Posting in Accounting: Definition, Example, Purposes, Meaning, Importance

When we studied about real accounts, you understood that there are some accounts that do not vanish after the accounting period ends. The balances of assets and liabilities are carried forward to the next accounting year. Let’s say a company has $3,000 worth of rent expenses per month that needs to be posted for the annual general ledger.

They must enter every business deal into their record journal in order to accomplish this. The date and a summary for each transaction should be entered accurately. To keep track of your transactions, you can record these entries in a journal, ideally in chronological order. Your general ledger may be created and maintained with the aid of accurate and well-organized diary entries.

Example of Posting

After testing and analysis in the fourth step, the unadjusted trial balance is taken on to the fifth step. Once the accounting period has ended and all transactions have been recognized, documented, and posted to the ledger, this is the initial action that is taken. (this is usually done electronically and automatically, but not always). Making sure the total credit balance and total debit balance are equal is the goal of this step. If those numbers are off, this stage can detect a lot of errors.

  • In addition to sales, there are expenditures, which can take many different forms.
  • You will notice that the transactions from January 3, January 9, and January 12 are listed already in this T-account.
  • Also termed as fictitious account relates to accounts of expenses, income and profit or losses.
  • There were just under 26,000 hospitalizations due to Covid the week of Dec. 10, a 10 percent increase from about 23,000 hospitalizations the week prior.

Accounting principles require that accounting journal entry modifications are kept to a minimum once an FI document has been posted in SAP S/4HANA. Credits increase balance sheet liability accounts, shareholders’ equity accounts and sales accounts. Credits decrease balance sheet asset accounts and expense accounts.

Closing the Books

Cash is labeled account number 101 because it is an asset account type. The date of January 3, 2019, is in the far left column, and a description of the transaction follows in the next column. Cash had a debit of $20,000 in the journal entry, so $20,000 is transferred to the general ledger in the debit column.

Post entries frequently

Nominal account balances are transferred immediately to the profit and loss account. To discuss the Post accounting procedure in the ledger in a chronological way, that is, date-wise. These items would be combined at the conclusion of the accounting period and recorded as one line item in the general ledger. This way, the general ledger contains all the data for the time period, but if there is a query about a specific month, it is possible to return to the subsidiary ledger and see more information. In contrast to asset accounts, where the situation is reversed, the credit amount raises the balance sheet’s liability accounts, such as shareholders’ equity, sales account, etc. There may be more or less technical automation used, depending on the system used by each business.

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This is posted to the Cash T-account on the debit side beneath the January 17 transaction. Accounts Receivable has a credit of $5,500 (from the Jan. 10 transaction). The record is placed on the credit side of the Accounts Receivable T-account across from the January 10 record. This is posted to the Cash T-account on the credit side beneath the January 14 transaction. Accounts Payable has a debit of $3,500 (payment in full for the Jan. 5 purchase).

The balance at that time in the Common Stock ledger account is $20,000. This can require a significant amount of additional research work. 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. The best example of Post accounting is, If a person acquires credit, the transaction is recorded in both the creditor’s and the purchaser’s accounts.

At this stage, companies use posting to transfer the amounts from the initial records to the general ledgers. This process may occur at different intervals based on several factors, including the company size, volume of transactions, etc. As stated above, modern accounting systems perform this process automatically.