What is the meaning of posting in journal entries

Definition

Posting refers to moving the transaction entries from the journal to the ledger books of the company. It is an important part of the accounting cycle.

Posting helps us to classify transactions in a better manner.

A journal is used to record transactions in chronological order while ledger books are used to classify transactions into assets, liabilities, expenses, and incomes.

Steps of Posting

• Create and name ledger accounts for different items of trial balance

• Identify those entries in the journal that relate to the relevant ledger book under consideration.

• Post the entry on the debit or credit side of the ledger account.

• For example, when salaries are paid a salary account is debited and a bank account is credited. When posting this transaction in the bank account we will debit the bank account and write “To salaries” under the head “particular”. This will indicate that salaries were paid from a bank account causing a reduction in the bank balance.

• After all the journal entries relevant to a particular ledger account have been posted in it, we will tally the total of the debit and the credit side of the ledger account to ascertain any balance left.

• Usually, asset accounts have the debit side exceeding the credit side. That is to say, they have a debit balance. Liability accounts usually have a credit balance.

• It is not necessary that every ledger account may have a balance left at the end. The total of the amounts on the debit side may be equal to the total of the amounts on the credit side in some ledger accounts.

• The last step is to recheck the ledger account to identify and correct any mistakes that may have occurred during the posting process.

Importance of Posting

• Posting helps us to classify transactions in a better and more efficient manner.

• Posting makes the books of accounts more readable.

• An accountant may choose to engage in posting once every month or even once every day as per the requirements of the business and the financial reporting norms.

• Posting is necessary for the creation of financial statements. A trial balance cannot be drafted without determining the balance of each ledger account.

• Posting helps us to know the balance of each account This helps to run the business smoothly by tracking balances timely and making up for any likely deficiency in advance.

• Analysis of how balances of various ledger accounts have changed over time helps us to draw valuable conclusions for the business.

Conclusion

We can conclude by saying that the process of posting refers to transferring the entries from the journal to the ledger accounts.

Posting is an essential step of the accounting cycle and without it, financial statements cannot be prepared. Any error while posting is bound to adversely affect the creation of the financial statements.