Rohit Agarwal 9883248954

Chapter 5 : Self Balancing Ledgers

Self-balancing System
General/Nominal Debtors /Sales /Sold / Creditors /Purchases /Bought/
Ledger Customer Ledger Suppliers Ledger

1. Debtors Ledger General Ledger

Adjustment (Con.) A/c Adjustment (Control) A/c

2. Creditors Ledger General Ledger

Adjustment (Control) A/c Adjustment (Control) A/c

ƒ Sectional Balancing System: The system of Sectional Balancing is a variant of Self Balancing System.
Under this system only general ledger is maintained. The account representing the purchases ledger is
called Total Debtors Account and that representing the sales ledger is called Total Creditors Account.

ƒ Self Balancing System: Self Balancing System is a system of keeping ledgers, where every ledger is
arranged in such a manner that each of them becomes a separate ledger. Each ledger amount is the
balance of itself. Under this system, the adjustment accounts are opened to complete double entry
system in the respective ledgers.

ƒ The advantages of Self Balancing System are:

(i) It is easier to detect the error in this system, because a separate trail balance is prepared for all the
ledgers.
(ii) A complete trial balance can be prepared without balancing subsidiary ledgers.

ƒ Difference between Sectional Balancing and Self Balancing:

Basis of
Self Balancing System Sectional Balancing System
Distinction
Separate trial balance is prepared in each
Trial balance Trial balance is prepared in G. L. only.
ledger.
Double entry Double entry is completed in each ledger. Double entry is completed in G. L. only.
Control Control accounts are opened in all the
Control accounts are opened in G. L. only.
accounts ledgers.
Volume of
It involves more accounting work. It involves less accounting work.
accounting
It is easier to detect the error in this It is difficult to detect the errors in this
Detection of
system, because a separate trail balance is system because a separate trial balance
errors
prepared for all the ledgers cannot be prepared for each ledger.

Write answer of these questions in your copy:

1. Distinguish between Sectional Balancing and Self Balancing. [ISC 2005]
2. State the advantages of Self Balancing System? [ISC 2006]
3. What is the purpose of opening the adjustment accounts in the self balancing system?
[ISC 2007]
4. Name the two accounts that are responsible for completing the double entry under sectional balancing
system. State in which ledger they are kept. [ISC 2008]

Total Debtors Account

ƒ Sectional balancing General Ledgers
Total Creditors Account

rohit.agarwal@icai.org 21
 Rohit Agarwal 9883248954

In The General Ledger In The Debtors Ledger

Dr. Debtor Ledger Adjustment A/c Cr. Dr. General Ledger Adjustment A/c Cr.
Particulars Rs. Particulars Rs. Particulars Rs. Particulars Rs.
To Balance b/d *** By Blalance b/d *** To Blalance b/d *** By Balance b/d ***
To General Ledger Adj. A/c *** By General Ledger Adj. A/c *** To Debtor Ledger Adj. A/c *** By Debtor Ledger Adj. A/c ***
Credit Sales *** Cash Received *** Cash Received *** Credit Sales ***
B/R Dishonoured *** Bank (Chq received) *** Bank (Chq received) *** B/R Dishonoured ***
Bank (Chq Dishonoured) *** B/R Received *** B/R Received *** Bank (Chq Dishonoured) ***
Interest & Cartage charged *** Returns Inwards *** Returns Inwards *** Interest & Cartage charged ***
B/R (Cancelled Upon Renewal) *** Discount Allowed *** Discount Allowed *** B/R (Cancelled Upon Renewal) ***
Discount Disallowed *** Bad debts *** Bad debts *** Discount Disallowed ***
Endorsed B/R Dishonoured *** Transfer *** Transfer *** Endorsed B/R Dishonoured ***
To Balance c/d *** By Blalance c/d *** To Blalance c/d *** By Balance c/d ***
*** *** *** ***
Note: Cash sales, Provision for bad and doubtful debts' Provision for discount on debtors, Bad debts recovered, B /R discounted, Trade discount do not affect the
aforesaid accounts.

In The General Ledger In The Creditors Ledger

Dr. Creditors Ledger Adjustment A/c Cr. Dr. General Ledger Adjustment A/c Cr.
Particulars Rs. Particulars Rs. Particulars Rs. Particulars Rs.
To Balance b/d *** By Balance b/d *** To Balance b/d *** By Balance b/d ***
To General Ledger Adj. A/c *** By General Ledger Adj. A/c *** To Creditors Ledger Adj. A/c *** By Creditors Ledger Adj. A/c ***
Cash Paid *** Credit Purchases *** Credit Purchases *** Cash Paid ***
Bank (Chq issued) *** Endorsed B/R Dishonoured *** Endorsed B/R Dishonoured *** Bank (Chq issued) ***
B/P Accepted *** Interest & Cartage charged *** Interest & Cartage charged *** B/P Accepted ***
B/R Endorsed *** B/P Withdrawn *** B/P Withdrawn *** B/R Endorsed ***
Returns Outward *** Discount Returned *** Discount Returned *** Returns Outward ***
Discount Received *** By Balance c/d *** To Balance c/d *** Discount Received ***
Transfer *** Transfer ***
To Balance c/d *** By Balance c/d ***
*** *** *** ***
Note: Cash purchases, Provision for discount on creditors, Trade discount, Bill payable met during the year do not affect the aforesaid accounts.