Self-Balancing Ledger -

Self-Balancing Ledger

In case of large business with voluminous transactions, having large numbers of ledgers are kept by a concern, the accountant would have to face great difficulty in tracing errors in case of difference in Trial Balance. To reduce the trouble and time involved in locating the errors and to distribute work among several persons, this system has been designed, which is maintained by adopting any one of the following two systems:

– Self-Balancing System,

– Sectional Balancing System.

Maintenance of Self-Balancing Ledgers

Following is an example of such Self-Balancing ledgers maintained:

Sales Ledger (Debtors Ledger): In the sales ledger individual debtors accounts are maintained. All credit sales, cash collections, discount, sales return, bad debts, etc. are recorded in the individual debtors account.
Bought Ledger (Creditors Ledger): In the bought ledger, individual creditor’s accounts are maintained.
General Ledger: General Ledger contains real accounts, nominal accounts and non-trading personal accounts except those relating to trade debtors and trade creditors.

If the Sales or Bought ledgers double entry is not complete, a separate trial balance cannot be taken out from ledgers. If these ledgers are maintained in such a way as to offer separate trial balances, the system would be known as “Self-balancing”. In such a case a “General Ledger Adjustment Account” is prepared in each of the subsidiary ledgers. The General Ledger would have:

Bought Ledger Adjustment Account (i.e.; Total Creditors Account) and
Sales Ledger Adjustment Account (i.e.; Total Debtors Account).

These accounts are known as Control Accounts.

Advantages of Self-Balancing Ledger

Easy location of Errors: Under Self-Balancing Ledger system detection of error is simpler.
Division of Work: As multiple ledgers are maintained, accounting work can be divided among many clerks, each clerk being in charge of a particular ledger.
Information Access: Details of transaction related to Debtors and Creditors can be accessed immediately.
Internal Control: Chances of mistakes and fraud are reduced as controls are maintained through General ledgers.
Fixation of Responsibility: Responsibility can be easily fixed to the concerned ledger keeper.
Early Preparation of Final Accounts: From trial balance drawn from General Ledger final accounts can be easily prepared.
Quick Finalization: The system enables preparation of accounts without personal ledgers having to be balanced individually.

Disadvantages of Self-Balancing Ledger

Additional Work: Some additional columns have to be maintained for entry of control accounts.
Not suitable for small concerns: For small concerns, maintenance of these ledgers may not produce advantages.

Accounting Procedure

Under Self-Balancing system, the 3 ledgers (i.e., Sales Ledger, Bought Ledger and General Ledger) are made self balancing by introducing the four Accounts:

In General Ledger:
Debtors Ledger Adjustment A/c,
Creditors Ledger Adjustment A/c.
In Debtors Ledger: General Ledger Adjustment A/c.
In Creditors Ledger: General Ledger Adjustment A/c.

Transfer between Subsidiary Ledger

Sometimes purchase may be made from a customer (whom previously goods were sold). The person’s account will appear in the Sales Ledger (as debtors) and also in the Purchase Ledger (as creditors). He will pay or be paid only the difference. To square up accounts, his balance will have to be transferred from one ledger to another (Purchase and Sales).

Transfer of this nature affects the two personal accounts and all the adjustment accounts. Suppose, A’s Account has been transferred in this manner. The following journal entries show transfer from A’s Purchase ledger to A’s Sales ledger:

To transfer his credit balance to his account in the Sales Ledger: A A/c Dr. (In Purchase Ledger) To A A/c (In Sales ledger)

To correct the two adjustment accounts in respect of creditors: Bought Ledger Adjustment A/c Dr. (In General Ledger) To General Ledger Adjustment A/c (In Purchase Ledger)

To correct the two adjustment accounts in respect of customers: General Ledger Adjustment A/c Dr. (In Sales Ledger) To Sales Ledger Adjustment A/c (In General Ledger)

Balances in Personal Ledgers

Normally, Customers Accounts in Debtors Ledger will show debit balances. But, in some exceptional cases, Customer’s Accounts show credit balances, like –

If a customers has paid advance but goods have not been dispatched to him.
If a customer has paid in full and then he returns some goods.

Similarly Creditors Accounts show credit balances in credit ledger. But in some exceptional cases, Creditors Accounts show debit balances. For example, if advance has been paid to a creditor but goods have not so for been received.

In the above cases, debit and credit balances will be shown separately in Adjustment Accounts.

Other Entries

Apart from sales, purchase and payments made to or received from creditors and debtors, there are some others entries related to debtors, as shown below:

Recovery of bad debts: For recovery of bad debts (Previously written off), following journal entry is made:

Cash A/c	Dr.
To Bad Debts Recovered A/c

Cash Accounts and Bad Debts Recovered Account both will appear in General Ledger. Therefore, Adjustment Accounts will not be affected.

Endorsement of B/R to Creditors: Following journal entry is made for this transaction:

Creditors A/c	Dr.
To B/R A/c

Above transaction will be debited in creditors Ledger Adjustment Account and credited in General Ledger Adjustment Account.

Dishonoure of Endorsed B/R : The entry will be:

Debtors A/c	Dr.
To Creditors A/c

Above entry will affect both personal ledgers (Debtors and Creditors Ledger) and all the four Adjustment Accounts will be affected. Following entries will be made in Adjustment Accounts:

Sales Ledger Adjustment A/c	Dr.
To General Ledger Adjustment A/c (In Sales Ledger)
General Ledger Adjustment A/c (In Purchase Ledger)	Dr.
To Purchase Ledger Adjustment A/c

B/R discounted with Bank: This will also not affect Adjustment Accounts. Both debit and credit aspects of this transaction will appear in General Ledger. Therefore, Adjustment Account will not be affected.
Provision for Bad and doubtful debts: This will not affect Adjustment Accounts. In case balance of sundry debtors has been given at net amount after deducting provision for bad and doubtful debts, amount of debtors should be shown at gross value in Adjustment Account.

Sub-Division of Sales Ledger and Purchase Ledger

If number of customers and creditors is large, more than one Sales Ledger and Purchase Ledger may be maintained. This sub-division of Ledger can be made on the following basis:

On the Basis of Alphabets: Account of customers whose names start with the alphabets A to H, from I to P, from Q to Z, in such case separate adjustment accounts for each sub-division will be maintained in the General Ledger.
On the Basis of Area: Instead of sub-division on the basis of name, the sub-division may be done on the basis of area. For example, if customers of business are spread over the country, a separate ledger may be maintained for each state.

Sectional Balancing System

Under this method also personal accounts of trade debtors and trade creditors are maintained in separate ledgers like Self-balancing system. In this system three ledgers are maintained:

General Ledger
Sales Ledger or Debtors Ledger.
Purchase Ledger or Creditors Ledger.

But under Sectional Balancing System, Trial balance is prepared only in General Ledger. Following Control Accounts are opened in General Ledger to complete double entry:

Total Debtors Account or Debtors Ledger Control Account.
Total Creditors Account or Creditors Ledger Control Account.

Distinction between Self-Balancing and Section Balancing System

	*Self-Balancing*	*Sectional Balancing*
Trial Balance	Separate trial balance is prepared for each ledger.	Trial balance is prepared for General Ledger only.
Control Account in ledgers	Control accounts are opened in all the ledgers.	Control accounts are opened in General Ledger only.
Double Entry	Double entry is completed in each ledger.	Double entry is complete in General Ledger only.
Number of Entries	It involves more accounting entries comparing to self balancing system.	It involves less accounting work as compared to self balancing system.
Control Accounts	Control accounts are normally called ‘Adjustment Accounts’.	Control accounts are normally called ‘Total Accounts’ or Contact Accounts.

Accounting Procedure of Sectional Balancing System

Under sectional balancing system personal accounts of Debtors and Creditors are maintained in Sales Ledger and Purchase Ledger respectively on single entry basis. In General Ledger, double entry is completed with the help of Total Debtors and Total Creditors Accounts.
To prove the accuracy of the Sales Ledger would be to maintain a Total Debtors Account in the General Ledger whereas accounts of individual customers would be maintained in the Sales Ledger. In the General Ledger, the Total Debtors Account would be periodically posted by the totals of various transactions (e.g. monthly total credit sales, total amount received from credit customers, total discount allowed to them, total returns inwards, total bill receivable received etc.) The balance in the Total Debtors Account should be equal to the total of balances shown by the accounts of individual customers ensuring accuracy of the Total Debtors Account as well as individual customers’ account. Any difference indicates error somewhere.
In the same way, the accuracy of individual suppliers accounts may be checked by comparing the total of their balances with the balance in the Total Creditors Account.
The double entry would be completed in the General Ledger itself. For instance for credit sales, Total Debtors Account would be debited and Sales Account credited. For goods returned to suppliers, Total Creditors Account would be debited and Return Outward Account credited.
The “total accounts” (also known as adjustments or control accounts) prove the accuracy of the subsidiary (Sale or Bought) ledgers.

Rectification of Errors

For rectification of errors relating to self balancing and sectional balancing system, the following steps should be followed:

Under Self-Balancing System : To rectify error, normal entry of rectification should be made. At first it will be checked whether adjustment account’s error affects also, then these will also be rectified. If error affects only personal account, there will be no effect on adjustment accounts.
Under Sectional Balancing System : Under this system personal accounts of debtors and creditors will be corrected through single entry. Accounts related to General Ledger will be corrected through Total Debtors or Total Creditors Account.

Practical Problems

General Ledger Adjustment A/c, Debtors Ledger Adjustment A/c and Creditors Ledger Adjustment A/c)

Ex. Peers Ltd. has three ledgers in use, viz. a Debtors Ledger, a Creditors Ledger and a Nominal Ledger, which are kept on the system of self-balancing. From the following particulars, prepare the adjustment account that would appear in each of these ledgers.

Date	Particulars	Rs.
2009, Jan. 1	Balance of Sundry Debtors	15,000
	Balance of Sundry Creditors	17,000
Jan. 31	Credit Purchases	6,000
	Credit Sales	10,700
	Cash Sales	1,500
	Paid to Creditors	9,800
	Discount allowed by them	400
	Cash received from debtors	7,700
	Discount allowed	300
	Bills payable accepted	1,300
	Bills Receivable	3,000
	Return Inwards	870
	Return Outwards	600
	Rebates allowed to debtors	280
	Rebate allowed by creditors	350
	Provision for Doubtful Debts	320
	Bad Debts	450
	Bills Receivable dishonoured	475

Solution:

Steps involved in solving the above problem:

Preparing Debtors Ledger Adjustment A/c in General Ledger.
Preparing Creditors Ledger Adjustment A/c in General Ledger.
Preparing General Ledger Adjustment A/c in Debtors Ledger.
Preparing General Ledger Adjustment A/c in Creditors Ledger.

Working Details:

In General Ledger

Debtors Ledger Adjustment Account

Dr.					Cr.
Date	Particulars	Rs.	Date	Particulars	Rs.
2009 Jan. 1	To Balance b/d	15,000	2009 Jan. 31	By Nominal Ledger Adjustment A/c:
Jan. 31	To Nominal Ledger Adjustment A/c: Sales	10,700		Bank Discount	7,700 300
	Bill Receivable dishonored	475		Bills Receivable	3,000
				Return Inwards	870
				Allowances	280
				Bad Debts	450
			Jan. 31	By Balance c/d	13,575
		26,175			26,175

Creditors Ledger Adjustment Account

Dr.					Cr.
Date	Particulars	Rs.	Date	Particulars	Rs.
2009 Jan.31	To Nominal Ledger Adjustment A/c:		2009 Jan. 1	By Balance b/d	17,000
	Bank Discount	9,800 400	Jan.31	By Nominal Ledger Adjustment A/c: Purchases	6,000
	Bills payable	1,300
	Return Outwards	600
	Allowances	350
Jan.31	To Balance c/d	10,550
		23,000			23,000

In Debtors Ledger

General Ledger Adjustment Account

Dr.					Cr.
Date	Particulars	Rs.	Date	Particulars	Rs.
2009 Jan. 31	To Debtors’ Ledger Adjustment A/c: Bank	7,700	2009 Jan. 1 Jan.31	By Balance b/d By Debtors Ledger Adjustment A/c:	15,000
	Discount	300		Sales	10,700
	Bills Receivable	3,000		Bills Receivable Dishonoured	475
	Return Inwards	870
	Allowances	280
	Bad Debts	450
Jan.31	To Balance c/d	13,575
		26,175			26,175

In Creditors Ledger

General Ledger Adjustment Account

Dr.					Cr.
Date	Particulars	Rs.	Date	Particulars	Rs.
2009 Jan. 1	To Balance b/d	17,000	2009 Jan.31	By Creditors Ledger Adjustment A/c:
Jan.31	By Creditors’ Ledger Adjustment A/c: Purchases	6,000		Bank Discount	9,800 400
				Bills payable	1,300
				Return Outwards	600
				Allowances	350
			Jan.31	By Balance c/d	10,550
		23,000			23,000

Note: Cash Sales and Provision for Doubtful Debts do not affect Debtors ledger. Therefore they are not entered in Self-Balancing Ledger System.

Transfer between Subsidiary Ledger)

Ex. Prepare the General Ledger Adjustment Accounts as will appear in the Debtors’ and Creditors’ Ledger, from the information given below:

Balances on 1.4.98	Dr. (Rs.)	Cr. (Rs.)
Debtor’s Ledger	47,200	240
Creditor’s Ledger	280	26,300
Transactions for the year ended 31.3.99		Rs.
Total Sales		1,20,100
Cash Sales		8,100
Total Purchases		89,500
Creditors Purchases		67,000
Creditors paid off (in full Settlement of Rs.40,000)		39,500
Received from Debtors (in full Settlement of Rs.59,000)		58,200
Returns from Debtors		2,600
Returns to Creditors		1,800
Bills Accepted for Creditors		5,500
Bills Payable Matured		8,000
Bills Accepted by Customers		20,100
Bills Receivable Dishonoured		1,500
Bills Receivable Discounted		5,000
Bills Receivable endorsed to Creditors		4,000
Endorsed Bills Dishonoured		1,000
Bad-debts Written off (after Deducting Bad-debts Recovered Rs.300)		2,200
Provision for Doubtful Debts		550
Transfer from Debtors’ Ledger to Creditors’ Ledger		1,100
Transfer from Creditors’ Ledger to Debtors’ Ledger		1,900
Balance on 31.3.99
Debtors’ Ledger (Cr.)		Rs.380
Creditors’ Ledger (Dr.)		Rs.420

Solution:

Steps involved in solving the above problem:

Preparing General Ledger Adjustment A/c in Debtors Ledger.
Preparing General Ledger Adjustment A/c in Creditors Ledger.

In Debtors Ledger

Dr.	General Ledger Adjustment Account Cr.
Date	Particulars		Rs.	Date	Particulars		Rs.
1.4.98	To Balance b/d		240	1.4.98	By Balance b/d		47,200
31.3.99	To Debtors Ledger Adj. A/c:			31.3.99	By Debtors Ledger Adj. A/c:
	Bank	58,200			Sales on Credit (1,20,100 – 8,100)	1,12,000
Discount (59,000 – 58,200)	800
	Returns	2,600			B/R dishonored	1,500
	Bills Receivable	20,100			Endorsed Bills	1,000	1,14,500
	Bad Debts written- off (2,200 + 300)	2,500	84,200	31.3.99	By Balance c/d		380
	Transfer from Debtors Ledger to Creditors Ledger		1,100
	Transfer from Creditors Ledger to Debtors Ledger		1,900
31.3.99	To Balance c/d (Bal. fig.)		74,640
			1,62,080				1,62,080

In Creditors Ledger

Dr.	General Ledger Adjustment Account	Cr.
Date	Particulars		Rs.	Date	Particulars		Rs.
1.4.98	To Balance b/d		26,300	1.4.98	By Balance b/d		280
	To Creditors Ledger Adj. A/c:				By Creditors Ledger Adj. A/c: Bank	39,500
	Purchases	67,000			Discount Received (40,000 – 39,500)	500
	Endorsed B/R dishonoured	1,000	68,000		Returns Bills Payable	1,800 5,500
31.3.99	To Balance c/d		420		Bills Receivable endorsed	4,000	51,300
					Transfer from Debtors Ledger to Creditors Ledger		1,100
					Transfer from Creditors Ledger to Debtors Ledger		1,900
				31.3.99	By Balance c/d (Bal. Fig.)		40,140
			94,720				94,720

Computation of Credit Sales and Debtors Ledger Adjustment A/c

Ex. From the following information available from the books of a Trader from 1-1-2000 to 31-3-2000, you are required to draw up the Debtors Ledger Adjustment Account in the General Ledger:

Total sales amounted to Rs.1,80,000 including the sale of old Xerox Machine for Rs.4,800 (Book value Rs.8,000). The total Cash sales were 80% less than the total Credit sales.
Cash collections from debtors amounted to 70% of the aggregate of the opening debtors and credit sales for the period. Debtors were allowed a cash discount of Rs.20,000.
Bills Receivable drawn during the three months totalled Rs.30,000 of which bills amounting to Rs.10,000 were endorsed in favour of suppliers. Out of the endorsed Bills, one bill for Rs.6,000 was dishonoured for non-payment as the party became insolvent, his estate realized nothing.
Cheques received from customers Rs.8,000 were dishonoured, a sum of Rs.2,000 was irrecoverable. Bad debts written off in the earlier years realized Rs.11,000.
Sundry debtors as on 1-1-2000 stood of Rs.50,000.

Solution:

Steps involved in solving the above problem:

Computation of Credit Sale.
Preparing Debtors Ledger Adjustment A/c in General Ledger.

Working Details:

Computation of Credit Sales

Let, total credit sales = Rs.100.

Then, total cash sales = Rs.[100 – (100 x 80%)] = Rs.20.

Therefore, total sales = Rs.(100 + 20) = Rs.120.

Proportion of credit sales to total sales = 100/120.

So, amount of credit sales = Rs.(1,80,000 – 4,800) x 100/120 = Rs.1,46,000.

General Ledger

Debtors Ledger Adjustment Account

Dr.					Cr.
Date	Particulars	Rs.	Date	Particulars	Rs.
2000 Jan. 1 Mar. 31	To Balance b/d To General Ledger Adj. A/c: Sales (Note-1) Creditors-B/R dishonoured Bank cheques dishonoured	50,000 1,46,000 6,000 8,000	2000 Mar. 31	By General Ledger Adj. A/c: Collection-Cash and Bank [(50,000 + 1,46,000) x 70%] Discount Bills Receivable Bad Debts (6,000 + 2,000)	1,37,200 20,000 30,000 8,000
			Mar. 31	By Balance c/d	14,800
		2,10,000			2,10,000

Treatment of excess balance remained in Trial Balance

Ex. Prepare the Sales Ledger Control Account and the Bought Ledger Control Account from the following particulars-

Particulars	Debtors Ledger	Creditors Ledger
Debit Balances at the beginning of the year	1,54,900	800
Credit Balances at the beginning of the year	200	1,25,800
Credit Sales and Purchases	4,83,000	2,86,900
Cash received and paid	3,03,000	1,84,000
Cash paid to Debtors	1,200	–
B/R received and B/P accepted	43,000	34,000
Discount Allowed and Received	7,000	6,000
Returns	12,500	5,900
Transfer from Bought to Sold Ledger	8,400	8,400
Bad Debts	1,200	–
Provision for Bad Debts	3,400	–
B/P Dishonoured (Cancelled)	–	2,100
Debit balances at the end of the year	2,64,200	400
Credit Balances at the end of the year	600	1,76,350

There is excess of debit of Rs.450 in the Trial Balance of General Ledger. Give your comments regarding the difference.

Solution:

Steps involved in solving the above problem:

Preparing Sales Ledger Adjustment Account in General Ledger.
Preparing Bought Ledger Adjustment Account.

In General Ledger

Dr. Sales Ledger Adjustment Account Cr.

Particulars	Rs.	Particulars	Rs.
To Balance b/d	1,54,900	By Balance b/d	200
To General Ledger Adjustment A/c:		By General Ledger Adjustment A/c:
Credit Sales	4,83,000	Cash received from Debtors	3,03,000
Cash paid to Debtors	1,200	B/R received	43,000
To Balance c/d	600	Discount Allowed	7,000
		Return Inward	12,500
		Bad Debts written off	1,200
		By Bought Ledger Control A/c (Transfer)	8,400
		By Balance c/d (Balancing Figure)	2,64,400
	6,39,700		6,39,700

As given in Question, Closing balance Dr. = 2,64,200, but on balancing the Account, it is Rs.2,64,400 Dr. Hence, an excess Debit of Rs.200.

Dr. Bought Ledger Adjustment Account Cr.

Particulars	Rs.	Particulars	Rs.
To Balance b/d	800	By Balance b/d	1,25,800
To General Ledger Adjustment A/c		By General Ledger Adjustment A/c (Purchase Ledger)
Cash paid to Creditors	1,84,000	Purchases	2,86,900
B/P accepted	34,000	B/P dishonoured	2,100
Discount received	6,000
Returns Outward	5,900
Sales Ledger Adjustment A/c (Transfer)	8,400
To Balance c/d (Balance Figure)	1,76,100	By Balance c/d (given)	400
	4,15,200		4,15,200

As given in Question, Closing balance Cr. = 1,76,350, but as per above Account, it is Rs.1,76,100 Dr. Hence, an excess Debit of Rs.250.

Note: In the General Ledger there is an excess debit balance of Rs.200 in the Sales Ledger Adjustment Account” and lesser credit balance amounting to Rs.250 in the “Bought Ledger Adjustment Account” causing excess debit of Rs.450 in the Trial Balance of “ General Ledger”. Such errors could be due to error in posting to Control Accounts maintained in the General Ledger.

Sectional Balancing System

Ex. From the following information make journal entries and ledger accounts under Sectional Balancing System:

Debtors	Credit Sales Rs.	Cash received Rs.	Discount allowed Rs.	B/R drawn Rs.
P	14,000	6,000	400	2,000
Q	13,000	10,000	500	1,500
R	8,000	6,500	200	–
S	9,000	8,700	300	–
	44,000	31,200	1,400	3,500

Solution:

Steps involved in solving the above problem:

Passing Journal Entries.
Preparing Total Debtors Account.
Preparing Sales Account.
Preparing Cash Account.
Preparing Discount Allowed Account.
Preparing Bills Receivable Account.
Preparing Trial Balance in General Ledger.
Preparing P’s Account.
Preparing Q’s Account.
Preparing R’s Account.
Preparing S’s Account.
Making total balance of Sundry Debtors.

In General Ledger

Journal Entries

Particulars		Dr. (Rs.)	Cr. (Rs.)
Total Debtors Account To Sales Account (With total credit sales at the end of period)	Dr.	44,000	44,000
Cash A/c To Total Debtors A/c (with total cash received at the end of period)	Dr.	31,200	31,200
Discount A/c To Total Debtors A/c (With total discount allowed at the end of period)	Dr.	1,400	1,400
Bills Receivable A/c To total Debtors Account (With total B/R drawn at the end of the period)	Dr.	3,500	3,500

Total Debtors Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Sales A/c	44,000	By Cash A/c	31,200
		By Discount A/c	1,400
		By B/R A/c	3,500
		By Balance c/d	7,900
	44,000		44,000

Sales Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Balance c/d	44,000	By Total Debtors c/d	44,000

Cash Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Debtors c/d	31,200	By Balance c/d	31,200

Discount Allowed Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Total Debtors A/c	1,400	By Balance c/d	1,400

Bills Receivable Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Total Debtors A/c	3,500	By Balance c/d	3,500

Trial Balance in General Ledger

	Dr. (Rs.)	Cr. (Rs.)
Total Debtors Account	7,900
Sales Account		44,000
Cash Account	31,200
Discount allowed Account	1,400
Bills receivable Account	3,500
	44,000	44,000

In Sales Ledger

P’s Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Sales A/c	14,000	By Cash A/c	6,000
		By Discount A/c	400
		By B/R A/c	2,000
		By Balance c/d	5,600
	14,000		14,000

Q’s Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Sales A/c	13,000	By Cash A/c	10,000
		By Discount A/c	500
		By B/R A/c	1,500
		By Balance c/d	1,000
	13,000		13,000

R’s Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Sales A/c	8,000	By Cash A/c	6,500
		By Discount A/c	200
		By Balance c/d	1,300
	8,000		8,000

S’s Account

Dr.			Cr.
Particulars	Rs.	Particulars	Rs.
To Sales A/c	9,000	By Cash A/c	8,700
		By Discount A/c	300
	9,000		9,000

Balance of Sundry Debtors

	Rs.
P Q R	5,600 1,000 1,300
7,900

Rectification of Errors)

Ex. Pass necessary journal entries to rectify the following errors:

Under self balancing system and
Under sectional balancing system :
- Goods purchased from Mr. Roy for Rs.1,000/- entered in purchase book as Rs.1,400.
- Goods purchased from Mr. Gupta for Rs.430 entered correctly in purchase book but posted to Mr. Gupta’s A/c as Rs.340.
- Goods purchased from Mr. Dutt for Rs.830 entered in sales book.
- A sale of Rs.530 to Mr. Batra entered correctly in sales book but posted to Mr. Dey’s A/c as Rs.350.
- Bad debts aggregating Rs.560 were written off in sales ledger, but were not adjusted in General Ledger.
- The total of discount received column in the cash book for the month of July, amounting to Rs.910 was not posted.
- A cheque of Rs.3,000 received from Mr. Mukherjee posted to the account of Mr. Reddy.
- Total of sales book overcast by Rs.130.
- Sales Returns of Rs.510 by Mr. Mohanty entered in purchased as Rs.5,100.
- Sales of Machinery (assets) amounting to Rs.2,500 to Mr. Agarwal entered in sales book.

Solution:

Under Self-Balancing System

Journal Entries

		Dr.	Cr.
Particulars		Rs.	Rs.
Mr. Roy A/c To Purchases A/c	Dr.	400	400
Bought Ledger adjustment A/c To General Ledger adjustment A/c	Dr.	400	400
Suspense A/c To Mr. Gupta	Dr.	90	90
Purchase A/c To Mr. Dutt (in B.L.)	Dr.	830	830
Sales A/c To Mr. Dutt (in S.L.)	Dr.	830	830
General Ledger Adjustment A/c (in B.L.) To Bought Ledger Adjustment A/c	Dr.	830	830
General Ledger Adjustment A/c (in S.L.) To Sales Ledger Adjustment A/c	Dr.	830	830
Mr. Batra To Mr. Dey To Suspense	Dr.	530	350 180
Bad debts A/c To Suspense	Dr.	560	560
General Ledger Adjustment A/c To Sales Ledger Adjustment A/c	Dr.	560	560
Suspense A/c To Discount received A/c	Dr.	910	910
Bought Ledger Adjustment A/c To General Ledger Adjustment A/c	Dr.	910	910
Mr. Reddy To Mr. Mukherjee	Dr.	3,000	3,000
Sales A/c To Suspense A/c	Dr.	130	130
General Ledger Adjustment A/c To Sales Ledger Adjustment A/c	Dr.	130	130
Mr. Mohanty (in B.L.) To Purchase A/c	Dr.	5,100	5,100
Sales Returns A/c To Mr. Mohanty (in S.L.)	Dr.	510	510
Bought Ledger Adjustment A/c To General Ledger Adjustment A/c (in B.L.)	Dr.	5,100	5,100
General Ledger Adjustment A/c (in S.L.) To Sales Ledger Adjustment A/c	Dr.	510	510
Sales A/c To Mr. Agarwal (in S.L.)	Dr.	2,500	2,500
Mr. Agarwal (in G.L.) To Machinery A/c	Dr.	2,500	2,500
General Ledger Adjustment A/c To Sales Ledger Adjustment A/c	Dr.	2,500	2,500

Under Sectional Balancing System

Journal Entries

		Dr.	Cr.
Particulars		Rs.	Rs.
Total Creditors A/c To Purchase A/c	Dr.	400	400
Mr. Roy’s A/c will be debited by Rs.400 (in B.L.)
Mr. Gupta’s A/c will be credited by Rs.90 (in B.L.)
Purchase A/c To Total Creditors A/c	Dr.	830	830
Sales A/c To Total Debtors A/c		830	830
Mr. Dutt’s (in B.L.) will be credited by Rs.830.
Mr. Batra’s (in B.L.) will be credited by Rs.530 Mr. Dey’s A/c (in S.L.) will be debited by Rs.350
Bad Debts A/c To Total Creditors A/c	Dr.	560	560
Total Creditors A/c To Discount received A/c	Dr.	910	910
Mr. Reddy To Mr. Mukherjee	Dr.	3,000	3,000
Sales A/c To Total Debtors A/c	Dr.	130	130
Total Creditors A/c To Purchase A/c	Dr.	5,100	5,100
Sales Returns A/c To Total Debtors A/c	Dr.	510	510
Mr. Mohanty’s A/c (in B.L.) will be debited by Rs.5,100 Mr. Mohanty’s A/c (in S.L.) will be Credited by Rs.510
Sales A/c To Total Debtors A/c	Dr.	2,500	2,500
Mr. Agarwal’s A/c (in S.L.) will be Credited by Rs.2,500
Mr. Agarwal (in G.L.) To Machinery A/c	Dr.	2,500	2,500

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Self-Balancing Ledger

Self-Balancing Ledger

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