CHAPTER VI

POSTING TO THE LEDGER AND TRIAL BALANCE

PREPARATION

At the end of the chapter, learners shall have:

 defined general ledger and described the procedures in recording in the

general ledger;
 differentiated general ledger from a subsidiary ledger;
 classified accounts as either temporary or permanent;
 known how to post entries in the general and subsidiary ledgers;
 enumerated various account titles and their normal balances;
 explained the importance of a trial balance;
 prepared a trial balance; and
 known how to find and correct errors in a trial balance.

General Ledger
A complete record of the daily business transactions is kept in a journal.
But the debit and credit entries do not show the changes that took place for a
specific account. It is therefore necessary to transfer the entries to individual
accounts so that all changes in any single account may be summarized in only
one place called the ledger account. The balance of any account could be
determined at any given date in the ledger.

The compilation of all ledger accounts is the general ledger which is called
the book of final entry. The accounts in a general ledger are classified into two
general groups:

1. Permanent accounts which can be found in the statement of financial

position that includes assets, liabilities and capital accounts.

2. Temporary Accounts or nominal accounts are found in the income

statement. These accounts are used to gather information for a
particular accounting period. At the end of each accounting period, the
balances of these accounts are transferred to the capital account.

Each account has its own record in the ledger. Compared to a journal, a
ledger organizes information by account. The commonly used form of an account
kept on a general ledger is illustrated below:
 ACCOUNT NAME No. ___________
Date Particulars F Debit Date Particulars F Credit

Note that each ledger account is identified by an account name and an

account number or code (taken from the chart of accounts) written on top of the
ledger. The ledger maintains the basic format of a “T-account” but offers more
information. The ledger is divided into two sides for the debit and credit entries.
Each side has columns for the date, particulars, folio or posting reference and
amount.

Subsidiary Ledger

The items Accounts Payable and Accounts Receivable involve many

creditors and customers, respectively. With only one account each for Accounts
Payable and Accounts Receivable in the general ledger, it would require much
time and effort to get information about the account with a particular creditor or a
customer. In this way, the accounting records may not effectively serve the needs
of management. To remedy this situation, separate ledgers containing individual
accounts with creditors and individual accounts with customers are set up. These
separate ledgers are called subsidiary ledgers. Any ledger aside from the general
ledger is a subsidiary ledger. The Accounts Receivable ledger and Accounts
Payable ledger are the most commonly used subsidiary ledgers. Other subsidiary
ledgers include notes receivable ledger, notes payable ledger, inventory ledger
and expense ledger.

Below are sample forms of subsidiary ledgers:

Accounts Receivable Ledger

Name of Customer Contact No.___________

Date Item F Debit Credit Balance

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 Accounts Payable Ledger

Name of Supplier Contact No.___________

Date Item F Debit Credit Balance

Posting Procedures
The process of transferring to the ledger the same information recorded in
the journal is called posting. It may be done daily, weekly, or even monthly
depending on the needs of the business.

The procedures to be followed in posting from a general journal are the

following:
1. Locate the ledger account where the first debit entry in the journal is to
be posted.
2. Transfer to the pertinent columns in the ledger the information on the
date, particulars or explanation and debit amount.
3. In the posting reference column, write the page number of the journal
from which the entry was made.
4. In the posting reference column of the journal, write the account number
of the ledger to which the debit entry has been posted.
5. Follow the same procedures for the next debit entry to be posted. If the
next entry is a credit, apply the same procedures on the credit side of the
account.
Illustration:
GENERAL JOURNAL 1
Date Account Title and Explanation F Debit Credit
201A
July 1 Cash on Hand 101 150,000
R. Rosales, Capital 301 150,000
To record initial investment.

2 Taxes and Licenses 501 5,800

Cash on Hand 101 5,800
To record registration fees

3 Cash in Bank 102 105,000

Cash on Hand 101 105,000
To record deposit of cash.

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General Ledgers

CASH ON HAND 101

Date Particulars F Debit Date Particulars F Credit
201A 201A
July 1 Initial Investment GJ-1 150,000 July 2 Taxes and GJ-1 5,800
Licenses
3 Deposit at BDO GJ-1 105,000

CASH IN BANK 102

Date Particulars F Debit Date Particulars F Credit
201A
July 3 Initial Deposit GJ-1 105,000

R. ROSALES, CAPITAL 301

Date Particulars F Debit Date Particulars F Credit
201A
July 1 Initial GJ-1 150,000
Investment

TAXES AND LICENSES 501

Date Particulars F Debit Date Particulars F Credit
201A
July 2 Registration fees GJ-1 5,800

Note: The process of entering the journal page on the ledger and the ledger
account number in the journal is called cross-referencing. This will enable
anyone to trace an entry from the journal to the ledger and vice versa.

Posting to the Subsidiary Ledgers

Accounts Payable Subsidiary Ledger is to be made for each creditor or

supplier. Every transaction with the creditor is to be recorded such as when the
liability is incurred, returns and allowances are made, and partial or full payment
is made. The credit column is to be filled up when the liability is incurred and the
debit column is to be filled up for returns and allowances and payments. After each
transaction, the balance of the liability is to be determined. The folio column is to
be filled up with the page number of the journal from which the entry was made.

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Illustration:

Refer to the comprehensive illustration in Chapter 4.

Accounts Payable Subsidiary Ledger

Aquino Trading Contact No.__________

Date Item F Dr. Cr. Balance

201A
Jan.
5 Repair Supplies GJ-1 1,500 1,500

15 Full payment GJ-2 1,500 0

Accounts Receivable Subsidiary Ledger is to be made for each customer.

Every transaction with the customer is to be recorded such as when the credit sale
is made, when there are returns and allowances, and partial or full collection of
accounts. The debit column is to be filled up when the credit sale is made and the
credit column is to be filled up for returns and allowances and collections. After
each transaction, the balance of the account is to be determined. The folio column
is to be filled up with the page number of the journal from which the entry was
made.

Illustration:

Refer to the comprehensive illustration in Chapter 4.

Accounts Receivable Subsidiary Ledger

Jan Santos Contact No.________

Date Item F Dr. Cr. Balance

201A

Jan. 21 Services GJ-3 20,000 20,000

31 Partial Collection GJ-4 10,000 10,000

COMPREHENSIVE ILLUSTRATIONS

Posting from the General Journal (Service Business)

The following illustrations show how the ledger accounts of Tripler Repair
Shop (refer to Chapter IV) would look like after all the transactions have been

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posted from the general journal to the ledger (for purposes of convenience, the T-
account is used and the dates the transactions occurred are omitted).
Cash on Hand Cash in Bank
150,000 5,800 105,000 3,750
65,000 105,000 65,000 8,000
45,000 750 25,000
10,000 4,500 1,000
65,000 6,370
300 19,500
1,500

Accounts Receivable Notes Receivable

20,000 10,000 15,000

Store Supplies Repair Supplies

750 5,250

Due from Employees Tools and Equipment

1,000 40,000

Office Furniture Accounts Payable

7,000 500 1,500 1,500
300 130 500 7,000
25,000 32,000
6,500

Withholding Taxes Payable SSS Premiums Payable

780 480.50

Rosales, Capital Service Income

150,000 65,000
15,000
45,000
20,000

Rent Expense Salary Expense

4,500 20,760.50

Taxes and Licenses

5,800

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Posting from the General Journal (Merchandising Business)

The following illustrations show how the ledger accounts of CR Trading

(refer to Chapter V) would look like after all the transactions have been posted from
the general journal to the ledger (for purposes of convenience, the T-account is
used and the dates the transactions occurred are omitted).
Cash on Hand Cash in Bank
150,000 580 45,000 20,500
5,910 8,000 13,960 11,880
3,000 5,000 1,500
1,200 45,000 17,230
30,450 5,000
19,000 18,730
1,960 13,960
9,900 700
9,030 11,758
10,000 16,000
620
9,800

Accounts Receivable Notes Receivable

2,500 500 9,000 9,000
34,000 2,000 10,000 10,000
10,000
Advances to Employees Merchandise Inventory
1,500 1,500 18,000 800

Prepaid Rent Store Furniture

8,000 10,000

Store Equipment Withholding Tax Payable

12,000 120 420
420

SSS Contributions Philhealth Contributions

Payable Payable
800 250
800 250

Accounts Payable Notes Payable

5,000 5,000 9,800 6,000
1,000 12,000 9,800
12,000 27,900 40,000
9,800 24,000

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 5,000
12,100

C. Ruiz, Capital C. Ruiz, Drawing

173,000 800

Sales Purchases
9,000 27,900
15,500 20,500
30,450 80,000
19,000
34,000

Sales Returns & Purchase Returns &

Allowances Allowances
500 1,000
700 1,200

Sales Discount Purchase Discount

40 342
100

Interest Income Freight in

30 620

Taxes and Licenses Interest Expense

580 90

Wages
20,200
20,200

Getting the Balance of the Accounts

The preliminary step in the preparation of the trial balance is the footing of
the accounts. Footing is the process of determining the totals of each column of
the ledger. The steps involved in getting the balances are:
1. Add the debits of the account then record the total just below the last
debit posting.
2. Add the credits of the account then record the total just below the last
credit posting.

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 3. Take the difference of the totals in 1 and 2. If the debit total is more than
the credit total, the difference is written under the debit column. But if
the difference is a credit, then it is written under the credit column.

Take for example the following accounts from CR Trading (refer to postings
previously illustrated.)

Cash on Hand Accounts Payable

150,000 580 5,000 5,000
5,910 8,000 1,000 12,000
3,000 5,000 12,000 27,900
1,200 45,000 9,800 24,000
30,450 5,000 5,000
19,000 18,730 12,100
1,960 13,960 44,900 68,900
9,900 700 24,000
9,030 11,758
10,000 16,000
620
9,800
240,450 135,148
105,302

Normal Balances of Accounts

The normal balance of an account refers to the side of the account (debit
or credit) where increases are recorded. For example in asset accounts, increases
are recorded as debits thus, asset accounts normally have debit balances. In
liability and capital accounts, increases are recorded as credits so liability and
capital accounts normally have credit balances.

The normal balances of various types of accounts are summarized below:

Type of Account Normal Balance

Asset A debit
Liability L credit
Capital C credit
Drawing  debit
Revenue R credit
Expenses E debit

If an account that normally has a debit balance will have a credit balance,
or vice versa after footing the account, then it may be an indication of an accounting
error or of an unusual situation. For example, a credit balance in the furniture and
fixtures account could result only from an accounting error. On the other hand, a
debit balance in accounts payable account could result from an overpayment.

TRIAL BALANCE

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 In double-entry bookkeeping, the recording and posting functions maintain
the equality of the debits and credits. Debit entries in the journal are posted to the
debit side of the proper ledger accounts and the credit entries are posted to the
credit side of the proper ledger accounts. Proof of the equality of the debits and
credits in the general ledger is obtained periodically by preparing a trial balance.
A trial balance is a statement that shows the balances of all the general
ledger accounts. This is called the trial balance of balances. Another type of trial
balance is the trial balance of totals which shows every ledger account with their
total debits and total credits. In a trial balance of balances, only the debit or credit
balance is reflected in the trial balance. Accounts with zero balances are not shown
in this type of trial balance.

After obtaining the balance of each account, the trial balance could then be
prepared. The following are the steps in the preparation of a trial balance:

1. Place the heading of the statement at the top center of the report. The
heading includes the name of the business, the name of the statement and
the date of the statement. A sample heading appears as follows:

TRIPLER REPAIR SHOP

Trial Balance
July 31, 201A

2. Copy the accounts from the general ledger writing both the account title and
the account balances in the appropriate money column following the ALCRE
sequence. Two money columns should be provided – one for debit and
another for credit.
3. Get the total of the debit and credit money columns. It must be equal. Double
rule the total money columns to indicate that the statement is complete.

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The trial balance for Tripler Repair Shop is shown below:

Tripler Repair Shop

Trial Balance
January 31, 201A

Account Titles Debit Credit

Cash on Hand P87,150.00

Cash in Bank 106,380.00
Accounts Receivable 10,000.00
Notes Receivable 15,000.00
Due from Employees 1,000.00
Store Supplies 750.00
Repair Supplies 5,250.00
Tools and Equipment 40,000.00
Office Furniture 6,670.00
Accounts Payable P7,000.00
Withholding Taxes Payable 780.00
SSS Premiums Payable 480.00
Rosales, Capital 150,000.00
Service Income 145,000.00
Rent Expense 4,500.00
Salaries Expense 20,760.00
Taxes and Licenses 5,800.00
TOTAL P303,260.00 P303,260.00

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The trial balance for CR Trading is as follows.
CR TRADING
Trial Balance
January 31, 201A

Account Titles Debit Credit

Cash on Hand P105,302

Cash in Bank 7,850
Accounts Receivable 24,000
Merchandise Inventory 17,200
Prepaid Rent 8,000
Store Furniture 10,000
Store Equipment 11,880
Accounts Payable 24,000
Notes Payable 46,000
Withholding Tax Payable 840
SSS Contributions Payable 1,600
Medicare Contributions Payable 500
C. Ruiz, Capital 173,000
C. Ruiz, Drawing 800
Sales 107,950
Sales Returns & Allowances 1,200
Sales Discount 140
Interest Income 30
Purchases 128,400
Purchase Returns & Allowances 2,200
Purchase Discount 342
Freight in 620
Taxes and Licenses 580
Wages 40,400
Interest Expense 90
TOTAL P356,462 P356,462

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Finding and Correcting Trial Balance Errors
Even though the trial balance indicates that the ledger is in balance, the
ledger can still contain errors. For instance, if a journal entry was made debiting or
crediting the wrong accounts, or if an item was posted to the wrong account, the
ledger will still be in balance. In other words, a balanced trial balance is not an
assurance that no errors were committed. The following errors will not be detected
by a trial balance:
1. Failure to record or post transaction.
2. Recording the same transaction more than once.
3. Recording an entry with erroneous amounts
It is important therefore, to be very careful in preparing the journal entries
and in posting them to the ledger accounts.
The trial balance is prepared to test the account balances by showing
whether the total debits and total credits are equal. If they are not equal, then
accounting error exists. Most computerized accounting systems prevent the
recording of unbalanced journal entries. Because the journal amounts are posted
precisely as they have been journalized, trial balances will always balance. Hence
computers minimize accounting errors. But they cannot eliminate errors, because
human operators might input the amounts incorrectly.
The trial balance provides proof that the ledger is in balance. The
agreement of the debit and credit totals of the trial balance gives assurance that:
1. Equal debits and credits have been recorded for all transactions.
2. The addition of the account balances in the trial balance has been
correctly performed.

If the debit and credit totals of the trial balance do not agree, this indicates
that one or more errors have been made such as:
a) posting of a debit as a credit in the ledger or vice versa;
b) clerical errors in copying account balances into the trial balance;
c) arithmetic mistakes in determining account balance;
d) listing of a debit balance in the credit column of the trial balance or vice
versa; and
e) errors in addition of the trial balance.
The following pointers may be used for finding the error when the trial
balance does not balance.
1. Double check the additions of the debit and credit.
2. Find the difference between the debits and credits.
a. If the difference is equal to the amount of a specific transaction,
perhaps posting the debit or credit portion of this transaction was
forgotten.

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 b. Divide the difference by 9. If the difference is evenly divisible by 9, a
slide error or a transposition error might have been committed. A
slide occurs when debit or credit amounts “slide” a digit or two to the
left or right when entered. For example, if P450 was entered as P45.
P450 – P45 = P405
P405 ÷ 9 = P45
The difference is evenly divisible by 9.
A transposition occurs when the two digits are reversed. For
example, P450 was entered as P540.
P540 – P450 = P90
P90 ÷ 9 = P10
Again, the difference is divisible by 9.
Trace P10 through the ledger until it is located.
c. Search the trial balance for a missing account.
d. Trace each account and its balance from the ledger to the trial
balance.
If these pointers do not work, retrace the steps through the accounting
process. Double check the addition of the ledger accounts and journal footings.
Also trace the postings.
Once the error is found, correction should be made.
The methods of making the corrections are:
1. ruling method, and
2. correcting entry method.

Ruling Method

With ruling method, draw a line across the incorrect account title or amount
and write the correct information directly above the line or ruling. Corrections
should be initialed by the person doing them so that the source and reason for the
correction can be traced.
For example, assume that a P300 payment for Repairs and Maintenance
was incorrectly posted to Rent Expense on January 9. Correction using the ruling
method will be as follows:
Rent Expense
Date Particulars F Debit Date Particulars F Credit
201A
Jan. 9 300 srd

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 Repairs and Maintenance
Date Particulars F Debit Date Particulars F Credit
201A
Jan. 9 300
srd

Correcting Entry Method

If an incorrect entry has been journalized, a correcting entry should be

made. For example, assume that a P300 payment for Repairs and Maintenance
was incorrectly debited to Rent Expense. This will require a correcting entry such
as:
Dr. Repairs and Maintenance 300
Cr. Rent Expense 300
To correct error in recording expense.

The figure below shows the effect of the correcting entry on the ledger
accounts.

Rent Expense
Date Particulars F Debit Date Particulars F Credit
201A
300 Jan. 9 CE 300

Repairs and Maintenance

Date Particulars F Debit Date Particulars F Credit
201A
Jan. 9 CE 300

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 SUMMARY

This chapter discussed posting of transactions to the ledger or the book of

final entry and the preparation of a preliminary trial balance. A trial balance
contains various ledger accounts and balances on a particular date. It forms the
basis for preparing the financial statement. If it tallies, meaning the debit and the
credit side are in balance or equal, it means that the accounts are arithmetically
accurate but it is not a proof of one hundred per cent accuracy, because some
errors in principle and compensating errors may still remain. Therefore, it is very
important to carefully journalize and post the entries, following the rules of
accounting.

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1. What is a general ledger?

2. Describe briefly the procedures of posting. What difficulty could be

encountered if there is no cross-referencing?

3. Describe how the balance of accounts is computed.

4. Enumerate the various types of accounts and their normal balances.

5. What is a trial balance? Is it alright to have different debit total from the
credit total?

6. What is the correct sequence of accounts in the trial balance?

7. Should the accounts with zero balances appear in the trial balance?

8. Describe how to find errors in a trial balance.

9. Describe the methods in correcting errors in a trial balance.

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Exercise 6-1

Refer to Problem 4-1 of Chapter IV. From the general journal of Mrs. Yoso
for her business “Monique Angel’s in Heaven”, post the journal entries to the
general ledger and prepare a properly classified trial balance.

Exercise 6-2

Refer to Problem 4-3 of Chapter IV. From the general journal of Amor Powers
for her business “Amor Arts and Ads”, post the journal entries to the general ledger
and prepare a properly classified trial balance.

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Problem 6-1

Kareen Yap Security Agency completed the following transactions during June
201A.

June
1 Yap transferred cash from a personal account to an account to be used
for the business, P300,000.
3 Invested in the business personal weapons having a fair market value of
P24,000.
4 Bought communication equipment on account from Novo Electronics,
P23,740.
5 Paid rent for the month, P6,500.
6 Bought a used service vehicle for P80,000, paying P25,000 down with
the balance due in 30 days.
9 Paid insurance premium to ManuLife, P15,000.
12 Performed security services for Victor Angel’s Food Products at a bill of
P18,000.
16 Received bill from Hallmark Printers for office stationery, P2,000.
17 Billed Elmer Construction for services rendered, P20,000.
22 Paid Regal Shell Co. for gasoline purchased, P800.
24 Performed security service at Ilocos Norte Trade Fair. Billed organizers
for services rendered, P17,500.
27 Received full payment from Elmer Construction.
28 Paid salaries to employees, P24,500.
29 Withdrew cash for personal use, P15,000.
30 Received full payment from Victor Angel’s Food Products.

Required:

1. Prepare the journal entries for the June transactions.

2. Set up the following ledger accounts and post all the journal entries: Cash;
Accounts Receivable; Prepaid Insurance; Arms and Communications
Equipment; Service Vehicle; Accounts Payable; Yap, Capital; Yap,
Withdrawals; Service Revenues; Salaries Expense; Supplies Expense;
Gasoline Expense and Rent Expense.
3. Prepare a Trial Balance.

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