Posting from the cash journals to the General Ledger

What the journals cannot tell you

The CRJ tells you everything that came in during March. The CPJ tells you everything that went out. Neither tells you how much money the business actually has, or how much it has spent on wages this year, because those figures are scattered across dozens of lines in two different books.

The General Ledger fixes that. It is a set of accounts, one per item the business tracks, where every entry about that item is gathered in one place. Bank has an account. Wages has an account. Equipment has an account. To answer "how much cash do we have", you look at one account instead of re-reading two journals.

Moving figures from the journals into those accounts is called posting.

The ledger is in two parts

Accounts are grouped so the final statements are easy to prepare.

Balance Sheet accounts, numbered B1, B2, B3 and so on, are the things the business still has or still owes at the end of the year: Bank, Equipment, Petty cash, Debtors control, Capital, Loan.

Nominal accounts, numbered N1, N2, N3 and so on, are the income earned and expenses incurred during the year: Current income, Rent income, Wages, Stationery, Telephone.

What gets posted, and what does not

This is the rule to hold on to:

• Column totals are posted once. The Bank total, the Current income total, the Wages total. Forty entries become one figure in the ledger.
• Sundry entries are posted individually. A Sundry total is a mixture of unrelated accounts, so its total means nothing. Each line goes to its own account by name.

Directions follow the journal. Every CRJ line debited Bank, so the CRJ Bank total is posted to the debit side of the Bank account. Every CRJ analysis total was a credit, so it is posted to the credit side of its account. In the CPJ it is reversed: the Bank total goes to the credit side of Bank, and the analysis totals go to the debit sides of their expense and asset accounts.

Folio references

A folio is a cross-reference, and it is what makes the books auditable.

In the journal, the folio column holds the ledger account number the entry was posted to, such as B1 or N5. In the ledger, the folio column holds the journal and page it came from, such as CRJ1 or CPJ1. Each points at the other.

So an auditor who sees R57 750 on the debit side of Bank marked CRJ1 can turn to page 1 of the Cash Receipts Journal, find the entries that produced it, and from there reach the numbered receipts themselves. The folio is also how you tick off which entries you have already posted, so nothing is posted twice or missed.

Worked example. Mokoena Cycle Repairs, March. The CRJ was cast as Bank R57 750, Current income R7 350, Sundry R50 400 (capital R48 000 and rent income R2 400). The CPJ was cast as Bank R22 890, Consumable stores R3 800, Wages R4 200, Stationery R650, Sundry R14 240 (rent expense R5 500, equipment R7 900, telephone R840).

From the CRJ:

• Bank (B1): debit R57 750, folio CRJ1. One posting for all four receipts.
• Current income (N1): credit R7 350, folio CRJ1. The column total, posted once.
• Capital (B3): credit R48 000, folio CRJ1. A Sundry item, posted on its own.
• Rent income (N2): credit R2 400, folio CRJ1. Also Sundry, also on its own.

From the CPJ:

• Bank (B1): credit R22 890, folio CPJ1.
• Consumable stores (N4): debit R3 800. Wages (N5): debit R4 200. Stationery (N6): debit R650. Three column totals, three postings.
• Rent expense (N3): debit R5 500. Equipment (B2): debit R7 900. Telephone (N7): debit R840. Three Sundry items, posted individually.

Count the debits and credits posted. Debits: 57 750 + 3 800 + 4 200 + 650 + 5 500 + 7 900 + 840 = 80 640. Credits: 7 350 + 48 000 + 2 400 + 22 890 = 80 640. Equal, because the cross-casts held in both journals.

Core checkpoint: given cast cash journals, you can post correctly to the General Ledger. You know that analysis totals go once and Sundry lines go individually, you get the side right from which journal the figure came from, and you can explain what a folio of CRJ1 or B1 is pointing at.