Posting Transactions Flashcards
4.4: Post transactions to the general ledger.
What is a general ledger?
The book of accounts contains a company’s asset, liability, and shareholders’ equity (common shares, retained earnings, revenue, expense, and dividends declared) accounts.
What is the third step in the accounting cycle?
Transfer the journal entries recorded in the general journal to the appropriate accounts in the general ledger
What is the entire group of accounts (whether known as T accounts or general ledger accounts) maintained by a company called?
The ledger
Whats the purpose of the ledger?
Keeps all the information about changes in specific account balances in one place.
What is the general ledger, and how is it used in the accounting cycle?
The general ledger is a collection of all accounts used by a company. It contains accounts for assets, liabilities, shareholders’ equity, revenues, and expenses.
The third step in the accounting cycle involves transferring journal entries from the general journal to the appropriate accounts in the general ledger.
How is the general ledger organized?
The ledger is typically arranged in the order of financial statements:
1. Assets (beginning with current assets)
2. Liabilities
3. Shareholders’ equity (including common shares, retained earnings, dividends declared)
4. Revenues and expenses
What tools can be used to maintain the general ledger?
Companies can use:
- Loose-leaf binders or card files
- Spreadsheet software (e.g., Excel)
- Computerized accounting systems (most commonly used today)
Even a column in a spreadsheet can be used as a general ledger
Why are account numbers assigned to accounts in the ledger?
Account numbers are used to easily identify and organize the accounts, making it simpler to locate and manage them.
What happens in a computerized accounting system regarding the general ledger?
In a computerized system, journal entries are automatically posted to the general ledger by the software, making the process more efficient and reducing manual work.
What is a chart of accounts?
A list of a company’s accounts and account numbers that identify where the accounts are in the general ledger.
Where do most companies list their general ledger accounts?
In a chart of accounts
How does the chart of accounts differ between companies?
The number and type of accounts depend on:
- Size and complexity of the business.
- Management’s preferences for account detail.
- For example, small companies may use fewer accounts (e.g., one utility expense account), while large companies may have more detailed accounts (e.g., separate accounts for electricity, water, telephone).
Why do bigger corporations have a more complicated numbering system?
A small corporation will not have many accounts compared to a large company like Apple Inc. Small corp may be able to manage and report its activities using fewer than 100 accounts, whereas Apple requires thousands of accounts to keep track of its worldwide activities
How are accounts organized in the chart of accounts?
Accounts are organized in order of financial statement categories:
Assets (1000–2999)
Liabilities (3000–3999)
Shareholders’ equity (4000–4999)
Revenue (5000–6999)
Expenses (7000–9999)
How does the numbering system in the chart of accounts work?
The numbering system allows flexibility for growth:
Four-digit numbers are used, allowing for future accounts to be added as needed.
Example: Assets are numbered from 1000 to 2999, and Liabilities from 3000 to 3999.
How are account names and numbers used in practice?
Account numbers are typically used in a company’s actual accounting system to help organize and identify accounts.
What is posting?
The procedure of transferring journal entries to the general ledger accounts.
It accumulates the effects of journalized transactions in individual accounts.
How is posting done?
The debit and credit amounts from the general journal are transferred to the appropriate debit and credit columns in the general ledger accounts.
The date and amounts are recorded for both debit and credit entries.
What is the recommended order for posting?
Posting should be done in chronological order:
- Debits and credits of one journal entry are posted before moving on to the next journal entry.
- Posting should also be done on a timely basis (e.g., monthly) to keep the general ledger up to date.
How does posting work in a computerized system?
In a computerized accounting system, posting is usually performed automatically after each journal entry is made.
How does posting differ between manual and computerized systems?
In a manual system, posting is done manually after journal entries.
In a computerized system, the posting process is automated after journal entries are made.
How often should the first 3 steps of the accounting system be done?
Occur repeatedly in every company, whether a manual or a computerized accounting system is used.
Can the first 2 steps of the accounting system be fully automated?
No, the analysis and entering of each transaction—must be done by a person even when a computerized system is used.
What step includes the basic difference between a manual and computerized system?
In Step 3 of the recording process—posting the information (and in some of the subsequent steps in the accounting cycle
What is step 1 of the recording process?
First must determine if an accounting transaction has occurred. If so, the transaction is analyzed
What are the 3 things to identify when analyzing transactions?
- the types of accounts involved
- whether the accounts are increased or decreased
- the impact on the accounting equation
What is step 2 of the recording process?
To prepare the journal entry
What is step 3 of the recording process?
Post the journal entry to the general ledger (T) account
