How to Post to the General Ledger
Posting to the general ledger is an essential part of the accounting cycle. It involves transferring information from the original journal entries to the general ledger accounts. Here is a step-by-step guide on how to post to the general ledger:
- Identify the Accounts: The first step is to identify the accounts that will be affected by the transaction. This information should come from your journal entry. Each transaction affects at least two accounts, following the double-entry bookkeeping system.
- Determine the Type of Entry: Next, determine whether each account should be debited or credited. This is also recorded in your journal entry. Assets and expenses increase with a debit and decrease with a credit. Liabilities, equity, and revenue increase with a credit and decrease with a debit.
- Locate the Accounts in the Ledger: Once you know which accounts are affected and the type of entry, locate those accounts in the general ledger.
- Post the Entries: Record the date of the transaction, the amount, and any relevant description in the appropriate columns of the ledger account. Make sure to enter debit amounts in the debit column and credit amounts in the credit column.
- Calculate the New Account Balance: After you’ve posted the entry, calculate the new account balance. If it’s an asset or expense account, subtract any credits from the debits. If it’s a liability, equity, or revenue account, do the opposite.
- Check Your Work: Review the entries to make sure they have been posted correctly. The total debits should always equal the total credits.
- Repeat for All Journal Entries: Repeat this process for each journal entry in the period. Once all entries have been posted, you can use the balances in the general ledger accounts to prepare a trial balance, which helps in checking the accuracy of the entries and ensuring the books are balanced.
Remember to use the chart of accounts (COA) as a guide when determining which accounts should be debited or credited. The COA contains all the accounts that may be used when recording transactions in the company’s ledger.
Example of How to Post to the General Ledger
Let’s consider an example with a hypothetical company, “ABC Services”. Let’s say ABC Services made a sale on June 20, 2023, and the journal entry for that transaction is as follows:
| Date | Accounts | Debit ($) | Credit ($) |
|---|---|---|---|
| 20-Jun-23 | Accounts Receivable | 1000 | |
| Sales Revenue | 1000 |
Here’s how ABC Services would post this journal entry to the general ledger:
- Identify the Accounts: The accounts involved in this transaction are “Accounts Receivable” and “Sales Revenue.”
- Determine the Type of Entry: “Accounts Receivable” is debited (indicating an increase in assets) and “Sales Revenue” is credited (indicating an increase in revenue).
- Locate the Accounts in the Ledger: ABC Services locates the “Accounts Receivable” and “Sales Revenue” accounts in the general ledger.
- Post the Entries:Accounts ReceivableDateDescriptionDebit ($)Credit ($)Balance ($)20-Jun-23Sales on account10001000Sales RevenueDateDescriptionDebit ($)Credit ($)Balance ($)20-Jun-23Sales on account1000-1000
- Calculate the New Account Balance: The new balance of “Accounts Receivable” is $1000 (increase in assets), and the new balance of “Sales Revenue” is -$1000 (increase in equity, represented by a negative balance).
- Check Your Work: The total of the debits ($1000) equals the total of the credits ($1000), so the books are in balance.
ABC Services would repeat this process for all other transactions within the accounting period. By correctly posting to the general ledger, ABC Services can ensure accurate financial statements and business insights.
