Chapter 7 posting journal entries to general ledger accounts
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Transcript of Chapter 7 posting journal entries to general ledger accounts
Posting Journal Entries to General Ledger Accounts
Chapter 7
Exploring the Real World of BusinessOne world ranch on which
you might work is the King Ranch in Texas. Accounting for an operation like King Ranch means keeping track of the number of calves born each year or the pounds of cotton produced.
What do you think?What are some general
ledger account that might be used by King Ranch?
The General Ledger
Section 1
What You’ll Learn
The purpose of the general ledger.
How to open accounts in the general ledger
Key Terms
General ledger Ledger account form
General Ledger
Up-to-date ledgers allows to accountant to provide management information such as: Sales Service income Salary or commission expense
Setting Up the General Ledger In a manual accounting system the
accounts used by a business are kept on separate pages or card
These pages or cards are kept together in a book called a ledger.
In a computerized accounting systems the electronics files containing the accounts are still referred to as the ledger.
In either system the ledger is often called the general ledger.
The Four-Column Ledger Account Form
In the manual accounting system, the accounting stationery used to record information about specific accounts is a ledger account form.
Opening Accounts in the Ledger
Opening an Account with a Zero Balance
There are two steps to open an account with a zero balance Write the account name at the top of the
ledger account form. Write the account number on the ledger
account form.
Opening an Account with a Balance To open an account with a balance, six steps are
required.1. Write the account name at the top of the ledger
account form.2. Write the account number on the ledger account
form.3. Enter the complete date in the date column.4. Write the word “balance” in the description column.5. Place a check mark in the posting reference column
to show amount entered on this line not being entered from a journal
6. Enter the balance in the appropriate balance column in the ledger account form.
The Usefulness of Journals and Ledgers to Managers
To obtain information about specific business transaction, a manager might refer to the journal entry
To learn the current balance of important accounts, managers will look to the ledger accounts.
Check Your Understanding
Complete the following questions and problems. Thinking Critically Communicating Accounting Problem 7-1 Opening Ledger Accounts
Page 156
A Matter of EthicsMeeting a DeadlineImagine that you are an
accounting clerk for Ace Hardware. The store manager has asked you to prepare the trial balance for the month. The totals on the trial balance are not equal and you cannot find the error. You also realize the trial balance is due at the end of the day. You are frustrated and consider changing one of the account balances just to get the trial balance to balance.
Ethical Decision Making:
What are the ethical issues?
What are the alternatives?
Who are the affected parties?
How do the alternatives affect the parties?
What would you do?
The Posting Process
Section 2
What You’ll Learn
The purpose and importance of posting
How often a business posts transactions.
The six steps in the posting process How to compute an account balance. How to show an account with a zero
balance.
Key Term
Posting
The Fourth Step in the Accounting Cycle: Posting The general journal is a sort of business
diary containing all the transactions of the business.
To provide a clear picture of how each account is affected by each transaction the journal entry is posted to the general ledger accounts.
The purpose of posting is to show the impact of business transaction on the individual accounts
Posting to the Roadrunner General Ledger
Key Points
Posting to the General Ledger Accountsfor every transaction you will post to at least two ledger accounts. You will post the debit part of the entry to one ledger account and the credit part of the entry to another ledger account.
Math Hints
When the transactions effect both side of the accounting equation: Amounts added to one side must also be
added to the other side Amounts subtracted from one side must
also be subtracted from the other side
The Importance of Posting Posting organizes transaction details
into proper accounts. Posting summarizes all business
transactions so managers can see the cumulative effects on the accounts.
Computing a New Account Balance When the existing account is a debit,
and The amount posted is a debit, ADD the
amounts. The amount posted is a credit, SUBTRACT
the amounts. When the existing account balance is a
credit The amount posted is a debit, SUBTRACT the
amounts. The amount posted is a credit, ADD the
amounts.
Calculating Balances Debit amounts are added together.
Credit amounts are added together.
Debit and credit amounts are subtracted.
Key Points
Showing a Zero Balance in a Ledger Account
To show a zero balance, a line should be drawn across the center of the column – where the normal balance would appear.
Check Your Understanding
Complete the following questions and problems. Thinking Critically Analyzing Accounting Problem 7-2 Posting from the General
Journal to the Ledger
Page 164
Preparing the Trial Balance
Section 3
What You’ll Learn
The purpose of a trial balance. How to prepare a trial balance How to identify and locate trial
balance errors.
Key Terms
Proving the ledger Trial balance Transposition error Slide error Correcting entry
The Fifth Step in the Accounting Cycle: The Trial Balance
Proving the ledger is adding all the debit balances, then adding all the credit balances, and comparing the two total to see whether they are equal.
Trial balance is a formal way to prove that debits equals credits. It is a list of all account names and their
current balances.
Accounting Tips
Trial BalanceWhen preparing a trail balance, be sure to
list all the general ledger accounts, in the order in which they appear in the ledger and on the chart of accounts. List even those accounts with a zero balance. Every account is listed to avoid omitting an account (and its balance) from the trial balance.
Finding Errors1. Add the debit and credit column again, you may have
added incorrectly2. Find the difference between the debit and credit
column. (this is the amount you are out of balance).If the amount is 10, 100, 1000 and so on, you probably made an addition error. Add the columns again.
3. Check if the amount you are out of balance is evenly divided by 9. If the difference between the columns is evenly divisible by 9, you may have made a transposition or slide error A transposition error occurs when two digits with an
amount are accidently reversed A slide error occurs when a decimal point is moved by
mistake.
Finding Errors (cont.)4. Make sure you have included all of the general
ledger accounts in the trail balance. Look in the general ledger accounts for an account balance equal to the amount you are out of balance.
5. If all of the general ledger accounts and their balances are included in the trial balance , one of the account balances could be recorded in the wrong column.
6. If you still have not found the error, recompute the balance in each ledger account.
7. Finally check the general ledger accounts to verify that correct amount are posted from the journal entries.
Correcting Errors
The method for correcting an error depends on when the error is found Error in a journal entry that is not posted. Error in posting to the ledger when the journal
entry is correct. Error in a journal entry that is posted.
Correcting Errors (cont.)
Follow the correcting entry steps in the book for Roadrunner on page 168 to 169. Mistake discovered Memorandum create for correction Journal entry made date of the discovery Posted to ledger with correcting error
listed in description (in each account affected)
Check Your Understanding
Complete the following questions and problems Thinking Critically Computing in the Business World Problem 7-3 Analyzing a Source
Document Problem 7-4 Recording and Posting a
Correcting Entry Page 170
What You’ll Learn
How to analyze business transactions in the general ledger
How to post transaction in the ledger How to prepare a trial balance
Chapter 7 Problems
Problem 7-7 Journalizing and Posting Business Transactions Page 175-176 Analyze
Problem 7-8 Journalizing and Posting Business Transactions Page 176-177 Analyze