ACC1100 Chapter Notes - Chapter -: Trial Balance, General Ledger, The Ledger
31 May 2018
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Week 3
Tuesday, 27 March 2018
4:34 PM
Steps in the Recording Process
1. Analyse each transaction information in a journal
2. Enter the transaction information in a journal
3. Transfer the journal information to the appropriate accounts in the ledger
Evidence of the transaction comes in the form of a source document, such as a purchase order, a
purchase invoice, a cheque, cash register tape, etc.
Each source document is analysed to determine the effect of the transaction on specific accounts.
The transaction is then entered in the journal. Finally the journal entry is transferred to the
designated accounts in the ledger.
The Journal
Transactions are initially recorded in chronological order in a journal before they are transferred to
the accounts. For each transaction the journal shows the debits and credit effects on specific
accounts.
The general journal is the most basic form of journal, and makes two significant contributions to the
recording process.
• It provides a chronological record of all transactions
• It discloses in one place the complete effect of a transaction. This helps to prevent or locate
errors.
Entering transaction data in the journal is known as journalising.
Separate journal entries are made for each transaction. A complete journal entry consists of
1. The date of the transaction
2. The accounts and amounts to be debited and credited
3. A brief explanation of the transaction, referred to as a narration
Chart of Accounts
All transactions for a business are recorded in accounts set up in the general ledger. The chart of
accounts is a list of all these accounts. Account numbers as well as account names are often used for
each account.
Account numbers help distinguish the type of account it is. Ex. Motor vehicle can be both an asset or
an expense.
The General Ledger
The general journal provides a chronological list of all the transactions for a business. A chronological
list on its own, however, is of limited use. Classifying and summarising data improves their
usefulness for decision making.
The ledger accumulates all the information about changes in specific account balances such as sales
revenue, cash and wages expense.
A general ledger contains all the assets, liabilities and equity accounts.
Posting
The procedure of transferring journal entries to ledger accounts is called posting. This phase of the
recording process accumulates the effects of journalised transactions in the individual asset, liability,
equity, revenue and expense accounts. Posting involves the following steps:
1. Using the account number in the posting reference column, locate in the ledger the account to
be debited and enter the date the transaction occurred.
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Document Summary
Steps in the recording process: analyse each transaction information in a journal, enter the transaction information in a journal, transfer the journal information to the appropriate accounts in the ledger. Evidence of the transaction comes in the form of a source document, such as a purchase order, a purchase invoice, a cheque, cash register tape, etc. Each source document is analysed to determine the effect of the transaction on specific accounts. The transaction is then entered in the journal. Finally the journal entry is transferred to the designated accounts in the ledger. Transactions are initially recorded in chronological order in a journal before they are transferred to the accounts. For each transaction the journal shows the debits and credit effects on specific accounts. The general journal is the most basic form of journal, and makes two significant contributions to the recording process. It provides a chronological record of all transactions.
