How to Open a Ledger Account

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Journal entries record company transactions, such as sales and expenses. These entries are then posted to the general ledger, which contains the company's accounts. The journal is a chronological record of transactions, while the ledger summarizes the transactions by accounts. Examples of accounts include cash, inventory, marketing expenses and revenues. A ledger account must be opened before transactions can be posted.

  • Write the account name and number on the top of a ledger form. There might be six or seven columns in the form, including transaction date, details, reference number, and debit and credit balances.

  • Record the journal entries for each transaction. For example, if you sell an item for $20 cash, debit or increase cash and credit or increase sales by $20.

  • Post the journal entries to the corresponding ledger accounts. Continuing with the example, enter $20 under the debit column in the cash ledger account and $20 under the credit column in the sales ledger account.

  • Update the account balances. Ledger accounts keep running tallies of debit and credit transactions. To conclude the example, if the cash account had a debit balance of $100, the new debit balance will be $120 ($100 + $20). If the sales account had a credit balance of $500, the new credit balance will be $520 ($500 + $20).

  • Check your work. All journal entries should be posted correctly to the ledger. If you make errors here, they could affect other calculations all the way to the financial statements.

Tips & Warnings

  • Software accounting tools, such as Intuit QuickBooks and Sage Simply Accounting, generally make calculations simpler and less susceptible to errors.

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