General Ledger Accounts

Each different type of asset, liability, revenue, expense and owners 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# 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 on these accounts. This can be su""arised by the diagra" below(

DEBIT entry (DR)

Account Nature A ET

CREDIT entry (CR)

Increases

Decreases

Decreases

LIABILITIE

Increases

Decreases

OWNERS EQUITY

Increases

Decreases

RE!EN"E

Increases

Increases

E#PEN E Increases

Decreases

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 debtors 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 .

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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 8ash At 9an' &nventory ()toc' *ffice Equip"ent 8reditors (Accounts !ayable 9an' :oan 8apital Owners contribution of Assets and Liabilities at commencement of business * L+NG General Ledger 8ash at 9an'
DATE 5+451457 8apital PARTIC"LAR )NL RE, <6+ DEBIT +/ 555.55 CREDIT BALANCE +/ 555.55 =R

,+LI+

DEBIT +/ 555 1 /55 +, 555

CREDIT -

; /55 ; +55 +/ ;55

&nventory
DATE 5+451457 8apital PARTIC"LAR )NL RE, <6+ DEBIT 1 /55.55 CREDIT BALANCE 1 /55.55 =R

*ffice Equip"ent
DATE 5+451457 8apital PARTIC"LAR )NL RE, <6+ DEBIT +, 555.55 CREDIT BALANCE +, 555.55 =R

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8reditors (Accounts !ayable

DATE 5+451457 8apital PARTIC"LAR )NL RE, <6+ DEBIT CREDIT ; /55.55 BALANCE ; /55.55 8R

9an' :oan
DATE 5+451457 8apital PARTIC"LAR )NL RE, <6+ DEBIT CREDIT ; +55.55 BALANCE ; +55.55 8R

8apital
DATE 5+451457 PARTIC"LAR >arious Assets ? :iabilities )NL RE, <6+ DEBIT CREDIT +/ ;55.55 BALANCE +/ ;55.55 8R

Note/ general %ournals are posted directly to the accounts affected by each entry @ Aas 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.

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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 C C C

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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.

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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 debtorsE 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 REC5 No DI C5 E#P DEBT+R CA * ALE G T "NDR6 BAN7 -

+.-.57 /.-.57 ;.-.5x +..-.57

)ales )ales 8o""ission :. EdwardsDdebtor )ales

8RR 8RR +;. +;/ 8RR +;0 +;1 8RR +;2 ,./5 15588 +1/.55 1 81(558 1./5 ..,./5 /.55 -;/.55

.55.55 055.55

.5.55 05.55 ,,.15 ,,1.-5

..5.55 005.55 ,/5.55

0,/.55

0,./5 1/.55

+ 52,./5 ..,./5

+;.-.57 ,,.-.57 ,2.-.57

). Gac'eyDdebtor &nterest revenue )ales 6. !ope

155.55 ( .(5588

15.55 (555(8 .8(5.8

2./.55 +1/.55 . 9:5588

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Post$ngs fro2 t%e cas% rece$'ts &ournal to t%e general ledger

General ledger (E<tract)

D$scount e<'ense (E<'ense)
DATE ,2.5-.57 PARTIC"LAR =ebtorEs control DEBIT +/.55 CREDIT BALANCE +/.55=R

De=tors (Asset)
DATE 5+.5-.57 ,2.5-.57 ,25-.57 PARTIC"LAR 9alance 9an' =iscount expense DEBIT 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

G T Collected (L$a=$l$ty)
DATE ,2.5-.57 9an' PARTIC"LAR DEBIT CREDIT ,//.,5 BALANCE ,//.,5 8R

Co22$ss$on (Re>enue)
DATE 5;.5-.57 9an' PARTIC"LAR DEBIT CREDIT ,,1.-5 BALANCE ,,1.-5 8R

Interest re>enue (Re>enue)

DATE ,,.5-.57 PARTIC"LAR 9an' DEBIT CREDIT 1/.55 BALANCE 1/.558R

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Ban? (Asset)
DATE ,2.5-.57 PARTIC"LAR 8ash receipts DEBIT -2;/.55 CREDIT BALANCE - 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 REC5No DI C5 E#P DEBT+R ALE G T "NDR6 BAN7 -

,557 5+45/ 5/45/ 5;45/ 5 +.45/

)ales )ales 8o""ission H. RichardsD debtor )ales 9. 6oelDdebtor &nterest revenue )ales F. Avalon Totals

8RR 8RR +;. +;/ 8RR +;0 +;1 8RR +;2 +5.55 38588 155.55 1 858588 -5.55 + 115.55 ,5.55 + /25.55

+ 055.55 , .55.55

+05.55 ,.5.55 + 555.55

+ 105.55 , 0.5.55 + 555.55

, /55.55

,/5.55 -55.55

. --5.55 + 115.55

+;45/ ,,45/ ,245/

, 255.55 : .88588

,25.55 :.8588 1 .88588

- -25.55 155.55 15 598588

General ledger (E<tract)

D$scount e<'ense (E<'ense)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

De=tors (Asset)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

Page : of 15

ales (Re>enue)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

G T Collected (L$a=$l$ty)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

Co22$ss$on (Re>enue)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

Interest re>enue (Re>enue)

DATE PARTIC"LAR DEBIT CREDIT BALANCE

Ban? (Asset)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

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Post$ng fro2 t%e cas% 'ay2ents &ournal to t%e general ledger Cas% 'ay2ents &ournal
DATE PARTIC"LAR ,+L I+ C*@ N+5 DI C5 RE!5 CREDIT+R P"RC*A E G T AAGE "NDR6 BAN7 -

5+.50.57 5-.50.57 5;.50.57 ++.50.57 ++.50.57 +/.50.57 +/.50.57 ,+.50.57 ,..50.57 -5.50.57

Iages !urchases =. 8otton Electricity Rent Iages T. Randall G. Ti""s =rawings Iages Totals

2-, 2-2-. 2-/ 2-0 2-1 2-2 2-; 2.5 2.+ 1(558 59(558 188588 19511 1./5 ,5.55 +./.55 ,/5.55 +/.55 +21./5 2..+ .55.55 .5.55

055.55

055.55 ..5.55 +21./5 2..5; -55.55 ;,./5 -55.55 055.55 +./.55 ,/5.55 ,,/.55 ,,/.55 055.55 38:58: . 118588

055.55

055.55 1 988588

General ledger (E<tract)

D$scount re>enue (Re>enue)
DATE -5.50.57 PARTIC"LAR 8reditors DEBIT CREDIT .,./5 BALANCE .,./5 8r

G T Pa$d (Negat$>e L$a=$l$ty)

DATE -5.50.57 PARTIC"LAR 9an' DEBIT .2..+ CREDIT BALANCE .2..+ =r

Cred$tors control (L$a=$l$ty)

DATE 5+.50.57 -5.50.57 -5.50.57 PARTIC"LAR 9alance =iscount revenue 9an' DEBIT .,./5 /2,./5 CREDIT BALANCE 1/5.55 8r 151./5 8r +,/.55 8r

Page 11 of 15

Purc%ases (E<'ense)
DATE -5.50.57 PARTIC"LAR 9an' DEBIT .55.55 CREDIT BALANCE .55.55 =r

Aages (E<'ense)
DATE -5.50.57 PARTIC"LAR 9an' DEBIT + 255.55 CREDIT BALANCE + 255.55 =r

Electr$c$ty (E<'ense)
DATE ++.50.57 9an' PARTIC"LAR DEBIT 2..5; CREDIT BALANCE 2..5; =r

Rent (E<'ense)
DATE ++.50.57 PARTIC"LAR 9an' DEBIT -55.55 CREDIT BALANCE -55.55 =r

DraB$ngs (Ca'$tal)
DATE ,..50.57 PARTIC"LAR 9an' DEBIT ,,/.55 CREDIT BALANCE ,,/.55 =r

Ban? (Asset)
DATE 5+.50.57 -5.50.57 PARTIC"LAR 9alance 8ash pay"ents DEBIT / 555.55 CREDIT - ..5.55 BALANCE / 555.55 =r + /05.55 =r

Page 1( of 15

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+5 DI CR E!5 CREDIT+ P"RC*A G T AAGE "NDR6 BAN7

+.;.5+ -.;.5+ ;.;.5+ ++.;.5+ ++.5;.5+ +/.;.5+ +/.;.5+ ,+.;.5+ ,..;.5+ -5.;.5+

Iages !urchases =. 8otton Electricity Rent Iages T. Randall G. Ti""s =rawings Iages Totals

2-, 2-2-. 2-/ 2-0 2-1 2-2 2-; 2.5 +/.55 .5.55 /25.55 + 555.55 -5.55 1/5.55 --.0. + 055.55 +05.55

, .55.55

, .55.55 + 105.55 1/5.55 --0.-0 +,55.55 -15.55 + ,55.55 , .55.55 /25.55 + 555.55 ;55.55 ;55.55 , .55.55 (1.35.3 1. ;38588

, .55.55

, .55.55 95588 ( ..8588 1 388588 1:.531 ; (88588

Post$ngs fro2 t%e cas% 'ay2ents &ournal to t%e general ledger

General ledger (E<tract)

D$scount re>enue (Re>enue)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

G T Pa$d ( Negat$>e L$a=$l$ty)

DATE PARTIC"LAR DEBIT CREDIT BALANCE

Cred$tors control (L$a=$l$ty)

DATE 5+.5;.57 PARTIC"LAR 9alance DEBIT CREDIT BALANCE - 1/5.55 8r

Page 1. of 15

Purc%ases (E<'ense)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

Aages (E<'ense)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

Electr$c$ty (E<'ense)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

Rent (E<'ense)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

DraB$ngs (Ca'$tal)
DATE PARTIC"LAR DEBIT CREDIT BALANCE

Ban? (Asset)
DATE 5+.5;.57 PARTIC"LAR 9alance DEBIT CREDIT BALANCE ,- +-5.55 =r

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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 ne t. !t is important to ensure that for every debit posted there is a corresponding credit posting.
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 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. 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 e actly as $tated (eg writing off bad debts . "ebit 9ad =ebts. #redit the debtor (and the control account .

)+"RNAL 8ash Receipts

8ash !ay"ents

)ales )ales Returns !urchases !urchases Returns <eneral

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