Patchogue-Medford High School

Accounting I – Chapter 7 Notes

Mr. Butzke

Chapter 7 – Posting Journal Entries to General Journal                                                                                                                                                         Page 164

Objective: Students will be able to demonstrate their knowledge in posting transactions from the general journal to the general ledger. They will then check the ledger for equality by preparing a Trial Balance. This will also show any errors that need to be corrected.

Previous topics from last chapter:

      Step 1 – Collect and verify source documents

      Step 2 – Analyze each transaction

      Step 3 – Journalize each transaction

The processes in this chapter are steps 4 & 5 in the Accounting Cycle.

               Step 4 – Posting to the General Ledger

               Step 5 – Preparing a Trial Balance

What is a General Ledger – A permanent record organized by account number. It is used by business to keep all of the transactions, account changes, and account balances in a book or file. Posting into this book summarizes the effects of all business calculations. Reports are generated from the accounts maintained in it.  (page 168)

      General Ledger Account Form – Information about each specific account is recorded here. This is usually in a four-column form that shows the following columns; date, explanation, post-reference, activity Dr. & Cr., and balance Dr. & Cr.

      There are six steps to opening an account in the General Ledger (G/L)

1. Put the Account Name on the top
2. Put the account number in the top right corner (when assigning numbers make sure to leave enough open numbers for room to add at a later date, ie 105 then 110)
3. Enter date of the opening
4. Write the word “Balance” in the explanation column
5. Put a check mark into the Post Reference column to show it is an initial balance
6. Put the appropriate amount directly into the Dr. or Cr. Column of the Balances.

Do problem 7-1, Opening Ledger Accounts pg, 170, WB pg 94

There are seven steps to posting from the G/J to the G/L (page 172)

1. Enter the date of the journal entry into the date column.
2. The description column is usually left blank

3.  In the post reference column of the G/L place the G/J and it page number. (GJ2)

4.Enter the debit from the G/J into the activity debit column of the G/L.

5. Compute and record the balance into the balance column for increases or decreases. (the balance can be either a Dr. or Cr.)
6. Go back to the General Journal and put the account number into its Post Reference column. This tells you that that amount has been posted.
7. Repeat steps 1-6 for a credit entry, replacing the Dr. info with Cr. Info. 

Go over General Journal and General Ledger activity transactions pg 174-176

Remember that account balances are “running balances” and all Dr. & Cr. Rules apply. A zero balance is a long dash in the balance column. (pg.177)

         Do problem 7-2, Posting from a G/J to a G/L, pg 178, WB pg 95

Proving the General Ledger

      This is done by creating a Trial Balance from the balances in the General Legder. You would record each account balance (in numeric order) into either the Dr. or Cr. Column. (pg. 180)

When you add down each column they should agree. There are two typical types of errors;

               Transposition error – when two numbers are reversed they cause an error and a difference between the two columns is divisible by 9. ( If 629 were recorded as 692 the difference is 63 which is divided by 9 exactly 7 times.)

               Slide error – when the decimal point is moved to a different place. (100.00 is shown as 10.00)

When errors are found that are not just recording error a Correcting Journal Entry must be made to correct the mistake. When recording correcting entries into the G/L you would now use the Description column by entering the words “Correcting J/E”.  You will use the Dr. & Cr. Columns to record the adjusting amounts, both must have the same amount in it. (pg. 182)  

Terms Page 185

Questions Page 186

Problems

Prob.  7-3        Analyzing a Source Document  TB pg 183   WB pg 96

Prob.  7-4        Record & post a correcting J/E TB pg 183   WB pg 97                     

Prob.  7-5        Posting G/L transactions          TB pg 188   WB pg 98    PC 119        Q 125

Prob.  7-6        use 7-5 to prepare a T/B           TB pg 188   WB pg 101  PC 120        Q 127

Prob.  7-7        J/E & posting & T/B                TB pg 188   WB pg 104-107  PC  121    

Prob.  7-8        J/E, post, T/B (use source doc)  TB pg 189    WB pg 108-113  PC 122      

Prob.  7-9        Record & Post correcting J/E   TB pg 190   WB pg 114         PC 123