Posting to the Ledger: The Classifying Phase

The third step in the accounting cycle is to post the journal entries into the ledger.
Posting refers to the process of transferring entries in the journal into the accounts in the ledger. Posting
to the ledger is the classifying phase of accounting.
An accounting ledger refers to a book that consists of all accounts used by the company, the debits and
credits under each account, and the resulting balances.
While the journal is referred to as Books of Original Entry, the ledger is known as Books of Final Entry.

Example: Posting Process

Let us illustrate how accounting ledgers and the posting process work using the transactions we had in
the previous lesson. Click here to see the journal entries we will be using.
Let's start. Take transaction #1 first.
Date

Particulars

2014

Debit

Dec 1 Cash

Credit

10,000.00

Mr. Gray, Capital

10,000.00

Now, go to the ledger and find the accounts. Post the amounts debited and credited to the appropriate
side. Debits go to the left and credits to the right. After posting the amounts, the cash and capital account
would look like:
Cash

Mr. Gray, Capital

10,000.00

10,000.00

Explanation: First, we posted the entry to Cash. Cash in the journal entry was debited so we placed the
amount on the debit side (left side) of the account in the ledger. For Mr. Gray, Capital, it was credited so
the amount is placed on the credit side (right side) of the account. And that's it. Posting is simply
transferring the amounts from the journal to the respective accounts in the ledger.
Note: The ledger accounts (or T-accounts) can also have fields for account number, description or
particulars, and posting reference.
Let's try to post the second transaction.

5 Taxes and Licenses

370.00

Cash

370.00

After posting the above entry, the affected accounts in the ledger would look like these:
Cash
10,000.00

Taxes and Licenses

370.00

370.00

There was a debit to Taxes and Licenses so we posted that in the left side (debit side) of the
account. Cash was credited so we posted that on the right side of the account.
Notice that after posting transaction #2, we now can get a more updated balance for each account. Cash
now has a balance of $9,630 ($10,000 debit and 370 credit). Nice, right? Post all the other entries and we
will be able to get the balances of all the accounts.

General Ledger Example

A general ledger contains accounts that are broad in nature such as Cash, Accounts Receivable,
Supplies, and so on. There is another type of ledge which we call subsidiary ledger. It consists of
accounts within accounts (i.e., specific accounts that make up a broad account).
For example, Accounts Receivable may be made up of subsidiary accounts such as Accounts Receivable
Customer A, Accounts Receivable Customer B, Accounts Receivable Customer C, etc.
Okay let's go back to the general ledger. In the above discussion, we posted transactions #1 and #2
into the ledger. If we post all 15 transactions (click here to see the entries) and get the balances of each
account at the end of the month, the ledger would look like this:

ASSETS

Cash

10,000.00 370.00
1,900.00 3,000.00
3,200.00 8,000.00
4,250.00 500.00
12,000.00 7,000.00
1,500.00
3,500.00
7,480.00

LIABILITES

CAPITAL

Accounts Payable

Mr. Gray, Capital

500.00

8,000.00
1,500.00
9,000.00

Loans Payable

12,000.00

10,000.00
3,200.00
13,200.00
Mr. Gray, Drawing

7,000.00

Service Revenue

1,900.00
4,250.00
3,400.00
9,550.00

Accounts Receivable

4,250.00 4,250.00
3,400.00
3,400.00
Service Supplies

1,500.00

Furniture and Fixtures

3,000.00

Service Equipment

16,000.00

Rent Expense

1,500.00

Salaries Expense

3,500.00

Taxes and Licenses

370.00

After all accounts are posted, we can now derive the balances of each account. So how much Cash do
we have at the end of the month? As shown in the ledger above, the company has $7,480 at the end of
December.
How about accounts receivable? Accounts payable? You can find them all in the ledger.
Note: The above is a simplified and theoretical example of a ledger. In reality, companies have a lot more
than 15 transactions! They may have hundreds or even thousands of transactions in one day. Imagine
how lengthy the ledger would be. Worse, imagine the work needed in posting that many transactions
manually.
Because of technological advancements however, most accounting systems today
perform automated posting process. Nonetheless, the above example shows how a ledger works.