Journal Posting
Journal Posting
Posting is an Accounting term/Jargon used to denote the process of recording transaction summaries from Accounting Journals/ Daybooks to Ledgers. Journal posting is carried out based on the double-entry accounting principle.
To ensure that the information is posted accurately, it is important that the name of accounts mentioned in the journal shall be the same as their ledger name while recording the transaction in Journals.
The journal posting shall be carried out regularly, however, it must be completed before the preparation of annual financial statements. Further, it is considered best practice to post most active accounts like cash, sales, and purchases on a daily basis.
Methods of Journal Posting
Posting from the Journals/ daybooks can be done in one of the following three ways;
1. All debit transactions to be posted first and then all credit transactions to be posted afterward.
2. Posting shall be done Ledgers-wise. Any account can be chosen and all related entries in Journals are posted to the relevant ledgers/ account. Following the same procedure for all the ledgers.
3. Each journal entry is posted one by one. This means if someone started from the Sale Journal/ daybook, all entries of the sale Journal are to be posted in sales, receivable control account, and nominal accounts before moving to the next journals.
The last method of journal posting is recommended as it seems to be more appropriate to ensure that all accounting entries have been posted properly. Please rework the example provided in the last chapter.
While posting journals to ledgers, it shall be ensured that proper cross-referencing has been done, so transactions can be traced back later on when required. Folio columns in the journal shall be properly filled by the short name of Ledger and Ledger page number. Similarly, Journal and the page number from where amounts are being posted shall be reflected in the Ledger’s Folio Columns.
Rules for Journal Posting
- For each journal, there shall be a separate ledger. For example, both sales and sales return journals are used to record sales, however as both are recorded in separate journals, therefore there shall be a separate ledger for both.
- While journal posting, if there is a debit entry in Journal it shall also be posted on the debit side as well, however, while posting in a ledger the corresponding account/ ledger being credited shall be referred to in the description.
For example, while posting utility expense from General Journal for an amount of $ 500 which was paid by cash, Journal entry of this transaction will be as follows;
Description
Dr.Utility Expense $500
Cr. Cash $500
Utility expenses shall be debited in the sub-ledger of utility expenses in General Ledger and as corresponding credit entry is cash, therefore cash shall be mentioned in the description while entering utility expense.
This very rule shall also be followed while posting credit entries in ledgers.
3. While posting a debit entry, the word “To” shall also be mentioned in the description. In the example given in Rule two above, “To Cash” shall be written in the description column of the utility expense ledger.
4. Likewise, during the posting of a credit entry the word “ By” shall be entered in the description column of the ledger. In our example of rule 2 above the description shall be “By Utility Expense”.
These rules of posting are customary, however usually ignored by modern-day accountants.
To elaborate the posting process further, let us see the examples of how the previously entered transaction in the Purchase and sales journal shall be posted in the relevant Ledgers.
Posting Sales
Sales are periodically posted from journals to Ledger. Moving forward with our example of M/s Johan & Co., let us see how the purchases made by the business during Oct, 20X7, are posted in Ledgers.
The above-stated transactions will be recorded into the Sales/ Sales Return Journal in the following manner;
At the period end, both the above-narrated Journals will be posted into the ledgers in the following manners;
At the period end i.e. 31 Oct, 20X7 Journals will be posted to Sales Ledger, Sales Return Ledger, and Sales Ledger Control Account (SLCA) by the total values, whereas individual customer accounts will be posted by the total value of each customer transaction carried out during the month.
Journal Posting into Sales Ledger Control Account
Journal Posting into Sales Ledger
Journal Posting into Sales Return Ledger
From the above example we can see that;
A. Total of the Sales Journal is debited in “Sales/ Receivable Ledger Control Account” with the description “To Sales Ledgers”
B. Total of the Sales Journal is credited in General Ledgers i.e. Sales and Sales Return Ledger with the description of “By a total of Sales journal” or “By Sundries”.
C. Folio columns of both journal and Ledger are cross-referenced.
D. Total sales to each customer made during the period are posted in each receivable account which will not be part of double entry. Entries into personal customer accounts can be made daily, so the business may have the most updated picture all the time.
However, the total balance of all receivables shall be equal to the balance of the “Receivable/ Sales Ledger Control Account” after the posting is complete at period end.
Posting Purchases
Similar to the Sales (as exemplified in the above paragraphs), purchases are posted from purchase journals to the ledgers, periodically.
The following points must be followed while Journal posting of Purchases is being done;
A. In “ General Ledger” Purchase account is debited with the periodic total “To Sundries” Or “ To total as per purchase Journal”
B. In “Payable/ Purchase Ledger Control Account” credited by the periodic total “By Purchases”
C. Folio numbers are entered in the relevant columns of both Journal and Ledgers.
D. Meanwhile the personal account of each supplier is credited with total purchases made from that supplier during the period.
It is very important to note that this credit transaction in the supplier’s personal account is not the part of Accounting Double Entry system and these personal ledgers are maintained to keep a record of each supplier.
ONLY the entries made in “Purchase Ledger” and “Purchase/Payable Ledger Control Account” become part of a double-entry accounting system.
Entries into supplier personal accounts can be posted daily so the business has updated the balance of each supplier. The total of each supplier account shall be equal to the “Payable ledger control account” after the posting has been completed. This is to ensure that complete entries have been posted to each supplier account.
Note: We have used the period of one month for posting purchases from Journal to Ledgers. However, this period may vary from business to business. In the modern-day computerized accounting system, this may easily be done at each day’s end.
