”—the general ledger is simply a summary of all your journal entries. This part of the study will basically look at an in depth issues of the ledger account.

When you make a payment on a loan, a portion goes towards the balance of the loan while the rest pays the interest expense. Debit notes that $600 is being added to your cash account. Here is an example of some common transactions postings. If you would like to see what it looks like to move journal postings into a general ledger in Excel, watch this additional video.

Can I correct an entry myself if I have posted it on the wrong side of the ledger?

However, the company only recorded transactions that resulted in a debit balance of $9,000 to the cash account. The difference of $1,000 is what would be journalized as an adjusting entry and posted to the cash account T-account. This cycle begins with a financial transaction and ends with financial statements. When a financial transaction occurs, companies record it in an initial record. Usually, it includes journal entries or the books of prime entry. After some time, transactions accumulate in these records.

• It consists of accounts within accounts (i.e., specific accounts that make up a broad account).
• For example, the exchange with client P can be found in a general ledger containing names like Mr P. This Mr P account will show all the exchanges of Mr P.
• Recording and posting in accounting are part of this cycle, and though they sound similar, their functions are completely different.
• At the end of each period (e.g., month), transfer journal entries into your ledger.
• If you fall into the second category, let Bench take bookkeeping off your hands for good.

When you
finalize the activity for an accounting period, close the period to
prevent the entry or posting of additional journal entries. Posting transactions in the general ledger is part of the accounting process. Journal entries are created first and then they have to post to the general ledger to affect reports.

Ledger Posting Examples

Transaction data is segregated, by type, into accounts for assets, liabilities, owners’ equity, revenues, and expenses. Posting from general journal to general ledger (or simply posting) is a process in which entries from general journal are periodically transferred to ledger accounts (also known as T-accounts). It is the third step of accounting cycle because business transactions are first analyzed, recorded in the journal and then they are posted to respective ledger accounts in the general ledger. The nominal ledger is a type of general journal or an electronic file that contains all the transactions that are related to a company’s accounts.

To keep your books accurate, post every transaction from your journal to your general ledger. As a business owner, you juggle posting in accounting a number of tasks, including accounting. You’re responsible for creating journal entries after every transaction.