NORIEL F.

GREGORIO
3. Posting – Transactions as classified and
recorded in the journal are transferred to
the appropriate accounts in the general
ledger and subsidiary ledger, if appropriate.

- is the process of transferring data from the

journal to the appropriate accounts in the
ledger.
 ILLUSTRATION: Posting to GL – Start Up
You opened a barbecue stand on January 1, 2019.
Transaction 1: You provided P800 cash as initial investment.
STEP 2: Journalizing
DATE ACCOUNT TITLES ACCT. DEBIT CREDIT
NO.
1/1/2019 Cash 110 800
Owner’s Capital 310 800
* To record owner’s initial investment to the
business

STEP 3: Posting
CASH (110)
Date Explanation PR Debit Date Explanation PR Credit

Jan. 1 Investment J1 800

OWNER’S CAPITAL (310)

Date Explanation PR Debit Date Explanation PR Credit

Jan. 1 Investment J1 800

 ILLUSTRATION: Posting to GL – Start Up
Transaction 2: On Jan. 2, the business obtained a loan of P1,200 and
issued a promissory note to the bank.
STEP 2: Journalizing
DATE ACCOUNT TITLES ACCT. DEBIT CREDIT
NO.
1/2/2019 Cash 110 1,200
Notes Payable 220 1,200
* To record loan obtained from the bank

STEP 3: Posting
CASH (110)
Date Explanation PR Debit Date Explanation PR Credit

Jan. 1 Investment J1 800

Jan. 2 Loan proceeds J1 1,200

NOTES PAYABLE (220)

Date Explanation PR Debit Date Explanation PR Credit

Jan. 2 Bank Loan J1 1,200

 ILLUSTRATION: Posting to GL – Start Up
Transaction 3: On Jan. 3, the business acquired equipment such as
barbecue grill and cooking accessories worth P1,520.
STEP 2: Journalizing
DATE ACCOUNT TITLES ACCT. DEBIT CREDIT
NO.
1/3/2019 Equipment 140 1,520
Cash 110 1,520
* To record acquisition of equipment

STEP 3: Posting
CASH (110)
Date Explanation PR Debit Date Explanation PR Credit

Jan. 1 Investment J1 800 Jan. 3 Purchase of Eq. J1 1,520

Jan. 2 Loan proceeds J1 1,200

EQUIPMENT (140)
Date Explanation PR Debit Date Explanation PR Credit

Jan. 3 Purchased Eq. J1 1,520

 ILLUSTRATION: Posting to GL – Start Up
Transaction 4: On Jan. 3, the business purchased inventory for P480
cash.
STEP 2: Journalizing
DATE ACCOUNT TITLES ACCT. DEBIT CREDIT
NO.
1/3/2019 Inventory 130 480
Cash 110 480
* To record acquisition of inventory

STEP 3: Posting
CASH (110)
Date Explanation PR Debit Date Explanation PR Credit

Jan. 1 Investment J1 800 Jan. 3 Purchase of Eq. J1 1,520

Jan. 2 Loan proceeds J1 1,200 Jan. 3 Purchase of Invty J1 480

INVENTORY (130)
Date Explanation PR Debit Date Explanation PR Credit

Jan. 3 Purchased Invty. J1 480

1. Analyzing the business documents or
transactions.
Identify the accounts (account titles) affected by the
transaction and the effects of the transaction on these
accounts (increase or decrease).
2. Journalizing
The transaction is recorded in debit/credit form (journal entry)
in the journal.
3. Posting
The debit(s) and credit(s) of the journal entry are transferred
to the affected accounts in the ledger.
4. Preparing the unadjusted trial balance

Trial balance is a list of general ledger accounts

and their balances. It is prepared to check
the equality of total debits and total credits in
the ledger. The preparation of trial balance
creates a starting point for the preparation of
the financial statements.
1. Unadjusted trial balance – this is prepared
before adjusting entries are made. Adjusting
entries, and consequently financial
statements, cannot be prepared unless the
total debits and credits in the unadjusted trial
balance are equal.
2. Adjusted trial balance – this is prepared after
adjusting entries are made but before the
financial statements are prepared.
3. Post-closing trial balance – this is prepared
after the closing process.

Asset and expense accounts appear on the debit side of

the trial balance whereas liabilities, capital and income
accounts appear on the credit side.
Purpose of a Trial Balance

1. Trial Balance acts as the first step in the preparation

of financial statements. It is a working paper that
accountants use as a basis while preparing financial
statements.

2. Trial balance ensures that for every debit entry

recorded, a corresponding credit entry has been
recorded in the books in accordance with the double
entry concept of accounting.
Purpose of a Trial Balance

3. Trial balance ensures that the account balances are

accurately extracted from accounting ledgers.

4. Trial balance assists in the identification and

rectification of errors.
Limitations of a trial balance
1. Trial Balance only confirms that the total of all debit
balances match the total of all credit balances hence,

2. Trial balance totals may agree in spite of errors. An

example would be an incorrect debit entry being offset
by an equal credit entry.

3. Trial balance gives no proof that certain transactions

have not been recorded at all because in such case,
both debit and credit sides of a transaction would be
omitted causing the trial balance totals to still agree.
How to prepare a Trial Balance

Following Steps are involved in the preparation of a Trial

Balance:
1. All Ledger Accounts are closed at the end of an
accounting period.
2. Ledger balances are posted into the trial balance.
3. Trial Balance is cast and errors are identified.
4. Suspense account is created to agree the trial
balance totals temporarily until corrections are
accounted for.
5. Errors identified earlier are rectified by posting
corrective entries.
6. Any adjustments required at the period end not
previously accounted for are incorporated into the
trial balance.
ERRORs revealed by a Trial Balance

The trial balance can reveal errors that caused the total debits
and total credits to be unequal. Examples:

1. Journalizing or posting one-half of an entry; i.e., a debit

without a credit, or vice versa.
2. Recording one part of an entry for a different amount than
the other part.
3. Errors of Transplacement (slide error) on one side of an
entry.
4. Errors of Transposition on one side of an entry.
ERRORs not revealed by a Trial Balance

The trial balance cannot reveal errors that do not cause the total
debits and total credits to be unequal. Examples:

1. Omitting entirely the entry for a transaction.

2. Journalizing or posting an entry twice.
3. Using wrong account with the same normal balance as the
correct account.
4. Wrong computation with the same erroneous amounts
posted to debit and credit sides.
 Baby Shark LTD.
Trial Balance as at 31 December 2019
Debit Credit
Account Title
Php Php
Cash 2,000
Accounts Receivable 3,000
Furniture & Fixture 5,000
Building 10,000
Accounts Payable 5,000
Share Capital 15,000
Sales 10,000
Cost of sales 8,000
General and Administration Expenses 2,000
Total 30,000 30,000
➢ Title provided at the top shows the name of the entity and accounting period end for which the trial
balance has been prepared.

➢ Account Title shows the name of the accounting ledgers from which the balances have been extracted.

➢ Balances relating to assets and expenses are presented in the left column (debit side) whereas those
relating to liabilities, income and equity are shown on the right column (credit side).

➢ The sum of all debit and credit balances are shown at the bottom of their respective columns.
RECORDING DRILLS:
Mr. Tiger Astig started a laundry business called “Tiga Laba Laundry Shop” on
January 1, 2020. The following were the transactions during the first week of
operations:

Jan. 01 Provided P500,000 as initial investment to the business

Jan. 02 Acquired washing machine for P200,000 cash.
Jan. 03 Acquired dryer machine for P100,000 cash.
Jan. 04 Purchased supplies for P20,000 cash.
Jan. 05 Rendered laundry services worth P15,000 on cash basis.
Jan. 06 Rendered laundry services worth P10,000 on account.
Jan. 07 Paid P2,500 to an employee representing her week’s
salary.

Do STEP 1 to STEP 4 of Accounting Cycle.

o Ferrer, Rodiel C. "Fundamentals of
Accountancy, Business &
Management 1" Series of 2017
o Frias, Solita A. "Fundamentals of
Accountancy, Business &
Management 1" Series of 2017
o Valix, Conrado T. “Theory of
Accounts"
THANK YOU!