A journal is organized by date, which is great for seeing what happened when, but terrible for answering "what is our Cash balance right now?" — you'd have to scan every single entry. Posting is the transfer of information from a journal to the general ledger, so each account collects its own history of debits and credits in one place, with a running balance.
The Balance-Column Ledger Account
A balance-column ledger account is a three-column account (debit, credit, and balance) that provides a running balance each time a new amount is posted, so the current balance is always visible without having to add up the whole account from scratch.
| Date | Explanation | Debit | Credit | Balance |
|---|---|---|---|---|
| Jan 1 | Opening entry | 10,000 | 10,000 Dr | |
| Mar 5 | Cash revenue | 850 | 10,850 Dr | |
| Apr 10 | Paid rent | 700 | 10,150 Dr | |
| May 14 | Paid A/P | 350 | 9,800 Dr |
The Chart of Accounts
A chart of accounts is a list of the names and account numbers of all of the accounts in a ledger. Numbering accounts (not just naming them) makes filing and cross-referencing faster and less error-prone, especially once a business has dozens or hundreds of accounts. A common numbering scheme groups accounts by type, in the same order they'll eventually appear on the financial statements.
| Number range | Account type |
|---|---|
| 100–199 | Assets |
| 200–299 | Liabilities |
| 300–399 | Owner's Equity (Capital, Drawings) |
| 400–499 | Revenue |
| 500–599 | Expenses |
Cross-Referencing
When an amount is posted from the journal to the ledger, the account number is written back beside the journal entry (in a "posting reference" or PR column), and the journal's page number is written into the ledger account. This two-way cross-reference lets anyone trace an amount from the ledger back to its original journal entry, or from the journal forward to see where it ended up — a key part of being able to audit the books later.