Journalizing and Posting: A Simple Worked Example

Journalizing and posting are the second and third steps of the accounting cycle. Journalizing records each transaction in the journal with its date and the accounts debited and credited. Posting copies each debit and credit to the matching general ledger account. The journal organizes transactions by date; the ledger organizes them by account.

Why it matters: Following both steps lets you explain where a balance came from, detect posting errors, and prepare the next checkpoint: the unadjusted trial balance.

Journal vs ledger vs chart of accounts: what is the difference?

A journal is the initial chronological record, often called the book of original entry. A ledger collects account records, including assets, liabilities, equity, revenues, expenses, and dividends. The chart of accounts is an index, not a list of current balances. Codes are company-specific; leaving gaps makes room for future accounts.

The IRS description of double-entry bookkeeping explains the journal-to-ledger sequence and debit-credit equality. Computerized systems often perform posting automatically, but the underlying account effects remain the same.

How to prepare a journal entry

Read the source document and perform accounting transaction analysis first. Enter the date, list debit accounts with their amounts, then list credit accounts and amounts. Add a short explanation that identifies what occurred. In a traditional journal, credit account titles are indented. The entry must have equal total debits and credits.

If debit and credit rules still feel shaky, review them in our Financial Accounting course. The debit-and-credit lessons are in Chapter 2; you can explore Chapter 1 free.

An entry involving one debit and one credit is simple. A compound entry has more than two account lines. It may contain multiple debits, multiple credits, or both. Count amounts, not lines, when testing equality. Posting references identify the relevant ledger account and the originating journal page or entry.

Journalizing and posting: the Meridian example

Hypothetical example. Meridian Design Studio Inc. opens in May 20X7 with zero balances. All common shares are no-par shares, with proceeds credited to Common Stock. Assume the completed services qualify for revenue recognition. Record the following transactions before any period-end adjustments; unused supplies and prepaid insurance initially use asset accounts.

On May 2, Equipment is debited for the full $9,000 acquired, although only $3,000 is paid immediately. On May 10, both Cash and Accounts Receivable are debited because $5,000 of completed services has two collection components. Each compound entry still balances.

How do you post journal entries to the ledger?

Transfer each debit to the debit side of its named ledger account and each credit to the credit side. Preserve the date, amount, and reference. Posting does not reverse the entry or create another transaction. A T-account shows the two sides simply; a running-balance ledger also displays the updated balance after each posting.

How to post a journal entry in 4 steps

For this example, assume Meridian’s chart of accounts numbers Cash as account 101, and all May entries fit on journal page J1. For each line of a journal entry:

1. Find the ledger account named in the entry and write the transaction date.
2. Enter the amount on the same side it appears in the journal: debit column for a debit, credit column for a credit. Then update the running balance.
3. In the ledger’s reference column, write the journal page the entry came from, such as J1.
4. Go back to the journal and write the ledger account number, such as 101, in the journal’s reference column. This last step shows that the line has been posted.

Here is Meridian’s Cash account after posting every May entry. Notice how the balance updates after each line.

The ending balance of $21,000 matches the rollforward in the table below.

For Cash, debit postings total $29,400 and credit postings total $8,400. The debit balance is $29,400 − $8,400 = $21,000. For Accounts Payable, credits exceed debits: $1,200 − $700 = $500 credit. A debit can therefore reduce a liability; it does not always increase an account.

Post all accounts, including those with only one entry. Equipment has a $9,000 debit balance, Notes Payable a $6,000 credit balance, and Service Revenue a $5,000 credit balance. The complete unadjusted trial balance assembles every ending balance from this same case.

Quick check: when every account is posted correctly, Meridian’s debit balances and credit balances each total $37,900. The debit balances are Cash $21,000, Accounts Receivable $2,000, Supplies $1,200, Prepaid Insurance $1,800, Equipment $9,000, Rent Expense $900, Salaries and Wages Expense $1,600, and Dividends $400. The credit balances are Accounts Payable $500, Unearned Service Revenue $2,400, Notes Payable $6,000, Common Stock $24,000, and Service Revenue $5,000.

For more worked examples like Meridian, explore the full Intermediate Accounting course.

What are posting references, and why do they matter?

In a manual system, the journal’s posting-reference column is typically filled after posting with the ledger account number. The ledger points back to the journal page, such as J1. Electronic records commonly use entry IDs and document links. These references help trace a balance to its postings, original entry, and supporting evidence.

A ledger total supports summary reporting, while transaction detail supports questions about customers, services, and dates. For example, one revenue balance cannot explain which customer generated the most sales. New technologies, including distributed ledgers (shared digital records such as blockchain), change how records are stored. They do not remove the need to classify each transaction correctly.

Common journalizing and posting mistakes

Posting the same entry twice doubles its effects. Switching the debit and credit sides changes account balances incorrectly. Recording the May 15 collection as revenue counts the May 10 service twice. Debiting expense when paying the supplier ignores the existing payable.

Exam tip: the size of a trial balance difference is a clue. If half the difference matches an amount in the journal, look for that amount posted to the wrong side. For example, posting the May 2 Equipment debit as a credit creates an $18,000 difference, and $18,000 divided by 2 is $9,000.

If the difference divides evenly by 9, look for a transposition, which means two digits were swapped. For example, posting the May 28 wages debit as $6,100 instead of $1,600, with Cash credited correctly, makes debits exceed credits by $4,500. And $4,500 divided by 9 is $500.

Keep in mind that a balanced trial balance does not prove every posting is right. Posting an entry twice, skipping an entire entry, or posting to the wrong account on the correct side all leave debits and credits equal.

Keep explanations specific enough to distinguish transactions. “Payment” alone does not tell a reviewer whether Cash paid for an asset, expense, liability, or dividend. High-volume businesses may organize frequent transactions using special journals; this tutorial uses the general journal to make every effect visible.

Practice questions with answers

Try each question before reading its answer.

1. What is the May 20 payment entry?

Answer: Debit Accounts Payable $700 and credit Cash $700. The company settles an existing obligation; it does not purchase supplies again.

2. A debit to Equipment is posted as a credit to Equipment. Was posting supposed to change the side?

Answer: No. Posting carries the same debit or credit into the same named account. Here, Equipment would show a $9,000 credit balance instead of a $9,000 debit balance. On the trial balance, total credits would exceed total debits by $18,000, which is exactly twice the amount posted to the wrong side. The journal entry itself still balances; the error lives in the ledger.

3. Does the chart of accounts show Meridian’s $21,000 cash balance?

Answer: No. The chart identifies the Cash account and its code. The ledger contains its activity and balance; the trial balance summarizes the ending balance.

Frequently asked questions

What is the difference between journalizing and posting?

Journalizing records the whole transaction in the journal. Posting places each debit and credit into the affected ledger account.

Does a compound entry violate double-entry accounting?

No. Double entry requires equal total debits and credits, not exactly two account lines.

Must a ledger use T-accounts?

No. T-accounts are a teaching format. A running-balance account or electronic ledger can show the same information with more detail.

Which comes first, journalizing or posting?

Journalizing always comes first. You record the full transaction in the journal, then post each debit and credit to the ledger. Posting first would leave no original record to trace back to.

What is a posting reference?

A posting reference is a code that links the journal and the ledger. In a manual system, the journal shows the ledger account number, such as 101 for Cash, and the ledger shows the journal page, such as J1.

Does accounting software still journalize and post?

Yes. Accounting software can automate journalizing and posting, although some systems require approval or a separate posting step before the ledger is updated. The debits, credits, and account effects are the same as in a manual system.

What comes after posting?

The next step is preparing the unadjusted trial balance, which lists every ledger account balance and checks that total debits equal total credits. Later in the cycle, after adjusting and closing entries, you prepare a post-closing trial balance.

About the author: Mansour Farhat, CPA, CIA, DBA teaches accounting through Farhat Lectures and the Farhat Lectures YouTube channel, creating courses and exam-focused lessons for accounting students and CPA, CMA, and EA candidates.

Learning scope: Intermediate Accounting, Section 2.2, Analyze and Record Business Transactions. This lesson ends before period-end adjusting entries.