Posting in Accounting: Definition, Example, Purposes, Meaning, Importance

When a financial transaction occurs, companies record it in the books of prime entry. Some companies also record it as a journal entry. As these transactions occur, companies accumulate them and post the cumulative amount in the general ledger. It happens through a process known as posting in accounting. It is a part of the accounting cycle performed by companies.

What is Posting in Accounting?

Posting in accounting refers to transferring journal entries to the general ledger. In some cases, it may also include getting information from the books of prime entry and entering it into those ledgers. The posting process is usually straightforward. It involves totaling the amounts from the initial records. Once accumulated, companies transfer these amounts to the relevant accounts in the journal ledger.

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In modern accounting systems, the posting process occurs automatically. As soon as companies record a financial transaction, it gets posted to the general ledger. From there, it reaches the trial balance and forms a part of the financial statements. Posting in accounting may also include the accounting entries necessary to record the total amount for each account.

How does Posting in Accounting work?

Every company follows an accounting cycle. This cycle begins with a financial transaction and ends with financial statements. When a financial transaction occurs, companies record it in an initial record. Usually, it includes journal entries or the books of prime entry. After some time, transactions accumulate in these records. However, these transactions only constitute a single part of the accounting cycle.

At this stage, companies use posting to transfer the amounts from the initial records to the general ledgers. This process may occur at different intervals based on several factors, including the company size, volume of transactions, etc. As stated above, modern accounting systems perform this process automatically. Nonetheless, the process behind it occurs in the same way.

What is the step-by-step Posting process in Accounting?

The posting process includes several steps. These include the following.

  1. Totaling the balance of the initial records, including journal entries and books of prime entry.
  2. Identifying sub-ledgers and general ledgers for the transactions.
  3. Creating the relevant general ledgers.
  4. Entering the details for the totals on the debit or credit side in the general ledger.
  5. Calculating the account balances for each account.
  6. Checking for any errors in the records and correcting them.

What must companies ensure while Posting in Accounting?

Transferring records from the initial records to the general ledgers requires companies to meet some criteria. While these criteria may differ between companies, the essential items include the following.

  • The post information must include details on the time and date of the financial transaction.
  • The posting must occur in chronological order.
  • An entry on one side of a general ledger (debit or credit) must also have a corresponding entry on the opposite side of another account.
  • Every detail must appear in its relevant column in the records.
  • The company must make a reference to the entry in the accounting records.
  • Balances on nominal accounts must go to the income statement account.

Conclusion

Posting in accounting refers to transferring accounting records to the general ledger. Most modern accounting systems perform this process directly. However, it follows a similar step-by-step process at the base. While posting, companies must also ensure some criteria, some of which include the ones given above.

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