Determining Account Balances

Once transactions have been analyzed and recorded in a journal, it is necessary to classify and

group all similar items. This is accomplished by the bookkeeping procedure of posting all the

journal entries to appropriate accounts. As indicated earlier, accounts are records of like items.

They show transaction dates, increases and decreases, and balances. For example, all increases and

decreases in cash arising from transactions recorded in the journal are accumulated in one account

called Cash. Similarly, all sales transactions are grouped together in the sales revenue account.

Posting is no more than sorting all journal entry amounts by account and copying those

amounts to the appropriate account. No analysis is needed; all the necessary analysis is performed

when the transaction is first recorded in the journal.

All accounts are maintained in an accounting record called the "general ledger." A ledger

is a "book of accounts." Exhibit 6 shows how the three cash transactions in the general journal

would be posted to the cash account in the general ledger, with arrows depicting the posting

procedures. Observe that a number has been inserted in the "posting reference" column in

both books. This number serves as a cross-reference between the general journal and the accounts

in the general ledger. In the journal, it identifies the account to which the journal entry

has