Posting in accounting

Posting in accounting is when the balances in subledgers and the general journal
are shifted into the general ledger. Posting only transfers the total balance in a
subledger into the general ledger, not the individual transactions in the subledger.
An accounting manager may elect to engage in posting relatively infrequently, such
as once a month, or perhaps as frequently as once a day.

Subledgers are only used when there is a large volume of transaction activity in a
certain accounting area, such as inventory, accounts payable, or sales. Thus,
posting only applies to these larger-volume situations. For low-volume transaction
situations, entries are made directly into the general ledger, so there are no
subledgers and therefore no need for posting.

For example, ABC International issues 20 invoices to its customers over a one-week
period, for which the totals in the sales subledger are for sales of $300,000. ABC's
controller creates a posting entry to move the total of these sales into the general
ledger with a $300,000 debit to the accounts receivable account and a $300,000
credit to the revenue account.

Posting is also used when a parent company maintains separate sets of books for
each of its subsidiary companies. In this case, the accounting records for each
subsidiary are essentially the same as subledgers, so the account totals from the
subsidiaries are posted into those of the parent company. This may also be handled
on a separate spreadsheet through a manual consolidation process.
Posting has been eliminated in some accounting systems, where subledgers are not
used. Instead, all information is directly stored in the accounts listed in the general
ledger.

When posting is employed, someone researching information in the general ledger

must "drill down" from the account totals posted into the relevant general ledger
accounts, and search in the detailed records listed in the relevant subledgers. This
can entail a significant amount of additional research work.
From the perspective of closing the books, posting is one of the key procedural
steps required before financial statements can be created. In this process, all
adjusting entries to the various subledgers and general journal must be made, after
which their contents are posted to the general ledger. It is customary at this point
to set a lock-out flag in the accounting software, so that no additional changes to
the subledgers and journals can be made for the accounting period being closed.
Access to the subledgers and journals is then opened for the next accounting
period.
If posting accidentally does not occur as part of the closing process, the totals in
the general ledger will not be accurate, nor will the financial statements that are
compiled from the general ledger.
What Are the Five Steps of Posting in Accounting?
Transaction analysis and journal entries are the first two stages of the accounting
cycle. Posting is the transfer of journal entries to a general ledger, which usually
contains a separate form for each account. Journals record transactions in
chronological order, while ledgers summarize transactions by account. Posting in
accounting consists of a few simple steps.

Enter Account Name and Number

Income statement accounts include sales (aka revenues), cost of goods sold,
marketing and advertising expenses, depreciation expenses, interest and taxes.
Balance sheet accounts include:

• Cash
• accounts receivable
• accounts payable
• bonds payable
• accumulated depreciation
• retained earnings
• common stock

Post the Entry Details

The second step is to post the date, description and reference number of each
journal entry for each account during an accounting period. The reference number
could be in "J#" form, where "J" refers to the company's journal and "#" refers to
the journal page number. For example, J1 would mean that the entry is from page
1 of the journal. The description is the same as in the journal: for example, "Cash
receipt, invoice number 11-1097."
Enter the Debits and Credits
The recording of debits or credits is the next step in the posting process. Each
transaction must have at least one debit and one credit.
Debits increase balance sheet asset accounts, such as cash and inventory, and
increase income statement expense accounts, such as marketing and salary
expenses. Debits decrease balance sheet liability accounts, such as notes payable,
and shareholders' equity accounts, such as retained earnings. Debits also decrease
sales accounts on the income statement.
Credits increase balance sheet liability accounts, shareholders' equity accounts and
sales accounts. Credits decrease balance sheet asset accounts and expense
accounts.

Find the Running Balances

The fourth step is to calculate the running debit and credit balance for each
account. For example, if the cash account has a debit entry of $10,000, a credit
entry of $5,000 and a debit entry of $25,000 on three separate dates, the total
debits are $10,000 plus $25,000, or $35,000, and the sum of the credits is $5,000.
Therefore, the debit balance on the last date is $35,000 minus $5,000, or $30,000

Correct Any Errors

The final step in the posting process is to check for mathematical and data transfer
errors. Accounting software packages may reduce these errors through
automation, but verifying the numbers is a prudent step that prevents errors from
propagating to the financial statements.
RULES FOR POSTING IN TO LEDGER
Posting the entries from day books to ledger is very important work. An
accountant must keep in his mind the following rules while posting the entries:-

1. Entries must be posted from the day books or journal only.

2. Posting of the entries must be date wise

3. Date of entry in day books must be the date of entry in ledger.

4. All amounts shown in debit side in journal must be posted in debit side of a
particular account. In ‘particulars’ column of ledger, the name of the other
account as shown in journal, relating to same entry, must be written and
the account head must start with ‘To’.

5. All amounts shown in credit side in journal must be posted in credit side of
a particular account. In ‘particulars’ column of ledger, the name of the
other account as shown in journal, relating to same entry, must be written
and the account head must start with ‘By’.

6. After the entry, page number of journal from where the entry is posted,
must be written in L/F column of account and the page number of ledger
account must be written in L/F column of journal or day book.

7. Then the balancing of the ledger should be done. Balancing is may be done
as running or can be done after doing the totals of debit and credit side. If
the total of debit side is more than credit side then the balance should be
shown as debit balance in balance column and if the total of credit side is
more than the total of debit side then balance should be shown as credit
balance in balance column. If the totals of debit and credit sides are equal
then the balance should be shown as ‘nil’ in balance column.
Posting to the General Ledger
A journal entry is like a set of instructions. The carrying out of these instructions is
known as posting.
As stated earlier, posting is recording in the ledger accounts the information
contained in the journal. The good news is you have already done the hard part —
you have analyzed the transactions and created the journal entries. When you
post, you will not change your journal entries. If you debit an account in a journal
entry, you will debit the same account in posting. If you credit an account in a
journal entry, you will credit the same account in posting. After transactions are
journalized, they can be posted either to a T-account or a general ledger.
Remember – a ledger is a listing of all transactions in a single account, allowing you
to know the balance of each account. The ledger for an account is typically used in
practice instead of a T-account but T-accounts are often used for demonstration
because they are quicker and sometimes easier to understand. The general ledger
is a compilation of the ledgers for each account for a business. Below is an example
of what the T-Accounts would look like for a company.
In contrast to the two-sided T-account, the three-column ledger card format
has columns for debit, credit, balance, and item description. The three-
column form ledger card has the advantage of showing the balance of the
account after each item has been posted. It is very important to understand
the debit and credit rules for each account type or you may not calculate the
balance correctly. Notice that I give an explanation for each item in the ledger
accounts. Often accountants omit these explanations because each item can
be traced back to the general journal for the explanation. The following are
examples of Ledger cards for the some of the accounts from the same
company shown in T-accounts above
these ledger examples that Cash is an asset and a debit increases an asset
and a credit decreases an asset. Accounts Payable is a liability account
and Design Services Revenue is a revenue account but both accounts
increase with a credit and decrease with a debit.

Posting is always from the journal to the ledger accounts. Postings can
be made (1) at the time the transaction is journalized; (2) at the end of
the day, week, or month; or (3) as each journal page is filled. The choice
is a matter of personal taste. When posting the general journal, the date
used in the ledger accounts is the date the transaction was recorded in
the journal, not the date the journal entry was posted to the ledger
accounts.

The accounting equation serves as an error detection tool. If at any point

the sum of debits for all accounts does not equal the corresponding sum
of credits for all accounts, an error has occurred. It follows that the sum
of debits and the sum of the credits must be equal in value. Double-entry
bookkeeping is not a guarantee that no errors have been made—for
example, the wrong ledger account may have been debited or credited,
or the entries completely reversed.
Posting is an important part of accounting since it helps to keep an
updated record of all ledger balances & at the same time it can help a
user to track how the ledger balances have changed over a period of
time.