Chapter 6PREPARING A CHART OF ACCOUNTS

POSTING FROM A JOURNAL TO A GENERAL LEDGER

Chapter 6 Goals• Define accounting terms related to posting from a journal to

a general ledger.

• Prepare a Chart of Accounts for a service business organized as a proprietorship.

• Perform file maintenance activities to keep the Chart of Accounts current.

• Open accounts in a general ledger and record their beginning balance.

• Apply the 5-step posting process to post the separate journal amounts and the totals of the journal’s special amount columns to general ledger accounts.

Goal 1: Define Accounting Terms• Posting from a Journal to a General Ledger

1. Ledger—a group of accounts

2. General Ledger—a ledger that contains all of the accounts needed to prepare financial statements. Arranged in order by category

3. Account Number—the number assigned to an account. Based on the category of the account. Ex: Assets begin with 100 because they are the first category. Cash would be 110 because it is always the first account in a general ledger. We use 10 for the first account in each category then increase by 10. The 2nd account would be 120.

4. File Maintenance—arranging accounts in a general ledger, assigning account numbers, and keeping records current (Preparing a Chart of Accounts)

5. Opening an Account—write the account title and account number on the account form

6. Posting—transferring transaction information from a journal page to the ledger account

Goal 2: Prepare a Chart of Accounts• An index of the accounts used by the

company

• Organized by category

• Account numbers are determined by the order of the categories• (100) Assets

• (200) Liabilities

• (300) Owner’s Equity

• (400) Revenue

• (500) Expenses

• Account numbers increase by 10 so you can add new accounts between existing accounts (510 515 520)

Goal 5: Five-Step Posting Process:1.Write the date in the Date column of the account.

2.Write the journal page number in the Post Reference column of the account.

3.Write the transaction amount in the Debit or Credit column of the account.

4.Determine the new balance of the account and write the balance in the Debit or Credit column of the Balance section of the account.a. If the account has a debit balance and the posted amount is a debit you would add the

number to the previous account balance to get the new account balance.

b. If the account has a debit balance and the posted amount is a credit you would subtract the number from the previous account balance to get the new account balance.

5.Return to the journal and write the account number in the Post Reference column or in parentheses under the total of the special amount column.a. Always the LAST step in posting. Demonstrates you have posted every item and allows for a

signal as to where you ended the last posting to enable you to begin posting again without omitting any postings.

Journal PageGeneral Ledger

Accounts

1 2 3 4

5

Posting the General Journal Individual Amounts

Journal PageGeneral Ledger

Accounts

1 2 3 4

5

Posting the General Journal Special Column Totals

Cash

Sales

110

410

13

5