Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

SOLUTION TO EXERCISE 2-4

TIP: Notice that there are no amounts reflected yet in the Retained Earnings account. The process of getting amounts into that account is discussed in Chapter 3.

Explanation: Posting refers to the process of transferring journal entries to the ledger accounts. This phase of the recording process accumulates the effects of journalized transactions in the individual accounts. Posting involves the following steps:

1. In the ledger, enter, in the appropriate columns of the account(s) debited, the date, journal page, and debit amount shown in the journal.
2. In the reference column of the journal, write the account number to which the debit amount was posted.
3. In the ledger, enter, in the appropriate columns of the account(s) credited, the date, journal page, and credit amount shown in the journal.
4. In the reference column of the journal, write the account number to which the credit amount was posted.

The use of the reference column in the journal serves two purposes. It allows for:

1. Cross referencing between the journal and the ledger which facilitates tracing of transactions from the journal to the ledger at a later date.
2. A method of noting that the posting has been completed.

When T-accounts are used, such as in this exercise, the journal page of the debit or credit amount being posted is typically omitted in the ledger.

The general journal for the J.Lo Motorcycle ...