From entries to balances to a list that must balance

Journal, then ledger

The journal is the chronological record: every transaction, in date order, both sides together. The ledger is the same information regrouped by account: every debit and credit that ever touched Cash, in one place, with a running balance. Posting is the transfer — each journal amount copied to its account's side in the ledger, with a cross-reference so that either book leads to the other. Nothing is analysed at posting; the thinking was done in the journal.

Worked example — Pinecrest's November

Pinecrest Physio Inc. opened November with these balances: Cash 18,000 · Equipment 22,000 · Accounts Payable 3,500 · Common Shares 30,000 · Retained Earnings 6,500 (debits 40,000 = credits 40,000). Eight entries were made in November — the four from L4.2 and four more:

Post the Cash account. Seven of the eight entries touch it:

Cash
─────────────────────────────────────────────
Date     Ref   Debit    Credit    Balance
Nov 1    bal                      18,000 Dr
Nov 1    J1               2,400   15,600 Dr
Nov 10   J3     5,600             21,200 Dr
Nov 14   J4       500             21,700 Dr
Nov 18   J5               2,000   19,700 Dr
Nov 21   J6               3,100   16,600 Dr
Nov 25   J7                 700   15,900 Dr

The running-balance form is what a case's ledger looks like: the balance is recomputed after every posting, so the last line is always the current balance. Accounts Payable: 3,500 + 3,800 − 2,000 = 5,300 credit. Service Revenue: 5,600 + 1,900 = 7,500 credit. Equipment: 22,000 + 3,800 = 25,800 debit. And so on for every account the eight entries touched.

The trial balance

A trial balance lists every account with a balance, debit balances in one column and credit balances in the other, and proves that the two columns add to the same total. It is not a statement — nobody outside the company sees it — but it is the checkpoint before the statements are attempted.

Pinecrest Physio Inc.
Trial Balance
At 30 November 2025
                            Debit     Credit
Cash                       15,900
Accounts Receivable         1,900
Supplies                      700
Equipment                  25,800
Accounts Payable                       5,300
Unearned Revenue                         500
Common Shares                         30,000
Retained Earnings                      6,500
Service Revenue                        7,500
Rent Expense                2,400
Salaries Expense            3,100
                           ──────    ──────
                           49,800    49,800

Every account's balance is on its normal side — assets and expenses in the debit column, liabilities, equity and revenue in the credit column — and the totals agree: 49,800 = 49,800. The ordering (assets, liabilities, equity, revenues, expenses) is the balance sheet's order followed by the income statement's, which is what makes the next step easy. Note that the trial balance carries Retained Earnings at its opening figure, 6,500: November's income has not been closed into it, and a closing retained earnings is computed, never read off a trial balance (Module 5 returns to this).