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CHAPTER EIGHT

The
General
Ledger
8-3

THE GENERAL LEDGER


Objectives:
1. Post entries from a general journal to
general ledger accounts.
2. Set up and arrange the general ledger
accounts.
3. Complete the Balance columns of the
general ledger accounts.
4. Correct errors in the general ledger.
5. Prepare a trial balance from the general
ledger accounts.
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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-4

Posting to the Ledger

• The year, month, and day are


entered in the Date column.
• The description column is for
special notations you may want to
enter.

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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-5

Posting to the Ledger (continued)

• The Posting Reference column is


used to refer back to the original
entry. A “J3” entry would indicate
that the information came from the
journal on page 3.

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8-6

Posting to the Ledger (continued)

• If a debit appears in the journal, it


will appear as a debit in the ledger.
• If a credit appears in the journal, it
will appear as a credit in the ledger.
• A running balance appears in the
ledger.

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8-7

Posting to the Ledger (continued)

• The number of the ledger account


will appear in the Post Reference
column in the journal.

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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-8

Setting Up and Using Accounts in


the General Ledger

• To make posting as simple as


possible, a separate ledger sheet is
used for each account.
• All the accounts together make up
the general ledger.

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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-9

Completing the Balance Columns of


the Accounts

• As each entry is posted from the


journal, the ledger account balance
is computed and recorded in either
the Debit Balance or the Credit
Balance column.

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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-10

Correcting Errors in the Ledger

• If an amount is incorrectly posted


or posted to the wrong account, the
error is corrected by drawing a
single line through the incorrect
data and writing the correct
information above it.

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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-11

Correcting Errors in the Ledger


(continued)

• If the error involves a journal entry


that was incorrectly recorded and
posted to the wrong account, then
another entry is required to correct
the error.

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8-12

Proving the Ledger

•The trial balance tests the accuracy of


the entries in the ledger.
•Account numbers are recorded in the
first column of the trial balance for
identification and reference purposes.

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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-13

Accounting Terminology

•Balance ledger form


•General ledger
•Ledger
•Posting
•Posting reference

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8-14

Chapter Summary

• The facts about a business’


transactions are sorted and
grouped by transferring the
information in the journal to the
ledger. This is called posting.

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8-15

Chapter Summary(continued)
• An account must be provided in the
ledger for each financial item in the
business.
• In the posting process, posting
references are recorded to permit
easy tracing of an entry from the
journal to the ledger or from the
ledger to the journal.
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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-16

Chapter Summary (continued)

• Ledger accounts are arranged in an


easy-to-follow order for preparing
financial statements.
• Balance sheet accounts are first and
income statement accounts follow.

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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-17

Chapter Summary (continued)

• After all postings for a month


have been completed, a trial
balance is taken to prove the
accuracy of the ledger.

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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-18

Topic Quiz
Answer the following true/false questions:

1. An account should be provided for


every financial item in the business. TRUE

2. The process of transferring information


from the journal to the ledger is called TRUE
posting.
3. Income accounts are generally listed
first in the general ledger. FALSE

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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-19

Investigating on the Internet

Sources of information about ledgers and


accounts can be accessed at some web
locations of businesses.
As a research assignment, access a
website and report those sources of
information that might concern the use of
ledgers and posting in business.
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Accounting Fundamentals, 7/e © 2006 The McGraw-Hill Companies, Inc., All Rights Reserved.
8-20

3. Income accounts are generally listed first in


the general ledger.

FALSE
Balance sheet accounts appear first
in the general ledger followed by
income accounts.

(Return to Topic Quiz)


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