Posting in Accounting

Posting in accounting refers to the transfer of balance from one ledger to the general ledger to make it easy to understand the accounting, and this posting in accounting is done at regular intervals, i.e., monthly, quarterly, half-yearly, or yearly depending upon the size of entity and volume of transactions of the entity.

It refers to the transfer of closing balance from various accounts to the general ledger. The posting varies as per the size of the organization and the volume of transactions. Some large organizations record the monthly closing balance. The balance is directly transferred to a general ledger for small organizations because of the low volume of accounting transactions.

This is also done where there are several branches of the organization, and separate accounts of branches are maintained or when the parent company maintains the accounts of its subsidiary or associate company. It is more of a manual process and involves workforce work. In the case of posting, consolidation of accounts is also required. With the advancement of technology, posting has become a traditional process, and it is rapidly eliminated due to the availability of automated software.

Steps in posting involve the following:

Step #1 - Create the Sub-Ledgers and General Ledgers with Various Transactions

Various accounts and transactions are to be recorded in their respective ledgers.

Step #2 - Create the General Ledger

The general ledger is the ledger in which balances of all sub-ledgers and general journals are to be transferred.

Step #3 - Enter the Name and Account in General Ledger with Details

Transfer in general ledger takes place with the name of the account and amount carried forward in subledger or general journal along with entry details.

Step #4 - Enter the Debit and Credit Balances in the Ledger

Debit and credit balances are to be entered into the general ledger as per the balance in the account. The debit balance increases the asset, whereas the credit balance increases the liability in the accounts.

Step #5 - Maintain the Account for each Period Separately

The general ledger for each period is to be maintained separately to avoid double balancing or mess in the accounts.

Step #6 - Correct any Errors

The final step is to cross verify the balances and recheck whether there are any mathematical errors; if any of the errors are found, rectify them to maintain proper records.

The details of XYZ internationals are as under:

XYZ international issues 20 invoices to its customers and records each transaction in the sales account and the respective debtor’s account. Also, the company purchased from 10 suppliers the records in purchases accounts and respective creditors’ accounts. In addition, some of the payable liability is recorded in the general journal account. The details are as under:

Prepare General Ledger.

Solution:

• Posting in a ledger to be made in a chronological manner, i.e., date-wise.
• While posting in the ledger, entry is to be made into both accounts, i.e., double entries are to be made. For example, in the case of the purchase on credit, the entry is to be made in the purchase account and the creditor’s account.
• The amount is to be shown in the amount column, the debit balance is to be debited, and the credit balance is credited on the credit side.
• The balance in the nominal accounts must be transferred directly to the profit and loss account.
• Assets are to be debited, and liabilities are to be credited.

1. Balance can be Easily Verified - With the posting in the accounts, the balances of each account can be easily known as on the date. It creates a clear understanding of the account balances and reduces the efforts of finding from each ledger account.
2. Ensures Smooth Running of Business - Posting of Balances ensures the smooth running of the business as posting balances can be easily tracked and called for. Cross-verification and arithmetical accuracy are to be rechecked.
3. Helps to keep Updated Records - It helps to keep an updated record of all ledger balances & also helps to keep tracking of the balances on how they changed over time.
4. Can be Easily Analyzed - As the balance of the ledger accounts can be changed with the recording of various transactions, if the balance is the same for a continuous period, one can analyze the account and request for clearance of balance or record it as bad debts.

Posting in the ledger is the accounting process. The balances of the general journal and various sub-ledgers are to be transferred at various intervals, ranging from daily to yearly. It is very helpful and useful in large organizations, as keeping track of the balance becomes very easy. Also, with the posing in a ledger, the arithmetic accuracy of the accounts can be verified, and the balances can be analyzed thoroughly to maintain the proper and accurate records.

Posting in the ledger is a manual process; hence workforce is needed. It ensures that all assets and liabilities are to be recorded properly. The balances of nominal accounts are directly transferred to the profit and loss account. The balances related to balance sheet items are to be transferred to the general ledger account. It helps keep the updated records, but with the advancement of technology and the availability of various software, the posting in balance has become the traditional concept.

This has been a guide to What is Posting in Accounting & its Definition. Here we discuss the step to calculate the posting in accounting and examples and rules and importance. You can learn more about it from the following articles –

• Ledger Balance
• Subsidiary Ledger
• Purchase Ledger
• Sales Ledger