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self balancing ledger

Satvir Singh (Newly minted CA) (1733 Points)

10 October 2010

Can anyone explain how self balancing ledger works, in 3-4 lines??

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3 Replies

Sunshine (Helping All) (10575 Points)
Replied 10 October 2010

there's nothing in it much....just a debtor's and creditor's account and a general ledger for all other records...just names are changed...go through the format that's simple and easy to understand...

VUELVE (CA- Student) (351 Points)
Replied 10 October 2010

In this Computerised System SBL has lost its relevance. But since you have asked I shall explain in brief. It is difficult to explain in 3 to 4 lines, so i'm explaining you to make you understand.

This is not a technical definition, just a rough one to understand.

Imagine a large organisation, where there are 2000 customers and 3000 creditors and innumerous general ledger and some 150 bank accounts. It is not possible for one person to make all entries, hence, different persons maintains different ledger, i.e., customers, creditors, GL separately.

Now, if each person will pass only one aspect of transaction. Agreed? i.e., person seeing debtors will pass only the debit in a credit sales, whereas he will not account the sales in Sales Ledger. Similarly the sales ledger person will give credit to sales account.

Now, there is a problem, if TB is prepared what if it does not tally. Ooch, how will identify which transaction was not recorded properly???

For that only, the Debtors person while

a) For sales

X A/c Dr

To General Ledger Adjustment A/c

b) For receipt, bad debts, sales reversals

GLA A/c Dr

To X A/c

Similarly, the person maintaining, sales ledger will

a) Sales

Total Debtor A/c

To Sales

b) Reversal

Sales A/c Dr

To Total Ledger

EFFECT:

1. Each person will be having a mini TB,

a) For Debtors person, the list of all debtors and its balances and for the credit he will have GLA, so if it doesn't tally, he will himself identify which entry he has missed. So individually each person will ensure that his mini TB will tally.

b) Now, after each mini TB is tallied, if Total Debtor a/c of GL person should tally with Individual balances of debtors person. If it does not only those entries needs to reverified and not all other transaction. So, when TB does not tally, instead of checking all the entries, we will be able to corner the error in one or two particular areas. Hope i have shed some light

Do some 5 or 6 problems, you will get a grip. While studying it give special importance to those transactions that will not come in these SBL.

In exam, the question typically contains some 10 items - answer will be 4 on the debit, 5 on the credit and one item to be ignored. Write a note for the ignoring item and then create a mirror image, i.e, reverse the sides and write the same transactions. Simple 8 marks.

Regards,

CA Student FA