Full Text Transcript
8
S -B L
ELF ALANCING EDGERS
BASIC CONCEPTS
(cid:190) Self Balancing Ledger System implies a system of ledger keeping which classifies ledgers
as per nature of transactions.
(cid:190) In this system, generally three ledgers, namely debtor ledger, creditor ledger and main
ledger (containing remaining accounts) are prepared.
(cid:190) In such a case "General Ledger Adjustment Account" is prepared in each of the subsidiary
ledgers. The General ledger would have Bought Ledger Adjustment Account (in reality,
Total Creditors Account) and Sales Ledger Adjustment Account (in reality, Total Debtors
Account). These accounts are known as Control Accounts
Question 1
Self balancing ledgers. (May, 1999 & May, 2002)
Answer
A self balancing ledger system implies a system of ledger keeping which classifies ledgers as per
nature of transactions namely Sales Ledger, Bought Ledger, General Ledger etc. and also make
them to balance independently. In order to make each ledger self-balancing, an extra account
called General Ledger Adjustment Account is opened in each of the sales ledger and bought
ledger. Normally, the accounts of individual debtors are maintained recording credit sales, cash
collections, discount, bad debts etc, in Debtors Ledger or Sales Ledger. The General Ledger
Adjustment account in the Sales Ledger gives a summary of all these transactions in a reverse
manner. Similarly in Bought ledger, General Ledger Adjustment account gives a summary of all
transactions of the Bought Ledger in a reverse manner. Against these ledger adjustment accounts,
two other adjustment accounts are maintained in the General Ledger to complete the double entry.
These adjustment accounts are known as Control Accounts. The correctness of individual
balances in each ledger would be verified by extracting its balances and agreeing them with the
balance of the Control Account. The object of the system is to identify errors and to facilitate their
quick detection with the minimum effort.
Question 2
Self and Sectional Balancing System. (November, 2000)
© The Institute of Chartered Accountants of India
Self Balancing Ledgers
Answer
A self balancing ledger system implies a system of ledger keeping which classifies ledgers as per
nature of transactions namely, Sales Ledger, Bought Ledger, General Ledger etc. and also make
them to balance independently.
In order to make each ledger self-balancing, an extra account called General Ledger Adjustment
Account is opened in each of the sales ledger and bought ledger. Normally, the accounts of
individual debtors are maintained recording credit sales, cash collections, discount, bad debts etc.
in Debtors Ledger or Sales Ledger. The General Ledger Adjustment account in the Sales Ledger
gives a summary of all these transactions in reverse manner. Similarly in Bought ledger, general
ledger adjustment account gives a summary of all transactions of the Bought Ledger in a reverse
manner. Against these ledger adjustment accounts, two other adjustment accounts are maintained
in the General Ledger to complete the double entry.
(a) Bought Ledger Adjustment Account.
(b) Sales Ledger Adjustment Account.
These adjustment accounts are known as Control Accounts. The correctness of individual
balances in each ledger would be verified by extracting its balances and agreeing them with the
balance of the Control Account. The object of the system is to identify errors and to facilitate their
quick detection with the minimum effort.
Under sectional balancing system, only two additional accounts (i) Total Debtors Account; and (ii)
Total Creditors Account are kept in the General Ledger. Thus, only the totals account for each of
the subsidiary ledgers is opened in the General Ledger and no Control Account/Adjustment
Account is opened in the subsidiary ledger. It would mean that whereas accounts of individual
customers would be maintained in the Sales Ledger; in the General Ledger, the Total Debtors
Account would be posted by the (monthly) totals of various transactions with credit customers. The
balance in the Total Debtors Account should be equal to the total of balances shown by the
accounts of individual customers. A difference would show that there are some errors
somewhere. In the same way, the accuracy of individual supplier’s account may be checked by
comparing the total of their balances with the balance of the Total Creditors Account. A trial
balance can be prepared on the basis of General Ledger only, without using Debtors’ Ledger and
Creditors’ Ledger since the double entry is completed in the General Ledger itself.
Question 3
State with reasons, whether the following statements are true or false:
(a) Under the self balancing system the general ledger adjustment account is always opened in
the general ledger.
(b) Purchase Ledger Adjustment Account under sectional balancing system is also known as
Creditors Ledger Control Account.
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Accounting
(c) In self balancing system, whenever a balance is transferred from an account in one ledger to
that in another, only one entry is recorded through the respective ledger.
(November, 2001 & November, 2002)
Answer
(a) False- Under the self balancing system, general ledger adjustment account is opened in
each of the sales ledger and purchases ledger. In general ledger, two adjustment
accounts namely sales ledger adjustment account and purchases ledger adjustment
accounts are maintained.
(b) True- Purchase ledger adjustment account is in reality, total creditors account, hence
also known as creditors ledger control account under sectional balancing system.
(c) False- Whenever a balance is transferred from one account in one ledger to that in
another, the entry is recorded through the journal. Also an additional entry is made in the
control accounts for recording the corresponding effect.
Question 4
Prepare the General Ledger Adjustment Account as will appear in the Debtors’ and Creditors’
Ledger from the information given below:
Dr. Cr.
Rs. Rs.
Balances on 1.4.2010
Debtors’ Ledger 47,200 240
Creditors’ Ledger 280 26,300
Transactions for the year ended 31.3.2011:
Total sales 1,20,000
Cash sales 8,100
Total purchases 89,500
Credit 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 receivables dishonoured 1,500
© The Institute of Chartered Accountants of India
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Self Balancing Ledgers
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
Balances on 31.3.2011
Debtors’ ledger (Cr.) 380
Creditors’ ledger (Dr.) 420
(May, 1999)
Answer
In Debtors’ Ledger
General Ledger Adjustment Account
Rs. Rs.
1.4.2010 To Balance b/d 240 1.4.2010 By Balance b/d 47,200
To Debtor’s ledger By Debtors ledger
adjustment adjustment
account: account:
Bank 58,200 Sales (on credit)
Discount 800 1,12,000
Returns 2,600 Bills receivable
Bills receivable 20,100 dishonoured 1,500
Endorsed bills
Bad debts Written receivable
off 2,500 84,200 dishonoured 1,000 1,14,500
To Debtors ledger 31.3.2011 By Balance c/d 380
adjustment
account:
Transfer from
debtors ledger to
creditor’s ledger 1,100
Transfer from
creditor’s ledger to
debtor’s ledger 1,900 3,000
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8.4
Accounting
31.3.2011 To Balance c/d
(balancing figure)
74,640
1,62,080 1,62,080
Creditor’s Ledger
General Ledger Adjustment Account
Rs. Rs.
1.4.2010 To Balance b/d 26,300 1.4.2010 By Balance b/d 280
To Creditors’ By Creditors’
ledger ledger
adjustment adjustment A/c:
A/c:
Purchases 67,000 Bank 39,500
Endorsed bills Discount received
receivable Returns 500
dishonoured 1,000 68,000 1,800
31.3.2011 To Balance b/d 420 Bills payable 5,500
Bills receivable
endorsed 4,000 51,300
By Creditors’
ledger
adjustment A/c:
Transfer from
debtors’ ledger to
creditors’ ledger 1,100
Transfer from
creditors’ ledger
to debtors’ ledger 1,900 3,000
31.3.2011 By Balance c/d
(balancing figure) 40,140
94,720 94,720
Notes: No entries will be made for the following transactions as they do not affect general ledger
adjustment accounts:
(i) Cash sales
(ii) Bills payable matured
(iii) Bills receivable discounted
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Self Balancing Ledgers
(iv) Bad debts recovered and
(v) Provision for doubtful debts.
Question 5
From the following information available from the books of a trader from 1.1.2011 to 31.3.2011, you
are required to draw up the Debtors Ledger Adjustment Account in the General Ledger:
(a) Total sales amounted to Rs. 1,80,000 including the sale of old zerox machine for Rs. 4,800
(book value Rs. 8,000). The total cash sales were 80% less than the total credit sales.
(b) 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.
(c) 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.
(d) Cheque received from customers Rs. 8,000 were dishonoured, a sum of Rs. 2,000 was
irrecoverable; Bad debts written off in the earlier years realised Rs. 11,000.
(e) Sundry debtors as on 1.1.2011 stood at Rs. 50,000. (May, 2000)
Answer
In General Ledger
Debtors Ledger Adjustment Account
Dr. Cr.
2011 Rs. 2011 Rs.
Jan. 1 To Balance b/d 50,000 Mar.31 By General ledger
Mar. 31 To General ledger adjustment account:
adjustment account:
Sales 1,46,000 Collection-cash and
[(100/120) x (1,80,000- bank(70 % of the 1,37,200
4,800)] Rs. 1,96,000)
Creditors-bill
receivable dishonoured 6,000 Discount 20,000
Bank-cheques dishonoured 8,000 Bills receivable 30,000
Bad debts 8,000
(6,000+2,000)
_______ By Balance c/d 14,800
2,10,000 2,10,000
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8.6
Accounting
Question 6
The following information is extracted from the books of Shri Hari for the year ended 31st March,
2011.
Rs.
Sales 3,80,800
Purchases 3,26,000
Return outwards 14,000
Cash received from debtors 1,78,200
Bills payable accepted 1,22,000
Returns inward 17,600
Cash paid to creditors 1,86,000
Bills receivable received 1,36,000
Discount received 4,000
Bad debit written off 24,000
Reserve for discount to debtors. 2,000
Discount allowed 1,800
Transfers from purchases ledger 26,600
The total of the sales ledger balance on 1st April, 2010 was Rs. 90,600 and that of the purchases
ledger balance on the same date was Rs. 78,600.
Prepare sales ledger and purchases ledger adjustment accounts from the above information.
(November, 2001)
Answer
Sales Ledger Adjustment Account
Rs. Rs.
1.4.2010 To Balance b/d 90,600 1.4.2010 By General ledger
1.4.2010 To General ledger to adjustment account:
to adjustment A/c: 31.3.2011 Cash 1,78,200
31.3.2011 Sales 3,80,800 Return inwards 17,600
Bills receivable 1,36,000
Bad debts written off 24,000
Discount allowed 1,800
Transfer from 26,600
purchases ledger
_______ 31.3.2011 By Balance c/d 87,200
4,71,400 4,71,400
© The Institute of Chartered Accountants of India
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Self Balancing Ledgers
Purchases Ledger Adjustment Account
Rs. Rs.
1.4.2010 To General ledger 1.4.2010 By Balance b/d 78,600
to adjustment account: 1.4.2010 By General ledger
to adjustment account:
32.3.2011 Cash 1,86,000 31.3.2011 Purchases 3,26,000
Return outwards 14,000
Bills payable 1,22,000
Discount received 4,000
Transfer to sales 26,600
ledger
31.3.2011 To Balance c/d 52,000 _______
4,04,600 4,04,600
Question 7
Prepare the Sales Ledger Control Account in General Ledger from the following particulars:
Rs.
Debit balance as on 1.10.2010 3,75,000
Credit balance as on 1.10.2010 500
Credit sales 10,00,000
Cheques received 11,25,000
Bills receivable received 1,25,000
Discounts allowed 12,500
Sales returns 25,000
Transfer from purchases to sales ledger 25,000
Bad debts 5,000
Bad debts previously written off now recovered 10,000
Reserve for discounts 25,200
Bills receivable dishonoured 12,500
Debit balance as on 31.3.2011 75,000
Credit balance as on 31.3.2011 ?
(November, 2002)
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Accounting
Answer
General Ledger
Sales Ledger
Rs. Rs.
1-10-2010 To Balance b/d 3,75,000 1-10-2010 By Balance b/d 500
1-10-2010 To General ledger 1-10-2010 By General ledger
to control A/c: to control A/c:
31-3-2011 Sales 10,00,000 31-3-2011 Bank 11,25,000
Bills receivable Bills receivable 1,25,000
(dishonoured) 12,500 Discount 12,500
31-3-2011 To Balance c/d (balancing figure) 5,500 Sales return 25,000
Bad debts 5,000
Transfer 25,000
31.3.2011 By Balance c/d (given) 75,000
13,93,000 13,93,000
Note: Reserve for discounts and bad debts previously written off now recovered do not appear in
debtors account and hence this will not figure in the sales ledger control account.
Question 8
From the following information, prepare Sales Ledger Adjustment A/c in the General Ledger:
Rs.
On 1.4.2010: Balance in sales ledger (Dr.) 1,41,880
(Cr.) 2,240
On 31.3.2011:
Total sales 7,68,000
Cash sales 40,000
Sales return 10,000
Cash received from customers 6,24,000
Discount allowed 11,200
Cash paid to supplier 4,80,000
Transfer from sales to bought ledger 20,800
Discount received 7,200
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Self Balancing Ledgers
B/R received 40,000
Reserve for doubtful debts 9,160
Cash paid to customer 1,840
Bills received dishonoured 6,000
Sales ledger balance (Dr.) 1,83,200
Sales ledger balance (Cr.) 13,720
(November, 2003)
Answer
In General Ledger
Sales Ledger Adjustment Account
Rs. Rs.
01.04.2010 To Balance b/d 1,41,880 1.4.2010 By Balance b/d 2,240
31.3.2011 To General ledger 31.3.2011 By General ledger
adjustment A/c in sales adjustment A/c in sales
ledger: ledger:
Credit sales 7,28,000 Cash 6,24,000
Cash paid 1,840
Bills receivable Discount
dishonoured 6,000 7,35,840 allowed 11,200
Transfers 20,800
To Balance c/d 13,720 Bills receivable
received 40,000
Sales return 10,000 7,06,000
_______ By Balance c/d 1,83,200
8,91,440 8,91,440
Question 9
From the following information prepare the necessary adjustment accounts as they would appear
in the general ledger of Vatika Ltd.
Rs.
Closing debtors balance (as per general ledger adjustment account) 60,000(Cr.)
Credit sales 40,000
Credit purchases 15,000
Paid to creditors 7,500
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Accounting
Discount allowed 1,500
Bills payable accepted 5,000
Discount received 500
Received from debtors 20,000
Bad debts 5,000
Closing creditors balance (as per general ledger adjustment account) 30,000(Dr.)
Bills accepted by customers 3,000
Discount allowed to debtors Rs. 500 was recorded as discount received from creditors.
(November, 2004)
Answer
In General Ledger
Debtors’ Ledger Adjustment Account
Rs. Rs.
To Balance b/d (bal.fig.) 49,500 By General ledger adjustment
account:
To General ledger adjustment Cash from debtors 20,000
account:
Credit sale 40,000 Bills receivable 3,000
Bad debts 5,000
Discount allowed (1,500+500) 2,000
______ By Balance c/d (60,000-500) 59,500
89,500 89,500
Creditors’ Ledger Adjustment Account
Rs. Rs.
To General ledger By Balance b/d (bal. fig.) 28,000
adjustment A/c: By General ledger adjustment A/c:
Cash paid to creditors 7,500 Credit purchases 15,000
Bills payable 5,000
To Balance c/d (30,000+500) 30,500 ______
43,000 43,000
© The Institute of Chartered Accountants of India
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Self Balancing Ledgers
Question 10
Gupta Traders keep their ledgers on the self balancing system. They provide you the following
information for the year ended 31st March, 2010:
`
Debtors balance on 1st April, 2009 1,37,250
Credit sales 68,100
Returns inward 1,200
Returns outward 1,800
Cash received from customers 76,800
Discount received 2,010
Acceptances received 25,500
Bills receivable dishonoured 3,600
Bad debts written off 7,500
You are required to prepare General Ledger Adjustment A/c in Sales Ledger of Gupta Traders.
(November, 2010)
Answer
In the books of Gupta Traders
General Ledger Adjustment A/c in the Sales Ledger
Date Particulars Amount Date Particulars Amount
` `
1 April, To Sales Ledger 1 April, 09 By Balance b/d 1,37,250
2009 to Adjustment A/c 1 April, By Sales Ledger
31st March, (in General 2009 to Adjustment
2010 Ledger): 31st March, Account (in
Returns inward 1,200 2010 General Ledger):
Cash Sales 68,100
(received from B/R dishonoured 3,600
customers) 76,800
Bills receivables 25,500
Bad debts 7,500
31st March To Balance c/d 97,950
2010
2,08,950 2,08,950
Note : Returns outward and discount received would be shown in the General Ledger Adjustment
Account of Purchases Ledger.
© The Institute of Chartered Accountants of India
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Accounting
EXERCISES
1. Prepare the Sales ledger control account and Purchases ledger control account from the following particulars:-
Sales Ledger Purchases Ledger
Debit balance as on 1.1.2011 1,50,000 1,000
Credit balance as on 1.1.2011 200 1,25,000
Credit sales and purchases 4,00,000 3,80,000
Cheque received and paid 4,50,000 3,50,000
Advance paid to creditors - 2,000
B/R received and B/P accepted 50,000 50,000
Discounts allowed and received 5,000 3,000
Returns 10,000 5,000
Transfer from purchases to sales ledger 10,000 10,000
Bad debts 2,000 -
Reserve for discounts 10,000 5,000
B/R and B/P dishonoured 5,000 5,000
Debit Balances as on 30.6.2011 30,000 -
Credit Balances as on 31.6.2011 ? 72,000
(Hints: Total of Sales Ledger Control Account = Rs. 5,57,200; and Purchases Ledger Control Account
= Rs. 5,11,000)
2. From the following information prepare Sales Ledger Adjustment Account and Bought Ledger Adjustment Account
in the General Ledger:
On 1.4.2010 balance in bought ledger (Dr.) Rs. 10,000, (Cr.) Rs. 96,000, balance in sales ledger (Dr.) Rs.
1,41,880 (Cr.) Rs. 2,240:
31.3.2011 Rs. 31.3.2011 Rs.
Purchases 5,40,000 Discount received 7,200
Purchases return 20,000 Bills receivable received 40,000
Total sales 7,68,000 Bills payable issued 22,400
Cash sales 40,000 Reserve for doubtful debts 9,160
Sales return 10,000 Cash paid to customers 1,840
Cash received from customers 6,24,000 Bills receivable dishonoured 6,000
Discount allowed 11,200 Bought ledger balance 10,400
Cash paid to suppliers 4,80,000 Sales ledger balanced 1,83,200
Transfer from sales to bought ledger 20,800
(Hints: Total of Sales Ledger Adjustment Account = Rs. 8,91,440; and Bought Ledger Adjustment Account
= Rs.6,46,400)
© The Institute of Chartered Accountants of India
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Self Balancing Ledgers
3. The following information is extracted from a set of books for the half-year ended 30th June, 2011
Rs.
Sales 5,63,000
Purchases 3,22,000
Returns outward 7,600
Cash received from debtors 1,84,200
Bills payable accepted 1,20,000
Returns inward 16,800
Cash paid to creditors 1,80,200
Bills receivable received 1,60,000
Discounts received 4,200
Bad debts written off 12,000
Discount allowed 10,800
Transfers from purchases ledger 6,800
The total of the sales ledger balances on 1st Jan, 2011 was Rs. 3,20,800 and that of the purchases ledger
balances on the same date was Rs. 1,86,400.
Prepare Sales Ledger and Purchases Ledger Adjustment Accounts from the foregoing information.
(Hints: Total of Sales Ledger Adjustment Account = Rs. 8,83,800; and Purchases Ledger Adjustment
Account = Rs. 5,08,400)
4. From the following particulars prepare customers control account in general ledger:
Rs.
Opening balance in customers ledger (Dr.) 2,35,000
Opening balance in customers ledger (Cr.) 3,500
Goods sold during the year 7,65,000
Returns inwards 15,000
Cash/cheques received 5,90,000
Bills received 1,10,000
Discount allowed 9,000
Cheque received dishonoured 5,000
Bills received dishonoured 7,000
Bad debts 9,000
A debit of Rs. 1,500 is to be transferred from customers ledger to suppliers ledger. Similarly a credit entry
Rs. 1,600 is to be transferred from suppliers ledger to customers ledger. Closing credit balance in customers
ledger is Rs. 3,000.
(Hints: Total of Customers Control Account = Rs. 10,15,000)
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Accounting
5. The following transactions have been extracted from the books of Mr. X. You are required to prepare the Sales
Ledger Adjustment Account as on 31.3.2011:
Rs.
Debtors balance on 1.3.2011 50,000
Transactions during the period were:
Sales (including cash sales of Rs. 20,000) 1,28,000
Cash received from debtors 90,000
Discount allowed to debtors 500
Acceptances received from debtors 8,000
Returns from debtors 6,000
Bills receivable dishonoured 1,500
Bad debts written off (after deducting bad debts recovered Rs.1,000) 4,000
Sundry charges debited to customers 600
Transfers to bought ledger 300
(Hints: Total of Sales Ledger Adjustment Account = Rs. 1,60,100)
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8.15