The Accounting Cycle and
the General Ledger

Posting information to the General Ledger is the fourth step in the Accounting Cycle.

The GL uses the Chart of Accounts to classify each posting by Account Number.

Let's continue our example by posting the four transactions in the General Journal into the Ledger Accounts.

As a quick recap, the following transactions occurred on January 1, 2007 to start Sunny Sunglasses Shop:

Jan. 1 Sunny invested $50,000 into his new business, Sunny Sunglasses Shop.

Jan. 1 Purchased inventory for $4,500. Paid $3,000 cash, with the balance of $1,500 due in 90 days.

Jan. 1 Purchased land for $20,000 with $2,000 as a down payment, and a 15 year mortgage for $18,000.

Jan. 1 Purchased insurance for the year for $2,400.

Adding the columns for each account and taking the difference between the two columns equals the balance of the account. For example, the debit column of cash totals $50,000, and the credits total $7,400. The difference between the two equals $42,600.

Just as the Ledger Accounts each reference the General Journal as a source of the transfer, the General Journal now references each Ledger Account in the reference column, which completes the posting for the General Journal below.