General Ledger Accounts Each different type of asset, liability, revenue, expense and owner’s equity of a business are recorded into separate ledger accounts which show the balances and any changes in each account. The general ledger contains all accounts, including control accounts, other than for individual Accounts Receivable (debtors and Accounts !ayable (creditors which are contained in the subsidiary ledgers. These accounts for" a detailed picture of the overall financial position of the business. The ledger accounts i"ple"ent the rules of double entry# entry# debits $ credits. Accordingly, for every debit entry there "ust be a credit entry for the sa"e value and vice versa. The rules are a very i"portant point of understanding the accounting process and need to be fully understood to allow correct processing, posting and entry of individual transactions or totals fro" %ournals. &t is also necessary to have the 'nowledge of the nature of the different account groups and the effect of debit and credit entries entries on these accounts. This can be su""arised by the diagra" below
DEBIT entry (DR)
Account Nature
CREDIT entry (CR)
Increases
AET
Decreases
Decreases
LIABILITIE
Increases
Decreases
Decreases
Increases
OWNERS EQUITY
Increases
RE!EN"E
Increases
E#PENE
Decreases
Increases
All %ournals are posted (totalled and the balances of each column transferred) to the general ledger. !osting the %ournal totals to the ledgers re"oves any unnecessary detail fro" the ledgers. &n effect the general ledger is a su""ary of the transactions for the business, with the Page 1 of 15
detail being previously recorded in the %ournals. Any changes to account balances are calculated with the "ini"u" nu"ber of entries as a result of this.
Post$ng t%e &ournals to t%e ledgers !osting to the %ournals can be done in any order as posting occurs on the one sa"e day, usually at the end of the "onth. )o"e posting orders "ay give rise to te"porarily artificial results, such as having a credit balance in the debtor’s control account if the cash receipts %ournal is posted first. *nce posting has been co"pleted the correct account balances will beco"e apparent. A suggested order in which to post the %ournals is +. general %ournal opening entry . purchases %ournal -. purchases returns %ournal . sales %ournal /. sales returns %ournal 0. cash receipts %ournal 1. cash pay"ents %ournal 2. general %ournal (all the other entries.
General 'ost$ng 'rocedures •
•
•
• •
• •
The totals of the %ournals are posted to the relevant ledger accounts at the end of each period, usually every "onth. Every colu"n in the %ournals should have a corresponding account in the general ledger to which the total of the colu"n is posted. )ince totals of colu"ns are posted, the last date in the %ournal is used as the date of entry in the ledger accounts. The rules of the ledger will deter"ine which accounts are debited or credited. As you are using the principles of double entry accounting, the debit entries "ust equal the credit entries. *nly once the %ournal is closed (around the end of the "onth are ledgers posted. Each sundry value is not totalled, but instead posted to the account to which it is categorised. They will then carry the date of the transaction and not be dated the day they are posted (end of "onth.
Page of 15
Post$ng t%e General ournal Trace the postings of the %ournal entries to the general ledger that follows. 3ote the particulars4details colu"n of the general ledger account lists the na"e of the other account (ie. cross reference affected by the transaction. * L+NG General ournal DATE 5+ 6uly 57
PARTIC"LAR
,+LI+
8ash At 9an' &nventory ()toc' *ffice Equip"ent 8reditors (Accounts !ayable
DEBIT +/ 555 1 /55 + 555
CREDIT -
; /55
9an' :oan 8apital
; +55 +/ ;55
Owners contribution of Assets and Liabilities at commencement of business
* L+NG General Ledger 8ash at 9an' DATE
5+451457
PARTIC"LAR
8apital
NL RE,
<6+
DEBIT +/ 555.55
CREDIT -
BALANCE +/ 555.55 =R
CREDIT -
BALANCE 1 /55.55 =R
CREDIT -
BALANCE -
&nventory DATE
5+451457
PARTIC"LAR
8apital
NL RE,
<6+
DEBIT 1 /55.55
*ffice Equip"ent DATE
5+451457
PARTIC"LAR
8apital
NL RE,
DEBIT -
<6+
+ 555.55
Page . of 15
+ 555.55 =R
8reditors (Accounts !ayable DATE
5+451457
PARTIC"LAR
8apital
NL RE,
DEBIT -
<6+
CREDIT -
BALANCE -
; /55.55
; /55.55 8R
CREDIT -
BALANCE -
; +55.55
; +55.55 8R
CREDIT -
BALANCE -
+/ ;55.55
+/ ;55.55 8R
9an' :oan DATE
5+451457
PARTIC"LAR
8apital
NL RE,
DEBIT -
<6+
8apital DATE
5+451457
PARTIC"LAR
>arious Assets ? :iabilities
NL RE,
DEBIT -
<6+
Note/ •
general %ournals are posted directly to the accounts affected by each entry @ as instructed by the general %ournalB.
•
Total debit (=R entries (C- /55.55 are e0ual to total credit (8R entries
•
(C- /55.55.
•
All entries in the general ledger "ust be traceable to a %ournal, so %ournal and page references are recorded in the %ournal reference colu"n. <6+ refers to page + of the general %ournal.
•
The date recorded in the general %ournal is the date that the entry is to be "ade in the general ledger.
Page of 15
Post$ng t%e Purc%ases ournal The purchases %ournal totals are posted in the sa"e way that you would post an individual purchase transaction. &nstead of having an individual account for each individual creditor in the general ledger, there is only the one being the 8reditors 8ontrol Account. The purchases %ournal records the credit purchase of stoc'4inventory for trade purposes. 9oth the expense (purchases and the negative liability (<)T !aid have increased. <)T !aid is offset against the liability <)T 8ollected @ thus the negative balance ie. a debit balance in a credit nature account. This has resulted in the increase of the liability to 8reditors. The entry can be su""arised as =R =R 8R
!urchases <)T !aid 8reditors 8ontrol
C C C
Post$ng t%e 'urc%ases returns &ournal The purchases returns entry effectively reverses the original purchase, but instead of crediting the purchases account, a separate purchases returns account is used. The purchases returns %ournal records the return of trading stoc' initially purchased on credit. The purchases (expense and the <)T !aid (negative liability have decreased, resulting in a decrease of 8reditors (liability. The entry can be su""arised as =R 8R 8R
8reditors 8ontrol !urchases Returns <)T !aid
Page 5 of 15
C C C
Post$ng t%e sales &ournal !osting of the sales %ournal totals follows the sa"e principles as posting individual sales transactions. &nstead of having one account for each individual debtor in the general ledger, there is one account being the =ebtors 8ontrol Account. The sales %ournal records the credit sale of trading stoc'. 9oth the revenue (sales and the liability (<)T 8ollected have been increased which is "atched by an increase in the asset =ebtors 8ontrol. The entry can be su""arised as =R 8R 8R
=ebtors 8ontrol )ales <)T 8ollected
C C C
Post$ng t%e sales returns &ournal The sales returns %ournal records the return of trading stoc' fro" debtors (on credit. The sales revenue and the <)T collected liability have both been decreased, "atched by a decrease in the asset account of =ebtors 8ontrol. The sales return effectively reverses the original sales, but instead of debiting the sales account a separate )ales returns account is used. The entry can be su""arised as =R =R 8R
)ales Returns <)T 8ollected =ebtors 8ontrol
C C C
Cas% rece$'ts and cas% 'ay2ents &ournals To post fro" the cash receipts or cash pay"ents %ournal to the general ledger, co"plete the following steps close the cash receipts %ournal at the required date and total the a"ounts listed access the general ledger and identify the relevant account for each heading you have used in the %ournal enter any opening balances for accounts first, if you have any listed identify each of the totals for the colu"ns (including sundry ite"s in the cash receipts %ournal and post the" in the relevant ledger accounts chec' over your postings for consistency. • •
• •
•
Page 3 of 15
Gu$del$nes/ The corresponding entry is written in the !articulars colu"n. The cash receipts %ournal is crossDreferenced when posted. This is valuable where further infor"ation is required fro" the cash receipts %ournal. =iscount expense "ay be offered to custo"ers4clients who pay their debt pro"ptly. This pay"ent is ad%usted in the discount expense ledger and the credit is "ar'ed in the debtors control ledger (it is not calculated in the grand total of all the other entries. This ensures that the debtors a"ount is reduced and recorded appropriately. • •
•
!osting to the 8ash Receipts 6ournal can be su""arised as =R 8R 8R 8R 8R
8ash at 9an' =ebtors 8ontrol )ales <)T 8ollected )undry Accounts
C C C C C
A3= A:)*, For discount expense, involving <)T =R =R 8R
=iscount Expense <)T 8ollected =ebtors 8ontrol
C C C
E#A4PLE Cas% Rece$'ts ournal DATE
PARTIC"LAR
REC No
DIC E#P
DEBT+R
CA* ALE
GT -
"NDR6 -
BAN7 -
+.-.57
)ales
8RR
55.55
5.55
5.55
/.-.57
)ales
8RR
055.55
05.55
005.55
;.-.5x
8o""ission
+;
+.-.57
:. EdwardsDdebtor
+;/
)ales
8RR
+;.-.57
). Gac'eyDdebtor
+;0
.-.57
&nterest revenue
+;1
)ales
8RR
6. !ope
+;2
2.-.57
.15 /.55
/5.55
-;/.55 0/.55
1./5
1.-5
0./5
+ 52./5
./5
./5 1/.55 155.55
./5
+1/.55
1588
1 8158
Page ; of 15
15.55
2/.55 +1/.55
.588
558
.8.8
. 9:588
Post$ngs fro2 t%e cas% rece$'ts &ournal to t%e general ledger
General ledger (E
2.5-.57
PARTIC"LAR
DEBIT
=ebtors control
CREDIT
+/.55
BALANCE
+/.55=R
De=tors (Asset) DATE
5+.5-.57 2.5-.57 25-.57
PARTIC"LAR
DEBIT
9alance 9an' =iscount expense
CREDIT
+ 5+./5 +/.55
BALANCE
+ /55.55=R 21./5 =R 1./5 =R
ales (Re>enue) DATE 2.-.57 9an'
PARTIC"LAR
DEBIT
CREDIT
BALANCE -/.55 8R
CREDIT //.5
BALANCE //.5 8R
CREDIT 1.-5
BALANCE 1.-5 8R
CREDIT
BALANCE
GT Collected (L$a=$l$ty) DATE 2.5-.57 9an'
PARTIC"LAR
DEBIT
Co22$ss$on (Re>enue) DATE 5;.5-.57 9an'
PARTIC"LAR
DEBIT
Interest re>enue (Re>enue) DATE
.5-.57
PARTIC"LAR
DEBIT
9an'
1/.55
Page 9 of 15
1/.558R
Ban? (Asset) DATE
PARTIC"LAR
2.5-.57
DEBIT
8ash receipts
CREDIT
BALANCE
-2;/.55
- 2;/.55=R
ACTI!IT6 Post the entries in the cash receipts journal below to the relevant ledger accounts below.
Cas% Rece$'ts ournal DATE
PARTIC"LAR
RECNo
DIC E#P
DEBT+R -
ALE -
GT -
"NDR6 -
BAN7 -
557 5+45/
)ales
8RR
+ 055.55
+05.55
+ 105.55
5/45/
)ales
8RR
55.55
5.55
05.55
5;45/ 5
8o""ission
+;
+45/
H. RichardsD debtor
+;/
)ales
8RR
+;45/
9. 6oelDdebtor
+;0
45/
&nterest revenue
+;1
)ales
8RR
F. Avalon
+;2
245/
+ 555.55 5.55
+ /25.55 /55.55
-5.55
+ 555.55
/5.55
--5.55
+ 115.55
+ 115.55 -55.55 255.55
Totals
+5.55
155.55
3888
85888
25.55
- -25.55 155.55
: .8888
:.888
1 .8888
15 59888
General ledger (E
PARTIC"LAR
DEBIT
CREDIT
BALANCE
CREDIT
BALANCE
De=tors (Asset) DATE
PARTIC"LAR
DEBIT
Page : of 15
ales (Re>enue) DATE
PARTIC"LAR
DEBIT
CREDIT
BALANCE
CREDIT
BALANCE
CREDIT
BALANCE
CREDIT
BALANCE
CREDIT
BALANCE
GT Collected (L$a=$l$ty) DATE
PARTIC"LAR
DEBIT
Co22$ss$on (Re>enue) DATE
PARTIC"LAR
DEBIT
Interest re>enue (Re>enue) DATE
PARTIC"LAR
DEBIT
Ban? (Asset) DATE
PARTIC"LAR
DEBIT
Page 18 of 15
Post$ng fro2 t%e cas% 'ay2ents &ournal to t%e general ledger Cas% 'ay2ents &ournal DATE
PARTIC"LAR
,+L I+
C*@ N+
DIC RE!
CREDIT+R
P"RC*AE
GT
AGE
"NDR6
055.55
BAN7 -
5+.50.57
Iages
2-
5-.50.57
!urchases
2--
5;.50.57
=. 8otton
2-
++.50.57
Electricity
2-/
++.50.57
Rent
2-0
+/.50.57
Iages
2-1
+/.50.57
T. Randall
2-2
1./5
+/.55
+/.55
+.50.57
G. Ti""s
2-;
5.55
/5.55
/5.55
.50.57
=rawings
25
-5.50.57
Iages
2+
55.55 +/.55
055.55
5.55
5.55
+21./5
+21./5 2.+
2.5;
;./5
-55.55
-55.55
055.55
055.55
/.55 055.55
Totals
58
5958
8888
91
1 98888
/.55 055.55
38:8:
. 888
General ledger (Eenue (Re>enue) DATE
-5.50.57
PARTIC"LAR
DEBIT
CREDIT
8reditors
./5
BALANCE
./5 8r
GT Pa$d (Negat$>e L$a=$l$ty) DATE
-5.50.57
PARTIC"LAR
DEBIT
9an'
CREDIT
2.+
BALANCE
2.+ =r
Cred$tors control (L$a=$l$ty) DATE
5+.50.57 -5.50.57 -5.50.57
PARTIC"LAR
DEBIT
9alance =iscount revenue 9an'
./5 /2./5
Page 11 of 15
CREDIT
BALANCE
1/5.55 8r 151./5 8r +/.55 8r
Purc%ases (E<'ense) DATE
-5.50.57
PARTIC"LAR
DEBIT
9an'
CREDIT
55.55
BALANCE
55.55 =r
ages (E<'ense) DATE
-5.50.57
PARTIC"LAR
DEBIT
9an'
CREDIT
+ 255.55
BALANCE
+ 255.55 =r
Electr$c$ty (E<'ense) DATE
++.50.57
PARTIC"LAR
DEBIT
9an'
CREDIT
2.5;
BALANCE
2.5; =r
Rent (E<'ense) DATE
++.50.57
PARTIC"LAR
DEBIT
9an'
CREDIT
-55.55
BALANCE
-55.55 =r
Dra$ngs (Ca'$tal) DATE
.50.57
PARTIC"LAR
DEBIT
9an'
CREDIT
/.55
BALANCE
/.55 =r
Ban? (Asset) DATE
5+.50.57 -5.50.57
PARTIC"LAR
DEBIT
9alance 8ash pay"ents
CREDIT
/ 555.55 - 5.55
Page 1 of 15
BALANCE
/ 555.55 =r + /05.55 =r
ACTI!IT6 Post the entries/data in the cash payments journal to the relevant ledger accounts below.
Cas% 'ay2ents &ournal DATE
PARTIC"LAR
,+L I+
C*@ N+
DICR E!
CREDIT+
P"RC*A
GT
AGE
"NDR6
BAN7
+.;.5+
Iages
2-
-.;.5+
!urchases
2--
;.;.5+
=. 8otton
2-
++.;.5+
Electricity
2-/
Rent
2-0
+/.;.5+
Iages
2-1
+/.;.5+
T. Randall
2-2
+/.55
/25.55
/25.55
+.;.5+
G. Ti""s
2-;
5.55
+ 555.55
+ 555.55
.;.5+
=rawings
25
-5.;.5+
Iages
++.5;.5+
Totals
55.55 + 055.55 -5.55
55.55
+05.55
+ 105.55
1/5.55
1/5.55 --.0
--0.-0
-15.55
+55.55
+ 55.55
55.55
55.55
;55.55 55.55 9588
..888
1 38888
1:.3
; 8888
;55.55 55.55
.3.3
1. ;3888
Post$ngs fro2 t%e cas% 'ay2ents &ournal to t%e general ledger
General ledger (Eenue (Re>enue) DATE
PARTIC"LAR
DEBIT
CREDIT
BALANCE
CREDIT
BALANCE
CREDIT
BALANCE
GT Pa$d ( Negat$>e L$a=$l$ty) DATE
PARTIC"LAR
DEBIT
Cred$tors control (L$a=$l$ty) DATE
5+.5;.57
PARTIC"LAR
DEBIT
9alance
- 1/5.55 8r
Page 1. of 15
Purc%ases (E<'ense) DATE
PARTIC"LAR
DEBIT
CREDIT
BALANCE
CREDIT
BALANCE
CREDIT
BALANCE
CREDIT
BALANCE
CREDIT
BALANCE
CREDIT
BALANCE
ages (E<'ense) DATE
PARTIC"LAR
DEBIT
Electr$c$ty (E<'ense) DATE
PARTIC"LAR
DEBIT
Rent (E<'ense) DATE
PARTIC"LAR
DEBIT
Dra$ngs (Ca'$tal) DATE
PARTIC"LAR
DEBIT
Ban? (Asset) DATE
5+.5;.57
PARTIC"LAR
DEBIT
9alance
- +-5.55 =r
Page 1 of 15
C%ec?l$st for Post$ng fro2 ournals $nto Ledger Accounts The following table is a chec'list for the postings to ledger accounts fro" the %ournals. •
Post all entries in one complete journal before proceeding to the net.
•
!t is important to ensure that for every debit posted there is a corresponding credit posting.
+"RNAL 8ash Receipts
•
•
8ash !ay"ents
)ales Returns !urchases !urchases Returns
All individual a"ounts or the total of each colu"n (eg cash sales and <)T are credited to the relevant account (control and subsidiary accounts for debtors.
•
"ebit =iscount Allowed, #redit the =ebtor (and the =ebtors 8ontrol Account.
•
9an' colu"n total credited to the 8ash Account.
•
)ales
P+TING T+ T*E LEDGER 9an' colu"n total debited to the 8ash Account.
All individual a"ounts or the total of each colu"n (eg cash purchases and <)T are debited to the relevant account (control and subsidiary accounts for creditors.
•
"ebit the creditor (and the control account, credit =iscount Received.
•
"ebit the individual debtor (and the control account, including <)T.
•
#redit the %ournal total to the )ales account and <)T account.
•
"ebit the %ournal total to the )ales returns account and <)T account.
•
#redit the individual debtor (and the control account including <)T.
•
"ebit the !urchases account with the %ournal total, and <)T account.
•
#redit the individual creditor (and the control account, including <)T.
•
"ebit the individual creditor (and the control account, including <)T.
•
#redit the %ournal total to the !urchases returns account and <)T account.
•
!ost it eactly as $tated (eg writing off bad debts.
•
"ebit 9ad =ebts.
•
#redit the debtor (and the control account.
3ote any entry affecting either a debtor or creditor "ust also be recorded on the sa"e side in the relevant control account and the subsidiary ledger.
Page 15 of 15
