Next, after complete transaction data are recorded, portions of the data are summarized and transferred to another journal, called the ledger:

So, the ledger is where information about all accounts is kept. In order for the information to get to the ledger, it must be posted from journals.

Sometimes information in journals is summarized into homogeneous groups before posting to the ledger. For instance, if there are a lot of cash payments for supplies during a period, such payments may be summarized to limit the number of records in the ledger. Note that only homogeneous transactions are usually summarized before posting.

After posting has been made, all debit and credit balances are compared to ensure they balance.

When all entries are posted, a trial balance is prepared.

A trial balance is a list of all accounts with their balances at a point in time.

Trial balances can be prepared at any time (before or after adjusting or closing entries). However, it is considered a good practice to have a trial balance before preparing financial statements because a trial balance shows accounts with their balances. Such information greatly facilitates preparation of financial statements. An example of a trial balance before and after all closing entries is shown below:

Cash

Supplies

Accounts Receivable

Interest Receivable

Prepaid Rent

Notes Receivable

Office Equipment

Accumulated Depreciation

Accounts Payable

Salaries Payable

Interest Payable

Notes Payable

Unearned Revenue

Contributed Capital

Distributions

Consulting Revenue

Interest Revenue

Depreciation Expense

Interest Expense

Office Maint.

Expense

Operating Expense

Rent Expense

Salaries Expense

Supplies Expense

Cash

Supplies

Accounts Receivable

Interest Receivable

Prepaid Rent

Notes Receivable

Office Equipment

Accumulated Depreciation

Accounts Payable

Salaries Payable

Interest Payable

Notes Payable

Unearned Revenue

Contributed Capital

Retained Earnings

After the post closing trial balance is prepared and checked to ensure credit balances equal debit balances, financial statements are prepared. We are skipping preparation of financial statements here because we have seen how that is done before. Note that preparation of financial statements is the final step in the sequence that was started by analyzing source documents.