BAF 3M1 – Financial Accounting Fundamentals Bando

Chapter 7 Summary Notes: Posting

Name: Nirusen Section #: __ K/U Score:__/10

7.1 Posting

The balance column account has three money columns: one for the debit amounts, one
for the credit amount, and a separate one for the balance

Opening an account means … preparing an account and placing it in its proper place in
the ledger.

The new account will need an account title, a name for which an account is prepared, and
a number for identification.

Posting is the process … of transferring information from the journal to the ledger

For each individual amount in the journal you must perform the following 6 steps:

Step 1
Record the date. Use the next unused line in the account
Step 2
Record the page number of the journal (where the transaction is journalized) in the
posting reference (P.R.) column of the account. Write the letter J (for Journal) in front of
this number.

Step 3
Record the amount. Debit amounts are entered in the debit columns of the accounts.
Credit amounts are entered in the credit columns of the accounts.
Step 4
Calculate the new balance. Indicate whether this balance is debit or credit in the Dr/Cr
column.
Step 5
Enter the new account balance you calculated in step 4 in the balance column.
Step 6
Record the number of the ledger account that received the posting. Enter this account
number in the posting reference (P.R.) column on the same line as the amount posted.

Ch 7 Summary Notes - page 1 of 5

 Cross referencing is … the recording of the journal page number in the account and the
recording of the account number in the journal.

There are three reasons for cross-referencing:

1. Entries in the journal can be followed through to the accounts where they have
been posted.
2. Entries in accounts can easily be traced back to their source in the general journal.
3. If the posting process is interrupted, it is easy to tell where to begin again. Journal
amounts that have been posted will have the ledger account number entered.

Forwarding is … the process of continuing an account in a new account form by

carrying forward the date and the balance from the completed page.

The first four steps in the accounting cycle are as follows:

Transaction occurs Accounting entries Journal entries Ledger balanced by

recorded in journal posted to the ledger means of trial balance.
accounts
Source document

7.2 Overcoming Errors

Accountants made it a rule not to erase or use liquid paper to correct errors. Erasures in
the books might arouse the suspicion of the auditors, the official examiners of the books
and records.

Errors Found Immediately:

It is simple to correct an error that is found right away. Simply stroke neatly through the
incorrect figures or letters and write in the correct ones immediately above.

Errors Found Later:

The accounting department may not learn of an error until quite some time has passed. In
many cases the error can be corrected by means of an accounting entry.

Ch 7 Summary Notes - page 2 of 5

A correcting journal entry is an accounting entry that cancels the effect of an error.

Trial Balance Out of Balance:

After a source document is analyzed, the system proceeds like this:

1. Equal debit and credit amounts are recorded in a journal entry.

2. Debit and credit journal amounts are posted to debit and credit columns in ledger
accounts.
3. New ledger account balances are calculated each time amounts from the journal
are posted.
4. Final balances of each ledger account are identified as either debit or credit. Then
they are transferred to debit and credit columns of the trial balance.
5. The totals of the two columns in the trial balance are calculated. If both totals are
the same, the ledger is in balance. Account balances shown on the trial balance
are then used to prepare the income statement and balance sheet.
Quick Tests for Detecting a Single Error:
If the trial balance columns do not equal any one of the following four quick tests might
reveal a single error. First calculate the difference between the debit and credit totals.

1. If the trial balance difference is a multiple of 10, such as 10 cents, 1 dollar, and
so on, an error in addition has likely been made. Therefore, re-add the trial
balance columns. If this does not work, recalculate the balance of each account
2. Check both the ledger and the journal to see if the trial balance difference is equal
to an amount entered in the ledger or journal. Whenever you find such an amount,
verify it to make sure that it has been handled correctly.
3. Divide the trial balance difference by two. Then search the trial balance and the
ledger accounts for this divided amount. If an equivalent amount is found, check
it carefully. Then search (1) the trial balance and (2) the ledger accounts for this
divided amount. If an equivalent amount is found, check it carefully. In particular,
look to see if a debit amount has been posted or transferred as a credit, and vice
versa.
4. If the trial balance difference is a multiple of 9, it is likely that a transposition
error or a decimal point error has occurred.
A transposition error is mistake caused … by changing the order of digits when
transferring figures from one place to another.
A decimal point error is a mistake caused … by misplacing the decimal point.
Procedures for Encountering Multiple Errors:
If the four quick tests fail to reconcile a trial balance discrepancy, it is likely that multiple
errors have been made. The following chart describes events that lead to balanced ledger:

Ch 7 Summary Notes - page 3 of 5

 Start

Take off a trial

balance

Does the trial Yes

balance
balance?

No

Apply the 4 quick File the trial

tests shown on pages balance for a
End
237 and 238 future refrence

Yes
Does the
trial balance Sequence of Balancing Steps:
balance? Step 1: Re-add the trial balance columns.
No
Step 2: check the transfer of account balances
from the ledger to the trial balance.
Perform the next step
in the balancing Step 3: re add the accounts from the point of the
sequence(at right) previous balance. Double check the accounting
indicator( Dr/Cr)

Step 4: Check postings from the point of the

previous balance look for:
No -incorrect amounts
Any errors -amounts not posted
found? -amounts posted twice
-amounts posted in the wrong column
Yes
Step 5: Check to see that each individual journal
7.3 Comparing Accounting Softwareentry
Programs
balances to Manual
(from Accounting
the point of the previous
Make the corrections balance)
andrecalculate the trial _________________________________
balance totals.

Ch 7 Summary Notes - page 4 of 5

 Accounting software is a fundamental tool in the accounting profession.
 Using computerized accounting software helps us understand all the important
procedures of the accounting cycle.
 One example of computerized accounting software is:
Sage Simply Accounting
 Unfortunately, we will be waiting until Grade 12 Accounting to use Simply
Accounting so we will ignore pages 244-255.

Ch 7 Summary Notes - page 5 of 5