self balancing ledger

Hi Faiz Ahmed, hope you are giving you May attempt. In this Computerised System SBL has lost its relevance. But since you have asked i shall explain in brief.

This is not a technical defintion, 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 seperately.

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 whch 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

Shiva

In IPCC, you are having this confusion because, you are preparing both debtors person as well as GL persons. Do some 5 or 6 problems, you will get a grip. While studying it give special importance to those transaction 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 mirrot image, i.e, reverse the sides and write the same transactions. Simple 8 marks..

Shiva - All the Best

OK  i got ur point . The reason for all those a/cs is to check accuracy independently without depending on the opposite side of the entry. but u said 1 thing that thr r chances of nt getting tallied. Y that wil happen if that person is creating corresponding side (dr or cr) by opeming GLA. so ultimately it shld tally no ... This is exactly where i m nt understanding. Hope u will clarify it. Thanks fr taking pains to explain me..... Do reply so that it becomes clear fr me.

Now i understood the game behind this SBL system. Thanks fr ur guidance in this regard. U have explained me practically. The concept that is behind this SBL is basically checking the accuracy of the accounts prepared by one person by other person in relation to that entry passed thru maintaining adjustments a/cs.. In a way it is counter checking before gng on for preparing a final TB. It is better to check at a stage where accounts are in control of a person rather than checking at afinal stage wherin it becomes difficult to fiind out errors if any.....

Hope nw i hv understood the concept behind SBL.  Thanks fr ur valuable inputs. Hope to hear from u in future also. Thanks.

even if errors r are found in SBL system, it is relatively easy to rectify it by checking at that level itself. It is like rectifying a child for his mistakes in childhood than to regret fr all those mistakes in adulhood . Am i Right.....?