CHAPTER 5 Posting to the Ledger & Trial Balance 3rd In the “Particular” column of the ledger, state
Preparation briefly the nature of the transaction how cash existed in
the record.
THE LEDGER
4th In the “Folio” column of the ledger, write down the
A grouping of the entity’s account is referred to
page of the Journal where the account “Cash in Bank”
as a ledger.
entry was taken from. Simultaneously, write down in
After transactions has been recorded in the
the Folio column of the Journal the account or page
journal, the entries will then be transferred to
number of the ledger where the entry is being posted.
the ledger
This is called cross referencing or cross indexing.
The process of transferring the entries from the
journal to the ledger is what we call as POSTING 5th Enter in the debit column of the ledger “Cash in
(2nd Step) Bank” the amount.
Posting simply means updating the ledger
**The same procedure is followed in posting the next
accounts due to the effects of transactions
account and subsequent journal entries.
recorded in the journal.
FOOTING THE GENERAL LEDGER
POSTING (2nd Step)
• After posting the journal entries, the amounts
Posting simply means updating the ledger
of debit and credit are being totaled and usually
accounts due to the effects of transactions
done at the end of the accounting period.
recorded in the journal.
Classifying is the transfer of the entries from Footing is the process of adding each of the two
the journal is actually the sorting process amount columns of an account or item in the
which means putting value in a certain place general ledger and finding their balances thereof.
according to its kind, class or nature
Classifying is the second phase of • If the total debit is greater than the total credit,
accounting. the difference is called a debit balance, and
written on the particulars column of the debit
ACCOUNTS IN THE GENERAL LEDGER side.
• If the total credit is greater than the total debit,
• Balance Sheet or Permanent Accounts
the difference is called a credit balance, and
– Assets, Liabilities, Owner’s Equity written on the particulars column of the credit
side.
• Income Statement or Temporary Accounts
** An account with a debit or credit balance is
– Income and Expenses
called an OPEN ACCOUNT. Only these accounts are
– Used to gather information for a particular accounting to be included in the Trial Balance.
period
• If the total debit is equal to the total credit, the
– At the end of the period the balances of these balance is Zero and the account is called IN
accounts are transferred to a permanent owner’s equity BALANCE OR a CLOSED ACCOUNT
account.
** CLOSED ACCOUNTS are NOT to be included in
PROCEDURES IN FILLING UP THE GENERAL LEDGER the Trial Balance.
1st Turn the ledger to the page where the account, Cash TRIAL BALANCE (3RD Step)
in Bank is located.
• A list of all accounts with their respective debit
2nd In the ledger account Cash in Bank, enter in the or credit balances.
date column at left side of the said ledger the date • It is merely copying carefully of what has been
when the transaction occurred as shown in the journal. footed in the ledger.
• It is prepared to verify the equality of debits and
credits in the ledger at the end of each
accounting period or at any time the postings 2. Error in determining the account balances:
are updated. • A balance was incorrectly computed
• A control device that helps minimize accounting • A balance was entered in the wrong balance
errors. column
• A trial does not prove that transactions have 3. Error in preparing the trial balance:
been correctly analyzed and recorded in the • One of the columns of the trial balance was
proper accounts. incorrectly added
• Again, it proves one aspect of the ledger, that is • The amount of an account balance was
the equality of the debits and credits. incorrectly recorded on the trial balance.
• A debit balance was recorded in the trial
TYPES OF TRIAL BALANCE
balance as a credit or vice versa, or a balance
• Trial Balance of Balances was omitted entirely
– Under this form, listings of the debit or credit EXAMPLE OF ERRORS & OMISSIONS COMMITTED
balances of each account in the general ledger that (TRIAL BALANCE IS STIL IN BALANCE)
are remaining open after footing has been done.
• A journal entry may not have been recorded in the
• Trial Balance of Totals journal (omission)
– Under this form, both debit and credit totals of • A journal entry may not have been posted in the
the general ledger will appear in the listing including ledger in its entirety (omission)
the closed account (total debit is equal to credit).
• Posting a correct amount to a wrong account (error)
**When you are required to prepare a Trial
• Wrong charging of account title in the journal entry
Balance, and no mention as to its form, it is
and was carried to posting in the ledger (error)
understood to be a Trial Balance of balances.
ERRORS NOT DETECTED BY A TRIAL BALANCE
PROCEDURES IN THE PREPARATION OF A TRIAL
BALANCE • Failure to record or post a transaction
1. List the account titles (only open accounts) in • Recording the same transaction more than once
numerical order.
• Recording an entry but with the same erroneous debit
2. Obtain the account balance of each account from and credit amounts
the ledger (or T-Account) and enter the debit
• Posting a part of a transaction correctly as debit or
balances in the debit column and the credit
credit but to the wrong account.
balances in the credit column.
EXAMPLE OF ERRORS & OMISSIONS COMMITTED
3. Add the debit and credit columns.
(TRIAL BALANCE IS OUT OF BALANCE)
4. Compare the total
• The footing of the debit and credit columns of the trial
5. If the total debit and credit is equal, double rule balance is wrong (error)
ERRORS IN TRIAL BALANCE • An account with “open balance” in the General Ledger
was not listed in the trial balance (omission)
• Errors and omissions are very common to occur
because of the volume of works to be done • The footing of the account balance in the General
which may result a trial balance either to be still Ledger is wrong (error)
“in balance” or “out of balance”.
EXAMPLE OF ERRORS & OMISSIONS COMMITTED
1. Error in posting a transaction to the ledger:
(TRIAL BALANCE IS OUT OF BALANCE)
• An erroneous amount was posted to the
account • Omission in posting either the debit or credit entry
• A debit entry was posted as credit or vice versa (omission)
• A debit or credit posting was omitted
• The balance of an account is listed in the trial balance d. If the amount of difference is divisible by 9, it
with a wrong amount such as transposition of the indicates as sliding error.
amount of sliding of the amount or listing a different
• Suggested sub-steps could not be applied if there are
amount from the correct one.
two or more errors being committed simultaneously.
EXAMPLE OF ERRORS & OMISSIONS COMMITTED
• If the trial balance is still out of balance, the only
(TRIAL BALANCE IS OUT OF BALANCE)
alternative is to go over with your work starting from
• Transposition error the trial balance, to the ledger, and finally to the
journal.
– Figures are incorrectly written
ERRORS THAT COULD NOT BE REVEALED BY A TRIAL
– Example, 3,628 is written as 3,682 or 6,328
BALANCE
• Sliding error
• A journal entry that has not been posted by its
– Error in placing the decimal point entirety
– Example P10,000.00 written as P1,000.00 or P545.00 • A debit or credit item of a journal entry which has
written as P5,450.00 or P235 written as P2.35 been posted in a wrong account and the balance of an
account listed in the trial balance is in its normal
WARNING!!!! balance.
• When a deliberate or an intentional act is done by
letting it appear that the trial balance is “in balance”
although actually “out of balance” by changing the
amount or charging an account with the amount of the
unlocated difference, the trial balance is said to “forced
balance” which is NEVER PERMISSIBLE in the accounting
practice.
LOCATING ERRORS IN THE TRIAL BALANCE
1. Add again the debit and credit columns of the trial
balance, if out of balance, then,
2. Go over with listed account balances and check
whether they are all in its normal balance. If found
correct and the trial balance is still “out of balance”,
then
3. Get the amount of the difference between the debit
and credit totals.
LOCATING ERRORS IN THE TRIAL BALANCE
a. If the amount of difference is 1,10,100,1000 it might
be an error in addition
b. If the amount of difference is 9 or a multiple of 9, the
orders of figures written are reversed (transposition
error)
c. If the amount of difference is divisible by 2 it might be
an error in listing the account balance/.
