How To Post Journal Entries To The General Ledger

How To Post Journal Entries To The General Ledger

As a small business owner, you will handle a number of tasks, such as accounting. After each transaction, you are in charge of recording journal entries. That's not all, though. Additionally, you must be familiar with posting journal entries to the general ledger.

The first step of accounting cycle is to collect source documents, the second step is to record journal entries. The third step is the posting of journal entries to the ledger (T-accounts).

But what is the meaning of posting? Posting is the transfer of balances in the journals to the debits and credits sides of the various T-accounts in the ledger.

Posting journal entries to the general ledger simply means transferring the balance from the journal to the individual accounts in the ledger. In this article, I will take you through how to post journal entries to the general ledger. Keep reading to find out how!

Meaning Of General Ledger


General ledger is a book used to record business transactions in a summarized form. You can record transactions in your ledger using debits and credits. The debit and credit sides must always balance. They are equal, but in opposition. Your financial accounts will be incorrect if they don't balance.

A general ledger contains five different categories of accounts:
  1. Equity / Capital
  2. Assets
  3. Liabilities
  4. Revenue / Income
  5. Expenses

Various sub-accounts might exist within each type of account. Assets could, for instance, consist of accounts for fixed and current assets.

Use double-entry bookkeeping when posting to the general ledger. When using double-entry bookkeeping system, you create two entries using debits and credits for each transaction.

Financial statements can be produced using information from your general ledger. You may therefore get a comprehensive picture of the financial situation of your company from your financial statements.

Meaning Of Journal Entries


A journal is a book which is used to record the day-to-day transactions of a business. You must enter every transaction your company does into your books. When recording a transaction, there are a few steps you must adhere to. Entering transactions into a journal is the first step.

Journal Entry Format


The format of a journal entry refers to how entries are arranged and shown in the journal.

How To Post Journal Entries To The General Ledger

Your journal is used for identifying transactions since it contains a list of all business transactions. Each transaction in a journal is called a journal entry. Additionally, each journal entry contains detailed information regarding the transaction, such as:
  1. Date of the transaction
  2. Description of transaction
  3. Account name
  4. Amount (e.g., $1000)

In order to maintain organization, journal entries make use of the five main accounts and their subaccounts. Additionally, journal entries use debits and credits. Ensure that there is a balance between your debits and credits when recording journal entries.

The five major accounts are affected differently by debits and credits. Debits increase some accounts, while credits increase others. See how credits and debits impact accounts using the graphic below:

How To Post Journal Entries To The General Ledger

Journal entries: Example


Journal entries could initially seem unclear. But as soon as you figure it out, keeping a journal will be less frightening. Check out the example below to see how it's done.

Prepare the necessary journal entries in the Books of a M/s. RS Food Products with the transactions below.

05/05/2020: Mr. Rohit Sharma started business with the name M/s. RS Food, Bhubaneswar, Odisha by investing ₹5,50,000 cash.

06/05/2020: Opened a Current Account with State Bank of India by depositing ₹48,000 cash.

06/05/2020: Bought furniture and fixtures for ₹32,500 from M/s. Dev Wood as per Cash Memo No-1350.

How To Post Journal Entries To The General Ledger

How To Post Journal Entries To The General Ledger


Once you are done with recording transactions in your journal, you should transfer them to your general ledger. The main reason you should post all journal entries to your general ledger is to keep your books accurate.

Use a ledger to categorize and arrange transactions. Move every journal entry into its individual account before posting it to the ledger. For instance, all the sales should be grouped into a single account to ascertain the total sales. Do this for all the transactions.

Transfer the journal's debit and credit balances to the corresponding ledger account. Your journal entries function as a manual. Do not alter any information while posting journal entries to your general ledger. For instance, if you debit any account in the journal, do the same in the ledger.

Remember that your general ledger lists all the transactions into a single account. This makes it possible to know the total of each account. But you need to do some math to find the balance. Calculate the following balances after posting transactions to the ledger:
  1. Subtract total credits from total debits in the asset and expense accounts.
  2. Subtract total debits from total credits in the liabilities, equity, and revenue accounts.

Consider purchasing accounting software if you wish not to mess with the calculations yourself. Accounting software allows you to enter transactions into your ledger and let the program take care of the calculations.

Don't worry if you feel a little lost. Just follow the steps below to post journal entries to the general ledger:
  1. Create journal entries.
  2. Make sure your journal entries have equal debits and credits
  3. Each journal entry should be transferred to individual ledger account.
  4. Do not alter any information; continue using the same debits and credits entries.
  5. Calculate account balances in your general ledger.

How To Post Journal Entries To The General Ledger: Example


Transaction: On January 1, 2015, a US company sold goods to a customer for cash $25,000.


The journal entry and posting to ledger accounts of the above transaction is illustrated below:

How To Post Journal Entries To The General Ledger

Why Are Ledger Entries Important?


The importance of ledger entries can be attributed to a number of factors. Ledger entries:
  1. Keep your business organized
  2. Make transactions easy to find
  3. Categorize transactions
  4. Provide you with a comprehensive view of your company's financial health
  5. Show your income sources and expenditures

In addition to the benefits mentioned above, submitting entries to the general ledger enables you to identify accounting errors in your records. Early error detection helps you avoid more serious issues later on, such as incorrect financial statements and tax filings.

By keeping your ledger current, you can prevent fines and ensure that your records accurately reflect the financial health of your company.

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