Now, a general ledger reconciliation looks different - and is easier - thanks to the advent of accounting software. Instead of recording each transaction in two places, you record transactions once, reducing the likelihood of transposition errors. The general journal and general ledger still exist in the modern era of accounting, just not in an analog format. Accountants regularly conducted general ledger reconciliations to catch errors. If you would like to see what it looks like to move journal postings into a general ledger in Excel, watch this additional video.You can imagine how easy it would be to make mistakes recording the same transaction in two places. Double-entry bookkeeping is not a guarantee that no errors have been made-for example, the wrong ledger account may have been debited or credited, or the entries completely reversed. It follows that the sum of debits and the sum of the credits must be equal in value. If at any point the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts, an error has occurred. The accounting equation serves as an error detection tool. When posting the general journal, the date used in the ledger accounts is the date the transaction was recorded in the journal, not the date the journal entry was posted to the ledger accounts. The choice is a matter of personal taste. Postings can be made (1) at the time the transaction is journalized (2) at the end of the day, week, or month or (3) as each journal page is filled. Posting is always from the journal to the ledger accounts. Accounts Payable is a liability account and Design Services Revenue is a revenue account but both accounts increase with a credit and decrease with a debit. Notice in these ledger examples that Cash is an asset and a debit increases an asset and a credit decreases an asset. The following are examples of Ledger cards for the some of the accounts from the same company shown in T-accounts above ( see how you get the same balance under either approach). Often accountants omit these explanations because each item can be traced back to the general journal for the explanation. Notice that we give an explanation for each item in the ledger accounts. It is very important for you to understand the debit and credit rules for each account type or you may not calculate the balance correctly. The three-column form ledger card has the advantage of showing the balance of the account after each item has been posted. In contrast to the two-sided T-account, the three-column ledger card format has columns for debit, credit, balance, and item description.
Below is an example of what the T-Accounts would look like for a company. The general ledger is a compilation of the ledgers for each account for a business. The ledger for an account is typically used in practice instead of a T-account but T-accounts are often used for demonstration because they are quicker and sometimes easier to understand. Remember - a ledger is a listing of all transactions in a single account, allowing you to know the balance of each account. After transactions are journalized, they can be posted either to a T-account or a general ledger. If you credit an account in a journal entry, you will credit the same account in posting. If you debit an account in a journal entry, you will debit the same account in posting. When you post, you will not change your journal entries. The good news is you have already done the hard part - you have analyzed the transactions and created the journal entries.
As stated earlier, posting is recording in the ledger accounts the information contained in the journal. The video provides a clear description of where in the accounting cycle posting occurs.
The carrying out of these instructions is known as posting. We have covered a lot of new words and concepts in this chapter, this video gives you a preview of what happens next when we organize the journal entry information:Ī journal entry is like a set of instructions.
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