Ledger Is Posting from Journal Entries Homework Answers

You must record every transaction in business as each of them holds great significance. Follow a systematic process while you record the transaction. Accounting is a process of steps taken carefully to record business transactions. Here, we identify ledger is posting from journal entries homework answers.
The first step of accounting is journal entries. You start off with journal entry and proceed further to subsequent ledger posting, income statement and balance sheet. Journal entry runs through an exhaustive list of business transactions. Each line of journal entry is incomplete without date, description and the amount of transaction.
Classification of accounts:
Journal entries are broadly categorized into the following accounts

  • Assets
  • Expenses
  • Liabilities
  • Revenue
  • Equity

Sub-categories of the heads do exist to simplify the process of ledger posting from journal entries homework answers.
Debit and credit are classic examples of equal and opposite entries which balance out the entire transaction giving clarity to the process. Debit and credit associated with journal entries have different impact on each of these account heads. The below table reveals the various impact the journal entry of debit and credit has on account heads.

Account headsRaiseReduction
AssetsDebitCredit
ExpensesDebitCredit
LiabilitiesCreditDebit
EquityCreditDebit
RevenueCreditDebit

 
Let’s elucidate our statement with the help of an example:
We have formulated a typical journal entry in a tabulated form to understand the process of ledger posting from journal entries homework answers.
 

DateAccountParticularsDebitCredit
6/17CashDeposited money into bank20000
6/17CapitalAccount20000
6/26ExpensePaid rentals for business1500
6/26CashLocation1500
6/28InventoryBuy inventory2000
6/28Accounts payable2000

 
We get the following after breaking down each journal entry

  • You have deposited money to your account on 6/17
  • You gained cash to the tune of $20000. Your asset account increases as cash are considered an asset.
  • By thumb-rule asset account is increased by debit.
  • Hence debit asset account $20000.
  • Cash earned is capital for business and part of owner’s equity.
  • With increase in equity, we credit capital account $20000.
  • Coming to rentals paid for business on 6/26, it is an expense incurred.
  • Expense account is increased by debit.
  • Hence debit expense account by $1500.
  • Expense incurred is equivalent to loss of cash.
  • Cash is an asset account reduced by credit.
  • Credit cash account by $1500.
  • On 6/28 you buy inventory. Inventory is an asset for business, and hence asset account experiences a raise.
  • By rule of thumb, asset account is increased by debits. Debit Inventory $2000.
  • To buy inventory, you need to pay money to the vendor which is part of accounts payable.
  • Accounts payable is a liability which is increased by credits. Credit account payable $2000.

Journal entries are simple basic entries that follow certain rules to pave the way for little more complicated ledger postings. Ledger postings ensure you get all the detail of an account at one glance at these postings instead of searching through various journal entries. It’s difficult in a business to go through all journal entries to make a connection with all transaction done for one particular account. This leads to the necessity of the requirement for ledger posting.
How to post journal entries to ledger?

  • Transfer the postings to ledger once the journal entry is made.
  • You must take into consideration each line of journal entry while going ahead with ledger posting.
  • Classify and organize the entries under individual Each line item pertains to ledger entries.
  • Transfer all debit and credit amount to ledger Calculate the balance of each account.
  • Calculate balance of asset account by deducting the total credit from total debit.
  • Calculate balance of liability account by deducting total debit from total

You can either use an accounting software or ERP for posting ledger accounts or do those manually using Excel spreadsheet. Before the advent of digitization, junior accountant of a firm used to do these calculations using pen and paper.
To differentiate ledger posting from journal entries homework answers, we tabulate the ledger postings as well.

DateParticularsDebitCredit
6/17Deposit$20000
6/20Deposit$1000
6/26Rent$1500
6/28Inventory$2000
Total$21000$3500
Total transaction$17500

 
This is how a T-ledger looks like.
Significance of ledger postings

  • Ledger posting is an organized process of identifying individual accounts.
  • If you try to find total amount paid under the head rent, all you have to do is open the ledger book and take a glance at the rent account for a particular period.
  • In absence of ledger accounts, you have to scour through several journal entries over a period of time to find total expense/earnings under a particular account.
  • Ledger posting classifies transactions under proper heads.
  • Analysis of your revenue and losses is ascertained using ledger postings.
  • Journal entries, on the other hand, do not reveal any trend or pattern of income generation or loss of revenue.
  • Ledger posting forms the basis of income statement and balance sheet.
  • You are in a position to rectify the heads under which postings are made once ledger postings are made.
  • In a way, ledger postings make way for accuracy in income statement and balance sheet.

Ledger posting from journal entries homework answers how a robust audit process relies more on ledger postings before moving ahead to income statement and balance sheet.


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