- Post journal entries to a general ledger
We now have two pages of journal entries for NeatNiks that we have prepared during the month of October. A business doing bookkeeping by hand like this might transfer (post) entries from the journal to the ledger daily, weekly, or monthly, depending on who is doing the posting and how busy that person is with other duties, and when the information is needed. Computerized accounting systems post immediately, which is one of the reasons most businesses rely on them, plus they never complain about the tediousness of their work.
You’ll probably never post from a journal to a ledger once you graduate with your accounting degree, but it’s important to know what is going on inside the invisible mind of your automated accounting system so you know two valuable things: (a) what data to put in and (b) how to tell if the reports you are getting from the computer make sense.
Remember the timeless adage about computers: garbage in, garbage out.
Here’s our completed journal through October 31:
| Date | Description | Post. Ref. | Debit | Credit |
|---|---|---|---|---|
| 20– | ||||
| Oct. 1 | Checking | 20,000.00 | ||
| Oct. 1 | Nick Frank, Capital | 20,000.00 | ||
| Oct. 1 | To record initial investment by owner and deposit to bank account | |||
| Oct. 4 | Prepaid Rent | 12,000.00 | ||
| Oct. 4 | Checking | 12,000.00 | ||
| Oct. 4 | To record prepayment of rent on vehicle | |||
| Oct. 7 | Supplies | 2,600.00 | ||
| Oct. 7 | Accounts Payable | 2,600.00 | ||
| Oct. 7 | To record purchase of supplies on account | |||
| Oct. 15 | Checking | 1,500.00 | ||
| Oct. 15 | Service Revenue | 1,500.00 | ||
| Oct. 15 | To record cash received for services rendered | |||
| Oct. 20 | Accounts Receivable | 7,250.00 | ||
| Oct. 20 | Service Revenue | 7,250.00 | ||
| Oct. 20 | To record cash billing for services rendered | |||
| Oct. 25 | Insurance Expense | 1,500.00 | ||
| Oct. 25 | Contractor Expense | 1,100.00 | ||
| Oct. 25 | Checking | 2,600.00 | ||
| Oct. 25 | To record payment of October insurance and contractors | |||
| Oct. 26 | Accounts Payable | 1,000.00 | ||
| Oct. 26 | Checking | 1,000.00 | ||
| Oct. 26 | To record payment account |
| Date | Description | Post. Ref. | Debit | Credit |
|---|---|---|---|---|
| 20– | ||||
| Oct. 30 | Checking | 1,600.00 | ||
| Oct. 30 | Accounts Receivable | 1,600.00 | ||
| Oct. 30 | To record receipt of payments from customers on account | |||
| Oct. 31 | Owner Withdrawal | 4,000.00 | ||
| Oct. 31 | Checking | 4,000.00 | ||
| Oct. 31 | To record payment to owner |
Making a Chart of Accounts
Now we need the chart of accounts:
- Checking
- Accounts Receivable
- Supplies
- Prepaid Rent
- Accounts Payable
- Contractor Payable
- Nick Frank, Capital Contributions
- Nick Frank, Withdrawals
- Service Revenue
- Insurance Expense
- Rent Expense
- Supplies Expense
- Contractor Expense
| Reference Number | Account |
|---|---|
| 110 | Checking |
| 120 | Accounts Receivable |
| 125 | Supplies |
| 130 | Prepaid Rent |
| 210 | Accounts Payable |
| 220 | Contractor Payable |
| 310 | Nick Frank, Capital |
| 330 | Nick Frank, Withdrawals |
| 410 | Service Revenue |
| 510 | Insurance Expense |
| 520 | Rent Expense |
| 530 | Supplies Expense |
| 540 | Contractor Expense |
Notice that we have left space between the accounts to be able to add more when we need to (and that we only used three digits instead of 4, because this is a pretty small company).
Now we need to create a ledger page for each account, but for now, let’s just make two pages: 110 Checking, and 310 Nick Frank, Capital.
| Date | Item | Post. Ref. | Debit | Credit | Balance | ||
|---|---|---|---|---|---|---|---|
| Debit | Credit | ||||||
| 20– | |||||||
| Oct | 1 | Balance | a | 0.00 | |||
| Date | Item | Post. Ref. | Debit | Credit | Balance | ||
|---|---|---|---|---|---|---|---|
| Debit | Credit | ||||||
| 20– | |||||||
| Oct | 1 | Balance | a | 0.00 | |||
Note that the opening balance is zero for both accounts since this is a new business.
Posting is a simple process. We take each journal entry, line by line, and methodically, carefully transfer the information to the appropriate ledger pages.
Here is the first entry posted to the ledgers:
| Date | Item | Post. Ref. | Debit | Credit | Balance | ||
|---|---|---|---|---|---|---|---|
| Debit | Credit | ||||||
| 20– | |||||||
| Oct | 1 | Balance | a | 0.00 | |||
| Oct | 1 | GJ1 | 20,000.00 | 20,000.00 | |||
| Date | Item | Post. Ref. | Debit | Credit | Balance | ||
|---|---|---|---|---|---|---|---|
| Debit | Credit | ||||||
| 20– | |||||||
| Oct | 1 | Balance | a | 0.00 | |||
| Oct | 1 | GJ1 | 20,000.00 | 20,000.00 | |||
Note a couple of important items:
- When we post from the journal to the ledger, we do exactly as the journal tells us. If we think it’s wrong, we go back to whoever analyzed the transaction and that person either makes a new journal entry or a correcting entry.
- When we post, we note the page of the journal so that we can go back later and find our source if we need to. We used GJ1 here because the entry came from page 1 of our General Journal (some businesses use special journals for certain purposes, but NeatNiks only has a general, all-purpose journal.)
We update the running total (the balance)—more on that later.
And we do one last thing: we note the account number in the POST. REF. column of the journal, like this:
| Date | Description | Post. Ref. | Debit | Credit |
|---|---|---|---|---|
| 20– | ||||
| Oct. 1 | Checking | 110 | 20,000.00 | |
| Oct. 1 | Nick Frank, Capital | 310 | 20,000.00 | |
| Oct. 1 | To record initial investment by owner and deposit to bank account |
Not only do these posting references provide cross-references for later, but they also let you track what you have posted so that if you get distracted for a moment, you’ll later know exactly where you left off.
Now let’s take a closer look at that account balance and revisit T accounts.