ILLUSTRATION

Once again, let us review the transactions of the newly organized accounting firm of Mr. Kayayan.
May 1. Mr. W. Kayayan invested P100,000 to start an accounting office.
May 3. Purchased office supplies worth P20,000 on account.
May 5. Purchased additional office supplies for cash, P10,000.
May 6. Paid the accounts payable in full.
May 8. Purchased 2 units of computer with printer for P50,000, 30 days.
May 10. Rendered accounting services for cash, P25,000.
May 15 Rendered accounting services on account, P 30,000.
May 15 Paid Meralco bills, P 3,500.
May 15 Paid salaries for the period, P15,000.
May 20 Collected P10,000 from customer.
May 22 A Short term loan from a local bank was granted in the amount of P50,000, less P5,000 financing charges. Mr. W.
Kayayan issued 1 year promissory note.
May 25 Paid telephone bill amounting to P 6,000.
May 27 Mr. Kayayan withdrew P20,000 for personal use.
May 30 At the end of the month, physical count of the office supplies revealed that P 5,000 had been consumed.
THE LEDGER
A grouping of the entity’s accounts is referred to as a ledger. Although some firms may use various ledger to accumulate
certain detailed information, all firms have a general ledger. A general ledger is the reference book of the accounting system
and is used to classify and summarize transactions, and to prepare data for basic financial statements. The accounts in the
general ledger are classified into two general groups:
 Permanent/Real accounts –balance sheet accounts
 Temporary/Nominal accounts –income statement accounts

Posting means transferring the amounts from the journal to the appropriate accounts in the ledger. The steps are illustrated
as follows:
1. Transfer the date of the transaction from the journal to the ledger.
2. Transfer the page number from the journal to the journal reference.
3. Post the debit figure from the journal as a debit figure in the ledger and the credit figure from the ledger as a
credit figure in the ledger.
4. Enter the account number in the posting reference column of the journal once the figure has been posted to the
ledger.

LEDGER ACCOUNTS POSTING

At the end of the accounting period, the debit and credit balance of each account must be determined to enable us to come
up with a trial balance.
 Each account balance is determined by footing (adding) all the debits and credits.
 If the sum of an account’s debit is greater than the sum of its credits, that account has a debit balance.
 If the sum of its credits is greater, that account has a credit balance.

****In the discussion of basic accounting, T-accounts is often use rather than the actual ledger to facilitate the posting step
in the accounting cycle.