Ledger Posting and Trial Balance Ledger Posting and Trial Balance
Accounting Cycle to Trial Balance
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Transcript of Accounting Cycle to Trial Balance
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Beginning the Accounting Cycle –
Journalizing, Posting,and the Trial Balance
Chapter 3
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Journalizing: analyzing andrecording business
transactions into a journal.
Learning Objective 1
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The Accounting Cycle
Accounting procedures are performed over a period of time.
Procedures are performed in a definite order in the accounting cycle.
The accounting period is a period of time covered by the income statement.
Usually this is a twelve month period. The accounting cycle has sequential steps to be
performed again each year.
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The Accounting Cycle
Accounting is the process that...– analyzes, – records,– classifies,– summarizes,– reports, and...– interprets.
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The Accounting Cycle
A sole proprietorship:– has one owner– begins with a monthly accounting cycle– owner has a capital and withdrawals
account
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Business Organizations
All three types of business entities use the same basic accounting system.
Sole proprietorship
Partnerships
Corporations
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Recording Business Transactions
The Accounting Period
One YearCalendar year
Fiscal year
Less than One YearQuarterlyMonthly
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Learning Unit 3-1
The Accounting Cycle:1 Analyzing2 Recording transactions – journalizing3 Posting to the ledger accounts4 Preparing the trial balance The accounting cycle has some variations in
a computerized accounting system.
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Learning Unit 3-1
What is the general journal? It is the book of original entry. Transactions are written in a journal in
chronological order. The format of the journal is important. Journalizing is the process of entering
information as debits and credits to the correct accounts.
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Learning Unit 3-1
What is the general ledger? It is the book of final entry. The information from the journal is
transferred to the ledger in the posting process.
Debits and credits in the journal remain exactly the same when posted to the accounts in the ledger.
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Learning Unit 3-1
What is the chart of accounts? It is the list of accounts used by a business. Each business entity has its unique chart
of accounts. Every chart of accounts has the same
numbered account categories:– Assets, Liabilities, Owner’s Equity– Revenues, Expenses
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Learning Unit 3-1
Journalizing Debits are always recorded first. Indent, then record the credit below the
debit. A short explanation is included on the
second line. Leave a space between journal entries.
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Learning Unit 3-1
Debits must always equal credits. Amounts incurred for items that benefit
future accounting periods are recorded as assets.
What are some examples?– prepaid rent– prepaid insurance
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Learning Unit 3-1
Amounts for items used (expenses incurred) in the current accounting period are recorded as expenses.
What are some examples?– supplies used– rent for the month– expired insurance
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Learning Unit 3-1
Amounts are recorded as revenue on the date in which they are earned.
When are revenues earned? When services are performed, not
necessarily when cash is paid.
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Learning Objective 2
Posting: transferring informationfrom a journal to a ledger.
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Learning Unit 3-2
Posting All transactions are recorded in the journal, then
amounts are copied to the ledger accounts named on the journal line.
Once the amounts are entered into the accounts, a posting reference (PR) must be entered in the journal.
New balances are computed in the running ledger accounts.
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Learning Unit 3-2
Posting
BalanceAccount: Cash Account: 1000
Insert the number of the journal page.
Date ref. debit credit debit credit
June 1 jr1 5,000 5,000
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Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Initial investment
June 1 Cash 1000 5,000 Clara J. Capital 3010 5,000
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Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Paid phone bill
July 3 Phone Expense 5040 155 Accounts Payable 2000 155
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Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Paid insurance bill
July 6 Insurance Expense 5060 150 Cash 1000 150
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Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Paid Accounts Payable
July 8 Accounts Payable 2000 200 Cash 1000 200
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Example
Journal Page 1
Date Account and Explanation Post Ref. debit credit
Performed Services
July 8 Accounts Receivable 1020 850 Service Revenue 4000 850
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Learning Objective 3
Preparing a trial balance.
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Learning Unit 3-3
Preparing the Trial Balance The trial balance lists the accounts that have
balances in the same order as they appear in the chart of accounts.
The trial balance will show if debits/credits have been interchanged, or if amounts have been transposed, or if a debit/credit was omitted or recorded twice.
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Learning Unit 3-3
Some errors do not show, such as omissions or recording to the wrong account.
Corrections before posting are made in the journal.
An audit trail must be left. Do not erase – cross out errors and enter
corrections.
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Learning Unit 3-3
What about corrections after posting? This means that errors are also in the ledger
accounts. Cross out incorrect amounts, change to
corrected amounts, and record balance changes.
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End of Chapter 3