Posting Journal Entries To Ledger Accounts Accounting Essay

Published:

Analysing the transactions and recording them as journal entries is the first step in all the accounting cycle. It is begins at the starting of an accounting period , continues during the whole period. Some common data included in journal entries such as : Journal entry number; batch number; type amount of money; accounting period; and description; name, auto-reversing; date

Journal entries are enter in chronological order and debits are enter before credits

Transaction analysis is a process whereby its determine for a particular business event has an economic effect on the Assets, Liabilities or Equity of the business. It involves ascertaining the magnitude of the transaction , its base on the currency value.

Once after analysis the transactions, accountants classify and to record the events have economic effect via journal entries according to Debit-Credit rules. Frequently journal entries are usually record in specialized journals, for Example like sales journal and purchases journal.

Lady using a tablet
Lady using a tablet

Professional

Essay Writers

Lady Using Tablet

Get your grade
or your money back

using our Essay Writing Service!

Essay Writing Service

Journal entries are assigned for specific accounts by using a Chart of Accounts, and also the journal entry is then recorded in a ledger account

Posting Journal Entries to Ledger Accounts

For The second step of accounting cycle is post to the journal entries to the ledger accounts. Definition: Ledger are contains summarized of the financial information that classified by assignment to a specific account number where by using a Chart of Accounts. Ledger is a permanent book of record, It contains all accounts relating to the financial transactions of a business. Therefore, it also called as the book of accounts.

The journal entries are recorded during the first step provide those information about where accounts are to be debited and where to be credited and also the magnitude of the debit or credit (Refer to the debit-credit-rules). For A ledger account is a statement shaped like an English alphabet 'T' that systematically contains all the financial transactions relating to either a thing for a certain period of time .

The debit and credit values of journal entries are transferred to ledger accounts one by one in such a way that debit amount of a journal entry is transferred to the debit side of the relevant ledger account and the credit amount is transferred to the credit side of the relevant ledger account.

After posting all the journal entries, the balance of each account is calculated. The balance of an asset, expense, contra-liability and contra-equity account is calculated by subtracting the sum of its credit side from the sum of its debit side. The balance of a liability, equity and contra-asset account is calculated the opposite way i.e. by subtracting the sum of its debit side from the sum of its credit side.

Unadjusted Trial Balance

An unadjusted trial balance is the one which is created before any adjustments are made in the ledger accounts

A trial balance is a list of the balances of ledger accounts of a business at a specific point of time usually at the end of a period such as month, quarter or year.

An unadjusted trial balance is the one which is created before any adjustments are made in the ledger accounts.

The unadjusted trial balance is the listing of general ledger account balances at the end of a reporting period, before any adjusting entries are made to the balances to arrive at financial statements. You use the unadjusted trial balance as the starting point for analyzing account balances and making adjusting entries

The preparation of a trial balance is very simple. All we have to do is to list down the balances of the ledger accounts of a business

Unadjusted Trial Balance

In accounting, a record of the assets and liabilities of a company made during an accounting period before any mistakes are corrected or any other adjustments (such as unearned revenue or prepaid expenses) are calculated

Adjusting Entries

In accounting/accountancy, adjusting entries are journal entries usually made at the end of an accounting period to allocate income and expenditure to the period in which they actually occurred

Adjusting entries are journal entries recorded at the end of an accounting period to adjust income and expense accounts so that they comply with the accrual concept of accounting. Their main purpose is to match incomes and expenses to appropriate accounting periods.

Lady using a tablet
Lady using a tablet

Comprehensive

Writing Services

Lady Using Tablet

Plagiarism-free
Always on Time

Marked to Standard

Order Now

The transactions which are recorded using adjusting entries are not spontaneous but are spread over a period of time. Not all journal entries recorded at the end of an accounting period are adjusting entries. For example, an entry to record a purchase on the last day of a period is not consider as an adjusting entry. An adjusting entry always involves either income or expense account

Each adjusting entry usually affects one income statement account (a revenue or expense account) and one balance sheet account (an asset or liability account). For example, suppose a company has a $100 debit balance in its supplies account at the end of a month, but a count of supplies on hand finds only $30 of them remaining. Since supplies worth $70 have been used up, the supplies account requires a $70 adjustment so assets are not overstated, and the supplies expense account requires a $70 adjustment so expenses are not understated

Adjustments fall into one of five categories: accrued revenues, accrued expenses, unearned revenues, prepaid expenses, and depreciation

These are following types of adjusting entries:

â- Non-cash:

These adjusting entries record non-cash items such as allowance for doubtful debts or depreciation expenses

â- Accruals:

These include revenues not yet received nor recorded and expenses not yet paid nor recorded. Accrued revenues are revenues that have been recognized (that is, services have been performed or goods have been delivered), but their cash payment have not yet been recorded or received. When the revenue is recognized, it is recorded as a receivable.

Accrued expenses have not yet been paid for, so they are recorded in a payable account. Expenses for interest, taxes, rent, and salaries are commonly accrued for reporting purposes

For example, on loan accrued or interest expense in the current period but not yet paid.

â- Prepayments:

Adjusting entries for prepayments are necessary to account for cash that has been received prior to delivery of goods or completion of services. When this cash is paid, it is first recorded in a prepaid expense asset account; the account is to be expensed either with the passage of time (e.g. rent, insurance) or through use and consumption

These are expenses paid in advance and recorded as assets, to be recorded as expense. And revenues received in advance and recorded as liabilities, to be recorded as revenue .

For example, adjustments to unearned revenue, prepaid rent , prepaid telephone bill prepaid insurance, office supplies and so on .,

Adjusting entries are journal entries recorded at the end of an accounting period to adjust income and expense accounts so that they comply with the accrual concept of accounting. Their main purpose is to match incomes and expenses to appropriate accounting periods.

The transactions which are recorded using adjusting entries are not spontaneous but are spread over a period of time. Not all journal entries recorded at the end of an accounting period are adjusting entries. For example, an entry to record a purchase on the last day of a period is not an adjusting entry. An adjusting entry always involves either income or expense account.

Adjusted Trial Balance

An adjusted trial balance is a listing of all the account titles and balances contained in the general ledger after the adjusting entries for an accounting period have been posted to the accounts.

Adjusted trial balance can be used directly in the preparation of the statement of changes in stockholders' equity, income statement and the balance sheet. However it does not provide enough information for the preparation of the statement of cash flows.

An Adjusted Trial Balance is a list of the balances of ledger accounts which is to be created after the preparation of adjusting entries.

Adjusted trial balance contains balances of revenues and expenses along with those of assets, liabilities and equities

The format of an adjusted trial balance is same as that of unadjusted trial balance.

The adjusted trial balance is an internal document and is not a financial statement. The purpose of the adjusted trial balance is to be certain that the total amount of debit balances in the general ledger equals the total amount of credit balances

Financial Statements

Lady using a tablet
Lady using a tablet

This Essay is

a Student's Work

Lady Using Tablet

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Examples of our work

A set of financial statements is a structured representation of the financial performance and financial position of a business and how its financial position changed over time.

A financial statement (or financial report) is a formal record of the financial activities of a business, person, or other entity

It is the ultimate output of an accounting information system and has following 5 components:

1.Income Statement

2.Balance Sheet

3.Statement of Cash Flows

4.Statement of Changes in Equity

5.Notes and Other Disclosures

Financial statements are better understood in context of all other components of the financial statements. For example a balance sheet will communicate more information if we have the related income statement and the statement of cash flows too.

The income statement can be prepared in one of two methods.The Single Step income statement takes a simpler approach, total revenues and subtracting expenses to find the bottom line. The more Multi-Step income statement (as the name implies) takes several steps to find the bottom line, starting with the gross profit. It calculates operating expenses and, when deducted from the gross profit, yields income from operations.

Adding to income from operations is the difference of other revenues and other expenses. When combined with income from operations, this yields income before taxes. The final step is to deduct taxes, which finally produces the net income for the period measured

In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership, or a corporation . Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year

Income Statement -- revenue statement, statement of financial performance, earnings statement, operating statement, or statement of operations) is one of the financial statements of a company and shows the company's revenues and expenses during a particular period

Balance sheet

Balance sheet lists current assets such as cash in checking accounts and savings accounts, long-term assets such as common stock and real estate, current liabilities such as loan debt and mortgage debt due, or overdue, long-term liabilities such as mortgage and other loan debt. Securities and real estate values are listed at market value rather than at historical cost or cost basis. Personal net worth is the difference between an individual's total assets and total liabilities

Annual Financial Statements

Financial statements prepared for a period of one year are called annual financial statements and are required to be audited by an auditor (a chartered accountant or a certified public accountant). Annual financial statements are normally published in an annual report which also includes a directors' report (also called management discussion and analysis) and an overview of the company, its operations and past performance.

Income statement communicates the company's financial performance over the period while a balance sheet communicates the company's financial position at a point of time. The statement of cash flows and the statement of changes in equity tells us about how the financial position changed over the period. Disclosure notes to financial statements cover such material information which is not appropriate to be communicated on the face of the main financial statements.

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer temporary accounts to permanent accounts. An "income summary" account may be used to show the balance between revenue and expenses, or they could be directly closed against retained earnings where dividend payments will be deducted from. This process is used to reset the balance of these temporary accounts to zero for the next accounting period

Closing entries are journal entries made at the end of an accounting period which transfer the balances of temporary accounts to permanent accounts. Closing entries are based on the account balances in an adjusted trial balance.

Definition of 'Closing Entry'

A journal entry made at the end of the accounting period. The closing entry is used to transfer data in the temporary accounts to the permanent balance sheet or income statement accounts. The purpose of the closing entry is to bring the temporary journal account balances to zero for the next accounting period, which aids in keeping the accounts reconciled

Temporary accounts include:

1.Revenue, Income and Gain Accounts

2.Expense and Loss Accounts

3.Dividend, Drawings or Withdrawals Accounts

4.Income Summary Account

Investopedia explains 'Closing Entry'

As with all other journal entries, the closing entries are posted in the general ledger. After all closing entries have been finished, only the permanent balance sheet and income statement accounts will have balances that are not zeroed. For example, revenue, dividend, or expense accounts are temporary accounts that need to be zeroed off and the balance transfered to permanent accounts.

The sequence of the closing process and the associated closing entries is:

1. Close revenue accounts to income summary, by debiting revenue and crediting income summary.

2. Close expense accounts to income summary, by debiting income summary and crediting expense.

3. Close income summary to retained earnings, by debiting income summary and crediting retained earnings.

4. Close dividends to retained earnings, by debiting retained earnings and crediting dividends.

Income summary account consider is a temporary account which facilitates the closing process.

The permanent account to which balances are transferred depend upon the type of business. In case of a company, retained earnings account, and in case of a firm or a sole proprietorship, owner's capital account receives the balances of temporary accounts.