1. Journal entries and adjusting entries
Journalizing is the process of chronologically recording transactions.
2. General ledger and T-accounts
The items entered in a general journal must be transferred to the general ledger. This procedure, posting, is part of the summarizing and classifying process. The general ledger contains all the same entries as those posted to the general journal; the only difference is that the data are sorted by date in the journal and by account in the ledger.
There is a separate T-account for each item in the ledger. A T-account appears as follows:
3. Trial balance and adjusted trial balance
A trial balance is a list of all open accounts in the general ledger and their balances.
Since certain accounts may not be accurately stated, adjusting entries may be required to prepare an adjusted trial balance.
4. Finance statements
The financial statements can be prepared from the adjusted trial balance.
A. An error being made in carrying the account balance to the trial balance.
An error in carrying an account balance to the trial balance may result in unequal totals of debits and credits, causing the trial balance to be out of balance.
Incorrectly computing the balance of an account may result in unequal totals of debits and credits on the trial balance, causing the trial balance to be out of balance.
Recording an account with a debit balance as a credit balance may cause the total credits recorded to be greater than the total debits by two times the incorrectly recorded amount, and the trial balance will be out of balance. Likewise, recording a credit balance as a debit will cause the trial balance to be out of balance.
The trial balance will not be out of balance by posting a debit to rent expense instead of posting it to utilities expense. The utilities expense account will be understated and the rent expense account will be overstated, but the total of all debits on the trial balance will not be affected.
A. general journal
The information required to first enter a transaction into the accounting records comes from source documents, but the actual entry is first recorded in the general journal. After being entered in the general journal, the details are posted to the general ledger.
A. usually done after each transaction is recorded.
Posting is usually done after several entries have been made, such as the end of a day, week, or month.
A. journal to the ledger
Posting is the process of transferring information from the journal to the ledger. Journalizing is the process of recording transactions in chronological order from source documents to the journal.