Posting journal entries may sound fairly complicated, but it's actually simpler than you might think. In this lesson we'll learn exactly what this entails and go through an example to illustrate how it's done.
If you landed directly on this page but could use some practice with accounting journals and/or T-accounts, then check out the following tutorials:
As previously mentioned, the first step in the accounting cycle is the collection of the source document, and the second step is recording the journal entries.
The third step in the accounting cycle is the posting of these journal entries to the ledger (T-accounts).
But what does posting exactly mean?
Very simple. Posting means to transfer the information calculated in the journals to the various T-accounts in the ledger.
Posting Journal Entries Example
Let's see exactly how this transfer is done. Take a look at the cash receipts and cash payments journals below, followed by the "Bank" T-account, then read on for the explanation of what information was posted (transferred) to this T-account and why:
First of all, a reminder about T-Accounts:
The T-account is a summary record of everything for a specific accounting item that occurred during a certain period of time.
The T-account shows the opening and closing balances as well as the individual transactions during the period covered.
In the "Bank" T-Account above you should be able to see that there is an opening and closing balance, as well as two line items for the total of "Cash receipts" and "Cash payments."
These last 2 totals come directly from the two journals above:
The $35,500 cash receipts in the "Bank" T-account comes from the total of the "Bank" column in the cash receipts journal.
And the $20,700 cash payments in the "Bank" T-account come directly from the total of the "Bank" column in the cash payments journal.
As you can see, we don't put each individual transaction from the journals concerning bank into the "Bank" T-account, but rather just the totals.
We take the total of cash receipts from the cash receipts journal (column "bank") and insert this on the debit side of the "bank" T-account. And we take the total of cash payments from the cash payments journal (column "bank") and insert this on the credit side of the "bank" T-account.
This is the act of posting journal entries to the ledger.
Note that modern accounting programs handle the posting of journal entries to the ledger automatically. However, it's still good to know how posting works, especially if there's any errors that need to be corrected and/or traced back through the system.