Accounting – Posting
We talked about exceptions in the Meaning of Balances and an input shared by a reader.
In an earlier post, I had mentioned the term “Posting”. Did you ever wonder what posting is? I am sure this term is quite known to almost all accounting students.
Posting was an important accounting process in manual / paper based accounting, done earlier. After the advent of computers and computer based accounting systems, this process is taken care of by the computer.
None the less, it is important to understand what this means. You have the prime books of entry, the cash book, the purchase and sales registers, the journal book. The secondary book is the general ledger. On a daily basis, you keep recording the transactions in these books. But then to get the summaries, you need to have the amounts recorded in the general ledger. This activity is called posting.
Let’s look at an example, you make a payment to a creditor Mr. ABC. The primary book is the cash / bank book, where on the credit side (credit what goes out) you make the payment entry. For traditional accountants, who were perpetually confused with the debits and credits, the left side was called the receipts side (you debited cash) and the right side the receipt side (you credited cash). From this, you made a posting to the ledger account of Mr. ABC. Since this entry was on the credit side of the cash book, the corresponding amount will go to the left or the debit side of the ledger account of Mr. ABC (debit the receiver) – see, you done even have to remember the full rule, if you got the first debit / credit correct.
This activity is called posting.
Next post we will share how modern day accounting systems achieve this process of posting.
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Updating transactions from the prime book of entry to the ledger.