In: Accounting
what does it mean when a question says "Post to cash ledger account" a T-account for cash only or T-account for everything ?
"Post to cash ledger account"
Ledger Posting
The process of accounting contains several important steps. Firstly, we have to record all transactions in a specific format in an accounting journal. Following that, we have to transfer these individual entries to ledger accounts. Accountants refer to this process as ledger posting. Let’s take a look at what ledgers are and how we post entries in them.
Each side of a ledger contains the following columns:
i) Date: This column basically depicts the date on which that transaction took place.
ii) Particulars: This shows the name of the relevant account which the transaction effects.
iii) JF (Journal Folio): This column denotes the page number on which the journal entry was passed.
iv) Amount: This column basically shows the amount associated with every entry.
Posting from Journal to cash Ledger
The final accounts of a business are prepared on the basis of the ledger. The following is a format of a ledger account:
Ledger
Dr. Cr.
Date | Particulars | JF | Amount | Date | Particulars | JF | Amount |
Posting into a ledger is made from the journal entries which are passed in the journal. It is important to mention that every journal entry will have to be posted to all accounts which have been debited and credited in the journal entry.
For example, for goods purchased for cash, Purchases Account is debited and Cash Account is credited. While posting this entry into the ledger, it will be posted both in Purchase Account as well as in Cash Account. All real accounts relate to assets, hence, show the debit balance only. The balance in nominal accounts indicates profit and loss. The balance in nominal accounts is transferred to Profit and Loss Account.
Let us take the example of the following journal entries to illustrate how the posting process is accomplished:
Cash A/c – Dr. 50,000
To Capital A/c 50,000
Furniture A/c – Dr. 10,000
To Cash A/c 10,000
These entries shall be displayed in their respective accounts as follows:
Cash A/c
Date | Particulars | JF | Amount | Date | Particulars | JF | Amount |
XX | To Capital | 50,000 | By Furniture | 10,000 |
T-account for not only cash T-account for everything
Understanding T-Account
In double-entry bookkeeping, a widespread accounting method, all financial transactions are considered to affect at least two of a company's accounts. One account will get a debit entry, while the second will get a credit entry to record each transaction that occurs.
The credits and debits are recorded in a general ledger, where all account balances must match. The visual appearance of the ledger journal of individual accounts resembles a T-shape, hence why a ledger account is also called a T-account.
A T-account is the graphical representation of a general ledger that records a business’s transactions. It consists of the following:
KEY TAKEAWAYS
Example of T-Account
If Barnes & Noble Inc. (BKS) sold $20,000 worth of books, it will debit its cash account $20,000 and credit its books or inventory account $20,000. This double-entry system shows that the company now has $20,000 more in cash and a corresponding $20,000 less in inventory on its books. The T-account will look like this: