3 7: Posting to the General Ledger Business LibreTexts

Posting dates are an essential aspect of bookkeeping that determines the accounting period for a transaction. They are significant because they help to maintain accurate financial records, ensure that financial statements reflect the true financial position of the business, and track financial activities. There are several options for posting dates, and the best option depends on the nature of the business and its accounting practices. Essentially, it is the date when a transaction is recorded in the accounting books.

Best practices for maintaining accurate posting dates

Posting accounting definition refers to the concept of posting in accounting. It explains the transfer of amount from journal to ledger or balance of various accounts to the general ledger to make it simple to understand. In some cases, it may make sense to use the payment date as the posting date for a transaction. This is particularly true for businesses that operate on a cash basis, where revenue is recognized when payment is received. Accounting is the process of keeping track of your business’s financial transactions.

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You don’t want to be in a situation where you have to pay more income tax than is normally required by the Internal Revenue Service (IRS). Accounting is like a powerful machine where you input raw data (figures) and get processed information (financial statements). The whole point is to give you an idea of what’s working and what’s not working so that you can fix it.

Income Statement

Therefore, the rule becomes debit all expenses and losses while credit all incomes and gains. Mentioning the date of transaction is the second step of posting a journal entry. Posting refers to the process of transferring an entry from a journal to a ledger account. This sounds like a lot of work, but it’s necessary to keep an accurate record of business events.

You can outsource your accounting work to outside professionals who specialize in bookkeeping and tax preparation. Outsourcing can offer many advantages because it allows you to take posting definition in accounting advantage of specialized skill sets that may not be available when hiring someone in-house. It’s also worth noting that while all CPAs are accountants, not all accountants are CPAs.

Identify Transactions

Another mistake that can lead to incorrect financial records is using the wrong accounting period. Each business has a specific accounting period, which can be monthly, quarterly, or annually. Transactions that occur outside of the accounting period should be recorded in the next accounting period. For example, https://www.bookstime.com/ if a business has a monthly accounting period and a transaction occurs on January 31st, it should be recorded in the month of January, even if it is not posted until February. Using the wrong accounting period can lead to incorrect financial records and can make it difficult to reconcile accounts.

• Besides, this frees up time so you can focus on running your business smoothly.
• As we have discussed in previous sections, posting dates play a crucial role in accurate bookkeeping.
• The debit amount increases the asset accounts of the balance sheet like inventory, cash, etc, and increase expense accounts like salary, marketing, etc while it goes vice-versa with liability accounts.
• The following are examples of Ledger cards for the some of the accounts from the same company shown in T-accounts above (see how you get the same balance under either approach).
• This section will discuss the different types of posting dates in bookkeeping and their importance.
• You can choose to manage your business accounting by hiring an in-house accountant or CPA.

Introduction for posting accounting definition

It consists of accounts within accounts (i.e., specific accounts that make up a broad account). There was a debit to Taxes and Licenses so we posted that in the left side (debit side) of the account. For example, if the purchase account has debit entries of $10000, $5000 and $3000 while credit entires as $1000 and $2000 then the sum will be $18000 and $3000 respectively. As a result, the final balance will be debit minus credit on the last date i.e $15000. They are the accounts of firms, other associations and persons with which the company has its dealings. This explains that the person who receives something debits while the person who gives something credits.

Businesses use posting at this point to move the sums from the original records to the general ledgers. Depending on a number of variables, such as the size of the business and the number of transactions, this process may happen at various intervals. Modern accounting systems carry out this procedure automatically, as was already mentioned. The balance sheet of the previous year is the basis of making opening en- tries of the subsequent year. But where more than two accounts are involved in one single transaction and there is only one journal entry made, it is said to be a compound entry. There can be two accounts in the debit and one in the credit or one in the debit and two in credit part.

• When determining posting dates, it is important to consider weekends and holidays.
• After journal entries are made, the next step in the accounting cycle is to post the journal entries into the ledger.
• After all accounts are posted, we can now derive the balances of each account.
• For example, if a transaction is recorded on the wrong date, it can be corrected immediately.
• The credit amount increases the liability accounts of the balance sheet like shareholders equity, sales account etc whereas the situation is vice-versa for asset accounts.
• Therefore, the total calculates by deduction of credit balance from debit, providing the figures for further analysis or financial statements.