Posting Journal Entries to Ledger Accounts
The journal entries recorded during the first step provide information about which accounts are to be debited and which to be credited and also the magnitude of the debit or credit (see debit-credit-rules). 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.
ExampleThe ledger accounts shown below are derived from the journal entries of Company A.
|Office Supplies||Prepaid Rent|
|Accounts Payable||Notes Payable|
|Utilities Payable||Unearned Revenue|
Revenue, Dividend and Expense Accounts
|Wages Expense||Miscellaneous Expense|
|Electricity Expense||Telephone Expense|