CHAPTER 6

• POSTING TO THE LEDGER AND TRIAL

BALANCE PREPARATION
• ( 2nd and 3rd Steps of the Accounting Process )
 Learning Objectives:

After studying this chapter, we should be able to:

1.Acquaint the proper use of a ledger under the
manual accounting systems and develop skills in
posting process.
2. Prepare a trial balance and learn how to locate
errors in the trial balance.
 POSTING TO THE LEDGER
2nd Step of the Accounting Process
 After the transaction has been recorded in the
journal, the entries in the journal will then be
transferred to another book called Ledger for
final recording. The process of transferring
entries from the journal to the Ledger is what
we call “Posting”, which is the 2nd step of the
accounting process. Posting simply means
updating the ledger accounts due to the effects
of the transactions recorded in the journal.
 POSTING TO THE LEDGER
2nd Step of the Accounting Process
 The transfer of entries from journal to Ledger
is actually the sorting process which means
putting each value in a certain place according
to its kind, class or nature. This refers to “
Classifying” which is the second phase of
accounting.
PROCEDURES IN POSTING JOURNAL ENTRIES TO THE
LEDGER
( Under Manual Accounting System )

 Remember, each item or account is provided

with a ledger. The account in the ledger are
arranged and placed with an account or page
number according to the sequence of the listing
of account titles in the Chart of Accounts
( Assets, Liabilities, Owner’s Equity, Income &
Expenses ).
 Using our illustrative problem, DAVAO
LAUNDRY SERVICES, the following are the
steps in posting the journal entries to the
General Ledger.
PROCEDURES IN POSTING JOURNAL ENTRIES TO THE
LEDGER
( Under Manual Accounting System )

1st step
As the first account in the General Journal entry
is “Cash in Bank” turn the ledger to the page
where the account “Cash in Bank” is located.
2nd step
In the ledger of the account “Cash in Bank” enter
in the date column at the left side ( debit ) of the
said ledger the date when transaction occurred as
shown in the journal.
PROCEDURES IN POSTING JOURNAL ENTRIES TO THE
LEDGER
( Under Manual Accounting System )

3rd step
In the “particular” column of the ledger, state
briefly the nature of the transaction, how cash
existed in the record.
4rth step
In the “folio” column of the ledger, write down the
page of the journal where the account “Cash in
Bank” entry was taken from simultaneously, write
down in the folio column of the journal the
account or page number assigned to the account “
Cash in Bank” . This is called “ cross-referencing”
or “cross indexing”.
PROCEDURES IN POSTING JOURNAL ENTRIES TO THE
LEDGER
( Under Manual Accounting System )

5th step
Enter in the debit money column of the ledger “
Cash in Bank” the amount and the same
procedure is followed in posting the next account
and subsequent journal entries.
 POSTING A JOURNAL ENTRY

General Journal J1
Date Account Title and Explanation Ref Debit Credit
2002
01.Sep Cash 101 850,000
S. Santos, Capital 850,000
Invested cash in business.
General Ledger
Cash 101
Date Account Title and Explanation Ref Debit Credit Balance
2002
01.Sep J1 850,000 850,000

In the ledger, enter in the appropriate columns of the account(s)

debited the date, journal page, and debit amount shown in the journal
and the account number to which the journal was posted.
 THE TRIAL BALANCE
 A trial balance is a list of accounts and their balances at a
given time.
 The primary purpose of a trial balance is to prove the
mathematical equality of debits and credits after posting.
 A trial balance also uncovers errors in journalizing and
posting.
 The procedures for preparing a trial balance consist of
1. listing the account titles and their balances,
2. totaling the debit and credit columns, and
3. proving the equality of the two columns.
 A TRIAL BALANCE

PIONEER ADVERTISING AGENCY

Trial Balance
October 31, 2002
Debit Credit
Cash $ 15,200
Advertising Supplies 2,500
Prepaid Insurance 600
Office Equipment The total debits 5,000
Notes Payable
Accounts Payable
must equal the $ 5,000
2,500
Unearned Revenue total credits. 1,200
C. R. Byrd, Capital 10,000
C. R. Byrd, Drawings 500
Service Revenue 10,000
Salaries Expense 4,000
Rent Expense 900
$ 28,700 $ 28,700
 LIMITATIONS OF A
TRIAL BALANCE
 A trial balance does not prove that all transactions have
been recorded or that the ledger is correct.
 Numerous errors may exist even though the trial balance
columns agree.
 The trial balance may balance even when
1. a transaction is not journalized,
2. a correct journal entry is not posted,
3. a journal entry is posted twice,
4. incorrect accounts are used in journalizing or posting,
5. offsetting errors are made in recording the amount of
the transaction.
Some errors and omissions committed that will
result a trial balance to be “in-balance” are as
follows:
1.A transaction may not have been recorded in the journal;
( omission )
2.A journal entry may not have been posted in the ledger
in its entirely; ( omission )
3.Posting a correct amount to a wrong account; ( error ).
Example: The correct amount of P 250 which was debited
to Accounts Receivable was erroneously posted to
Accounts Payable ledger.
4.Wrong charging of account title in the journal and was
carried to posting in the ledger; ( error ). Example: When
a typewriter was bought, it was erroneously debited to
Office Supplies Expense account instead of Office
Equipment.
Some errors and omissions committed that will result
a trial balance to be “out of balance” are as follows:
1.The footing of the debit and credit columns of the
trial balance is wrong: ( error )
2.An account with “open balance” in the General
Ledger was not listed in the trial balance ( omission )
3.The footing of the account balance in the General
Ledger is wrong; ( error )
4.Posting the amount of an item to the wrong side of
the account or ledger; ( error )
5.Omission in posting of either debit or credit entry in
the journal; ( omission ) Example: in a journal entry
debiting Cash and crediting Accounts Receivable,
posting was made for Cash but no posting made for
the Accounts Receivable account.
Some errors and omissions committed that will result
a trial balance to be “out of balance” are as follows:

6. The balance of an account is listed in the trial

balance with a wrong amount, such as transposition of
the amount or sliding of the amount or listing a
different amount from the correct one.
Example of an error in the transposition is the figure
1,528 is incorrectly written as 1,258. Sliding, is an
error in placing the decimal point of a figure. Like for
example, P 10.00 is incorrectly written as P 1.00, P
235.00 as P 2.35 and the like.
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 un located difference, the trial balance is said to be
“ forced balance” which is never permissible in the
accounting practice. This deliberate act, however, can
be discovered during an “audit” or “examination of
books of accounts.”
LOCATING ERRORS IN THE TRIAL BALANCE

1st step 2nd step

Add again the Go over with the listed account balances
debit and credit and check whether they are all in its
columns of the normal balances. A debit item might have
trial balance. If out been listed in the credit column and vice
of balance then, versa. If found correct and the trial
balance is still “out of balance, “then,
LOCATING ERRORS IN THE TRIAL BALANCE

3rd step
Get the amount of difference between the debit and credit totals.
If the amount of difference is 1, 10, 100, or 1,000, it might be an
error in addition;
If the amount of difference is 9 or a multiple of 9, the orders of
figures written are reversed : for example, 25 was written as 52 or 38
was written as 83. This is a transposition error;
If the amount of difference is divisible by 2 it might be an error in
listing the account balance. A debit amount was listed in the credit
column of the trial balance and vice versa.
If the amount of difference is divisible by 9 ( can be divided by 9 ) it
indicates as slide or misplacement of decimal point. For example, P
50 is incorrectly written as P5 or P235 as P2.35. This is a sliding
error.
LOCATING ERRORS IN THE TRIAL BALANCE

If the trial balance is still out of balance, the only alternative is to go

over with your work starting from the Trial Balance, to the ledger
and finally to the journal rather than tracing the error from the
Journal, to the Ledger and to the Trial balance.
 TRANSACTION ANALYSIS

Marc Doucet decides to open a computer

programming service.

BANK

Softbyt
e
 TRANSACTION ANALYSIS
TRANSACTION 1
On September 1, he invests P15,000 cash in the
business, which he names Softbyte.

Sept. 1 Cash 15,000

M. Doucet, Capital 15,000
Initial Investment.

Trans. # Assets = Liabilities + Owner's Equity

Accounts M. Doucet,
Cash Supplies Equipment Payable Capital
(1) 15,000 = 15,000 Investment
 TRANSACTION ANALYSIS
TRANSACTION 2

Softbyte purchases computer equipment for P7,000 cash.

Sept. 2 Office Equipment 7,000

Cash 7,000

Trans. # Assets = Liabilities + Owner's Equity

Accounts M. Doucet,
Cash Supplies Equipment Payable Capital
15,000 15,000 Investment
(2) (7,000) 7,000
Balance 8,000 + 7,000 = 15,000
 TRANSACTION ANALYSIS
TRANSACTION 3
Softbyte purchases computer paper and supplies expected to last
several months from Chuah Supply Company for P1,600 on account.

Sept 3 Office Supplies 1,600

Accounts Payable 1600

Trans. # Assets = Liabilities + Owner's Equity

Accounts M. Doucet,
Cash Supplies Equipment Payable Capital
Balance 8,000 7,000 15,000
(3) 1,600 1,600
Balance 8,000 + 1,600 + 7,000 = 1,600 + 15,000
 TRANSACTION ANALYSIS
TRANSACTION 4
Softbyte receives P1,200 cash from customers for
programming services it has provided.

Sept. 4 Cash 1,200

Service Income 1,200

Trans. # Assets = Liabilities + Owner's Equity

Accounts M. Doucet,
Cash Supplies Equipment Payable Capital
Balance 8,000 1,600 7,000 1,600 15,000
(4) 1,200 1,200 Service Revenue
Balance 9,200 + 1,600 + 7,000 = 1,600 + 16,200
 TRANSACTION ANALYSIS
TRANSACTION 5
Softbyte receives a bill for P250 for advertising its business
but pays the bill on a later date.

Sept. 5 Advertising Expense 250

Accounts Payable 250

Trans. # Assets = Liabilities + Owner's Equity

Accounts M. Doucet,
Cash Supplies Equipment Payable Capital
Balance 9,200 + 1,600 + 7,000 = 1,600 + 16,200
(5) 250 (250) Advertising Expense
Balance 9,200 1,600 7,000 1,850 15,950
 TRANSACTION ANALYSIS
TRANSACTION 6
Softbyte provides programming services of P3,500 for
customers and receives cash of P1,500, with the balance
payable on account.

Cash 1,500
Accts Receivable 2,000
Service Income 3,500
Trans. # Assets = Liabilities + Owner's Equity
Account Accounts M. Doucet,
Cash Receivable Supplies Equipment Payable Capital
Balance 9,200 + 0 + 1,600 + 7,000 = 1,850 15,950
(6) 1,500 2,000 3,500 Service Revenue
Balance 10,700 2,000 1,600 7,000 1,850 19,450
 TRANSACTION ANALYSIS
TRANSACTION 7
Expenses paid in cash for September are store rent,
P600, salaries of employees, P900, and utilities, P200.
Sept 7 Rent Expense 600
Salaries Expense 900
Utilities Expense 200
Cash 1,700
Trans. # Assets = Liabilities + Owner's Equity
Account Accounts M. Doucet,
Cash Receivable Supplies Equipment Payable Capital
Balance 10,700 2,000 1,600 7,000 1,850 19,450
(7) (600) (600) Rent Exp.
(900) (900) Salaries Exp.
(200) (200) Utilities Exp.
Balance 9,000 + 2,000 + 1,600 + 7,000 = 1,850 + 17,750
 TRANSACTION ANALYSIS
TRANSACTION 8
Softbyte pays its advertising bill of P250 in cash.

Sept 8 Accounts Payable 250

Cash 250

Trans. # Assets = Liabilities + Owner's Equity

Account Accounts M. Doucet,
Cash Receivable Supplies Equipment Payable Capital
Balance 9,000 2,000 1,600 7,000 1,850 17,750
(8) (250) (250)
Balance 8,750 + 2,000 + 1,600 + 7,000 = 1,600 + 17,750
 TRANSACTION ANALYSIS
TRANSACTION 9
The sum of P600 in cash is received from customers who
have previously been billed for services in Transaction 6.

Sept 9 Cash 600

Accounts Receivable 600

Trans. # Assets = Liabilities + Owner's Equity

Account Accounts M. Doucet,
Cash Receivable Supplies Equipment Payable Capital
Balance 8,750 2,000 1,600 7,000 1,600 17,750
(9) 600 (600)
Balance 9,350 + 1,400 + 1,600 + 7,000 = 1,600 + 17,750
 TRANSACTION ANALYSIS
TRANSACTION 10
Marc Doucet withdraws P1,300 in cash
from the business for his personal use.

Sept 10 M. Doucet, Drawings 1,300

Cash 1,300

Trans. # Assets = Liabilities + Owner's Equity

Account Accounts M. Doucet,
Cash Receivable Supplies Equipment Payable Capital
Balance 9,350 1,400 1,600 7,000 1,600 17,750
(10) (1,300) (1,300) Doucet, Drawings
Balance 8,050 + 1,400 + 1,600 + 7,000 = 1,600 + 16,450
 Cash
DEBIT CREDIT

( 1.) 15,000 7,000 ( 2 )

( 4. ) 1,200 1,700 ( 7.)
( 6. ) 1,500 250 (8.)
( 9. ) 600 1,300 (10)
18,300 10,250
8,050
 Accounts Receivable

DEBIT CREDIT

( 6) 2,000 600 ( 9 )
1,400
 TRIAL BALANCE
SOFTBYTE
TRIAL BALANCE
SEPTEMBER 30, 2015
ACCOUNTS DEBIT CREDIT
CASH P 8,050 P
ACCOUNTS RECEIVABLE 1,400  
SUPPLIES 1,600  
EQUIPMENT 7,000  
ACCOUNTS PAYABLE 1,600
M.DOUCET, DRAWINGS 1,300  
M.DOUCET, CAPITAL   15,000
SERVICE REVENUE 4,700
SALARIES EXPENSE 900
RENT EXPENSE 600
ADVERTISING EXPENSE 250
UTILITIES EXPENSE 200
     
TOTAL P 21,300 P 21,300
 SOFTBYTE
WORKSHEET
SEPTEMBER 30, 2015
 
  TRIAL BALANCE INCOME STATEMENT BALANCE SHEET

ACCOUNTS DEBIT CREDIT DEBIT CREDIT DEBIT CREDIT

CASH P 8,050 P     P 8,050 P

ACCOUNTS RECEIVABLE 1,400       1,400  
SUPPLIES 1,600       1,600  
EQUIPMENT 7,000       7,000  
ACCOUNTS PAYABLE 1,600     1,600
M.DOUCET, DRAWINGS 1,300       1,300  
M.DOUCET, CAPITAL   15,000     15,000

SERVICE REVENUE 4,700   4,700    

SALARIES EXPENSE 900 900      
RENT EXPENSE 600 600      
ADVERTISING EXPENSE 250 250      
UTILITIES EXPENSE 200 200      
             
TOTAL P 21,300 P 21,300 1,950 4,700 19,350 16,600

      2,750     2,750
 
             
  4,700 4,700 19,350 19,350
 FINANCIAL STATEMENTS AND
THEIR INTERRELATIONSHIPS

SOFTBYTE
Income Statement
For the Month Ended September 30, 2015
Revenues
Service revenue P 4,700
Expenses
Salaries expense P900
Rent expense 600
Advertising expense 250
Utilities expense 200
Total expenses 1,950
Net income P2750

Net income of P2,750 shown on the income statement is added to the

beginning balance of owner’s capital in the statement of owner’s equity .
 FINANCIAL STATEMENTS AND THEIR
INTERRELATIONSHIPS
SOFTBYTE
Statement of Owner's Equity
For the Month Ended September 30, 2015

M. Doucet, Capital, September 1 P15,000

Add: Net income 2,750 2,750
P17,750
Less: Drawings 1,300
M. Doucet, Capital September 30 P16,450

Net income of P2,750 is carried forward from the income statement to

the statement of owner’s equity. The owner’s capital of P16,450 at the
end of the reporting period is shown as the final total of the owner’s
equity column of the Summary of Transactions.
 FINANCIAL STATEMENTS AND
THEIR INTERRELATIONSHIPS
Owner’s SOFTBYTE
capital of Balance Sheet
P16,450 at the September 30, 2002
end of the Assets
reporting Cash P8,050
period – shown Accounts receivable 1,400
in the Supplies 1,600
statement of Equipment 7,000
owner’s equity Total assets P18,050
– is also shown
on the balance Liabilities and Owner's Equity
sheet. Cash of Liabilities
P8,050 on the Accounts payable P1,600
balance sheet is Owner's Equity
reported on the M. Doucet, Capital 16,450
cash flow Total liabilities and owner's equity P18,050
statement.