What is Ledger Posting? 

A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time. 

It shows you the opening balance, the transactions, and the closing balance at the end of a period. 

The first step in bookkeeping and accountancy is to write journal entries based on the transactions that have taken place, about financial transactions, business transactions, assets, and expenses.  

The entries are as per the double-entry system. Once these entries are recorded, to get a clear picture of the transactions that have hit an account, you will have to check every journal entry. Since the volume of transactions and entries is huge our calculation may not be accurate. 

To have all the entries about one account in one place, we need to post them to the general ledger account. This is the second step in the accounting of transactions. 

Ledger posting is the act of posting journal entries in the respective general ledger accounts to get a consolidated view of an account. At the end of the fiscal year, Ledger accounts are balanced and account balances in every ledger are consolidated together to make Trial Balance.  

Every general ledger, when balanced, forms a part of the chart of accounts, which is nothing but the Trial Balance. The trial balance is then used to prepare financial statements of the Company for a particular period. 

Ledger account  

All the ledger accounts that a Company uses are summarized to form a Chart of Accounts. 

Following are the primary ledger account categories: 

1. Assets 
2. Liabilities 
3. Income 
4. Expense 

The chart of accounts is further classified into each of the above primary ledger accounts to know the profit and loss & the Balance sheet of the Company. 

Following is the list of ledgers forming part of the primary ledgers is as follows: 

General Ledger Template 

XYZ Account 

For the period ended 31^st Dec 2020 

Dr.                                                                                                                                        Cr. 

Ledger account is also known as T-account as the account is T shaped. 

1. Date: Date on which the transaction took place 
2. Particulars: The other Account to be credited or debited 
3. JF No: Journal Folio number, Journal entry page number 
4. Amount: Amount of the transaction 
5. Abbreviations of “Dr.” and “Cr.” are used at the top to denote the Debit side and the Credit side of the ledger account 

The Procedure of Ledger Posting 

Once the general journal entries are recorded, we now start posting them into the respective ledger accounts. For that first, we need to see the accounting records of different accounts that need to be opened to pass these journal entries. 

While posting entries the account which is debited will be posted on the debit side and the one credited will be posted on the credit side. However, the name of the other account will be mentioned in the ledger account as a subsidiary ledger account or ledger entries in sub-accounts. 

We prefix “To” on the Debit side and “By” on the Credit side of the ledger account. 

Balancing the Ledger 

At the end of the accounting period, we balance the ledger accounts by taking the debit side and credit side total. If the debit side is higher than the credit side then the account is supposed to have a debit balance and vice versa. In the above example, the XYZ account has a debit balance as of 31^st Dec 2020 of $ 10,000. 

Example 1: 

XYZ Account had an opening balance of $ 20,000/-. The Cash Account has an opening balance of $ 5,000/- .A transaction took place during the year for which the Journal Entry is as under. Please post the entry into the ledger account. 

Journal Entry: 

30.9.2019        Cash A/c       Dr  $ 10,000 

                     To XYZ A/c    Cr $ 10,000 

Ledger posting for the above entry is as under: 

1.     Posting for Opening balances 

The XYZ account has an opening balance of 20,000$, we accordingly write the opening balance on the Dr side of the ledger.  The cash account has an opening balance of 5,000$, we write the opening balance on the Dr side of the ledger. 

2. General Journal entry posting 

XYZ Account 

For the period ended 31^st Dec 2020 

Dr.                                                                                                                                        Cr. 

Cash Account 

For the period ended 31^st Dec 2020 

Dr.                                                                                                                                        Cr. 

3.     Balancing the ledger: 

At the end of the period, the account is closed by finding out the account balance at the end of the period putting it on the other side of the ledger to tally both sides. 

In the above example, XYZ A/c has a closing debit balance of $10,000/- and a Cash account has a closing balance of $15,000/-. 

Example 2: 

On 1^st April 2021, XYZ Company issued 1000 shares of $10/- each to its shareholders. The Share capital account had an opening balance as of 1^st April 2021, of $1,00,000, while Cash Account had an opening balance of $ 10,000/- 

The journal entry and post the same into the ledger will be as follows: 

Journal Entry in XYZ Company’s books: 

1.4.2021          Cash A/c                      Dr $ 10,000 

                     To Share capital A/c   Cr $ 10,000 

Ledger posting: 

Posting for Opening balances 

The share capital account has an opening balance of 100,000$, we accordingly write the opening balance on the Dr side of the ledger. 

The cash account has an opening balance of 10,000$, we write the opening balance on the Dr side of the ledger. 

Share Capital Account 

For the period ended 30^th Apr 2021 

Dr.                                                                                                                                        Cr. 

Cash Account 

For the period ended 30^th Apr 2021 

Dr.                                                                                                                                        Cr. 

Balancing the ledger 

In the above example, Cash A/c has a closing debit balance of $20,000/- and Share Capital account has a closing balance of $110,000/-. 

Modern-day systems used for Ledger accounts 

Systems used in the modern-day are SAP, Oracle, and Tally which help in ledger posting, once the journal entries are passed. They directly throw the Trial balance at the end of the period to help you close the books of accounts. 

Common Mistakes and Pitfalls 

• Posting the entries on the wrong side of the account 
• Writing the wrong ledger account name in the ledger 
• Not balancing the ledger account correctly 
• Incorrectly classifying the ledger into primary ledger accounts 

Context and Application 

This topic is significant in the professional exams for both undergraduate and graduate courses especially following 

• B. Com Banking and Finance 
• Chartered Accountancy 
• CIMA (Management Accounting) 
• MBA