SelfBalancingLedgers

7/25/2019 SelfBalancingLedgers

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The Institute of Chartered Accountants of IndiaRecorded on: 1-February-2013

IPCC Group-I Paper 1: Accounting, Chapter 8

CA.SK Chhabra

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ICAI, 2013

1 This lecture has been delivered by faculty members to supplement the Study

Material, Practice Manual and other content

2 The views expressed in this lecture are of the Faculty Member.

3

The content of this video lecture has not been specifically discussed by theCouncil of the Institute or any of its Committees and the views expressed hereinmay not be taken to necessarily represent the views of the Council or any of its

committees

2


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The e-Lectures, PPT, Podcastsand Video lectures on ICAI

Cloud Campus aim tosupplement the Study Material,

Practice Manual and

Supplementary Study Material

The lecture recordings are madeaccording to the syllabus andlaws existing/ applicable as on

the date of recording.

Due to changes in law, there is

likely to be some time gapbetween these changes and therecording of updated lectures.

Hence, students are advised torefer to the Study Material

including Supplementary Study

Material, if any, and otherrelevant legislation for latest

provisions/ amendmentsrequired for forthcoming

examination.

3

This e-Lecture was Recorded

on:February 1, 2013

ICAI, 2013


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Self Balancing Ledgers

Components/ Divisions

Accounts prepared for each Sub-Division

What is Sectional Balancing?

Formats/ Proforma of Different accounts

Accounting Entries in the books of Drawer and Drawee

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An Intro.

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1

Debtors Ledger or

Sales Ledger or

Sold Ledger

Also known as Subsidiary Ledgers

2

Creditors Ledger

Purchase Ledger or

Bought Ledger

3 General Ledger (Nominal Ledger)

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In the General Ledger, Two Accounts are prepared

These ledger may be called by different names

BoughtLedger Sold Ledger

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Debtor Ledger Adjustment A/c

(simply debtors account)

Or

Sales Ledger Adjustment A/cOr

Sold Ledger Adjustment A/c

(In reality it is similar to total debtors account)

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Creditors Ledger Adjustment A/c

Or

Bought Ledger Adjustment A/c

Or

Purchase Ledger Adjustment A/c

(In reality it is similar to total creditors account)

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Adjustment account are also known as controlaccounts. For eg. Debtors Ledger Adjustment Account or

Debtors Ledger control account means the same thing

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In Debtors Ledger, following one account is prepared

General Ledger Adjustment Account(reverse to total debtors account)

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In Creditors Ledger, following one account is

prepared

General Ledger Adjustment Account(reverse to

total creditors account)

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To prove the accuracy of the Sales Ledger wemaintain a Total Debtor account in the GeneralLedger

Where accounts of Individual customer would bemaintained in the sales ledger, In General Ledger the Total Debtors Account would be

posted by the total of various transaction - Total CreditSales, Cash Received, Total Discount Allowed etc.

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Balance in the Total Debtors Account Should be equal to the Total of Balance shown by the

Accounts of Individual Customers

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Debtor Ledger Adjustment A/c in General Ledger General Ledger Adjustment A/c in Debtors Ledger Creditors Ledger Adjustment A/c in General Ledger General Ledger Adjustment A/c in Creditors Ledger

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Particulars Rs Particulars Rs

To balance b/d

Credit sales

To General Ledger Adjustment A/c

B/R(Dishonored)

Bank(Discounted B/R

Dishonored)

Interest Charged

B/R(Cancelled upon renewal)

Discount Allowed

Creditors(B/R Endorsed

Dishonored)

To balance c/d (Advances from

customers at the end)

By balance b/d

Cash Received

By General Ledger Adjustment A/c

Bank(Cheques Received)

B/R(Drawn)

Sales Return

Discount Allowed

Rebate/Allowance

Bad debts(Transferred from

Creditors Ledger

By balance c/d

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

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To balance b/d

Cash Received

To Debtors Ledger Adjustment A/c

Bank

B/R

Sales Return

Discount Allowed

Rebate/Allowance

Bad debts(Transferred from

Creditors Ledger

To balance c/d

By balance b/d

Credit Sales

By Debtors Ledger Adjustment A/c

B/R(Dishonored)

Bank(Discounted B/R

Dishonored)

Interest Charged

B/R(Cancellation upon

Renewal

Discount(Allowed)

By balance c/d

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

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To balance b/d

Cash(Paid)


Bank(Issued)

B/P

B/R(Endorsed)

Purchase Returns

Discount Received

Rebate/Allowance

To balance c/d

By balance b/d

Credit Purchases


Endorsed B/R Dishonored

Interest Charged By

Creditors

B/P (Dishonored)

Discount (Disallowed)

By balance c/d(Advances from

Suppliers at the end)

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

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To balance b/d

Credit Purchases

To Creditor Ledger Adjustment A/c


Interest Charged By

Creditors

B/P(Dishonored)

Discount(Disallowed)

To balance c/d (Advances to

customers at the end)

By balance b/d

Cash(Paid)

By Creditor Ledger Adjustment A/c

Bank(Issued Cheques)

B/P

B/R(Endorsed)

Discount Received

Purchase Returns

By balance c/d

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

XX

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Transfer from Debtors Ledger to Creditors Ledger

or from Creditors to Debtors LedgerAmount is reduced from Debtors and Creditors Balance

If in journal entry Debtors or Creditors Account is

Debited or Credited only then Debtor Ledger

Adjustment or Creditors Ledger Adjustment Account

are effected, otherwise it does not effect theseaccount

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Provisions for Doubtful Debts, Provision for

Discount on Debtors, Bad Debt Recovered, Cash

Sales & Purchase Do not affect the Debtors Account

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Comprehensive Problem

May 1999

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You are required to prepare the Sales Ledger Adjustment account as on 31.3.2012

Debtors balance 1.3.2012 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 bad debts recovered Rs. 1,000) 4,000

Sundry charges debited to customers 600

Transfers to bought ledger 300

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To balance b/d

Credit sales


B/R(Dishonored)

Sundry Charges

Cash Received


B/R(Drawn)

Sales Return

Discount

Transfer

Bad debts

By balance c/d

50000

108000

1500

600

90000

6000

500

300

5000

50300

8000

1,60,100

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May 2000

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Make the Debtors Ledger Adjustment Account in theGeneral Ledger 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 thanthe total Credit sales

Cash collections from debtors amounted to 70% ofthe aggregate of the opening debtors and Credit

sales for the period. Debtors were allowed a cashdiscount of Rs20,000

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Bills receivable drawn during the three months totalledRs.30,000 of which bills amounting to Rs.10,000 wereendorsed in favour of suppliers. Out of the endorsed

Bills one bill for Rs.6,000 were dishonoured for non-payment as the party became insolvent his estaterealized nothing

Cheques received from customers Rs.8,000 were

dishonoured a sum of Rs.2,000 was irrecoverable. Baddebts written off in the earlier years realized Rs.11,000

Sundry debtors as on 1.1.2012 stood at Rs.50000

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To balance b/d

Credit

sales[100/120*(180000-

4800)]


Bank(Cheques Dishonored)

B/R

Creditors

Cash Received


B/R(Drawn)

Discount

Bad debts(6000+2000)

By balance c/d

5000

146000

8000

6000

6000

137200

20000

8000

14800

30000

2,10,000 2,10,000

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May 2002

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Prepare General Ledger Adjustment A/c in the Debtor s and Creditor s LedgerBalance 1.04.2011 Dr Cr

Debtors Ledger 47,200 240 Creditors Ledger 280 26,300 Transactions for the year ended 31.3.12 Rs. Total Sales 1,20,100 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

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Bills Payable Matured 8,000

Bills Accepted by Customers 20,100

Bills Receivable Dishonoured 1,500

Bills Receivables Discounted 5000

Bills Receivables Endorsed to Creditors 4,000

Endorsed Bills Dishonored 1,000 Bad-Debts Written off (after 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 31.3.12

Debtors Ledger (Cr.) 380 Creditors Ledger (Dr.) 420

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To balance b/d

To Debtors Ledger Adjustment A/c

Bank

B/R

Sales Return

Discount Allowed

Bad debts

To balance c/d(Balancing figure)

By balance b/d

Credit Sales

By Debtors Ledger Adjustment A/c

B/R(Dishonored)

Endorsed Bills

By balance c/d

240

58200

20100

2600

800

2500

74640

47200

112000

1500

1000

380

Transfer from Debtor LedgerTo Creditor

Ledger(1900+1100)

3000

1,62,080 1,62,080

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To balance b/d

Credit Purchases

To Creditor Ledger Adjustment A/c


To balance c/d

By balance b/d

By Creditor Ledger Adjustment A/c

Bank(Issued Cheques)

B/P Accepted

Discount Received

Purchase Returns

By balance c/d(Balancing figure)

26300

67000

1000

420

280

39500

5500

500

1800

40140

Transfer from Debtors Ledger

To Creditors

Ledger(1900+1100)

3000

Endorsed To Creditors 4000

94,720 94,72037 ICAI, 2013


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Comprehensive ProblemMay 2003

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Prepare Sales Ledger Adjustment A/c in the General Ledger As on 1-04-2011 balance in sales ledger DR) Rs. 1,41,880 (CR) Rs. 2,240 As on 31.3.2012 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 B/R received(B/R drawn) 40,000 Reserve for doubtful debts 9,160 Cash paid to customer 1,840 Bill received dishonored 6,000 Sales Ledger Balance (Dr.) 1,83,200

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To balance b/d

Credit sales


B/R(Dishonored)

Cash Paid to customer

To balance c/d

By balance b/d

Cash Received


B/R(Drawn)

Sales Return

Discount Allowed

Transfer to bought ledger

Bad debts(b-f)

By balance c/d

141800

728000

6000

1840

13720

2240

624000

10000

11200

20800

2000

181200

40000

891440 891440 40 ICAI, 2013


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Comprehensive ProblemNov 2008

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Prepare the necessary adjustment accounts as they would appear in the General Ledgerof Govind Ltd.

Closing debtors balance (per General Ledger Adjustment A/c) 60,000 Cr

Credit sales 40,000

Credit purchases 15,000

Paid to creditors 7,500

Discount allowed 1,500

Bills payable accepted 5,000 Discount received 500

Received from debtors 20,000

Bad debts 5,000

Closing creditors balance (per General Ledger adjustment A/c) 30,000Dr

Bills accepted by customers 3,000

Discount allowed to debtors Rs. 500 was recorded as discount received from creditors.

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To balance b/d

Credit sales


By balance b/d

Cash Received


B/R(Drawn)

Discount Allowed 1500+500

Bad debts

By balance c/d(60000-discount)

49500

40000

Nil

20000

2000

5000

59500

3000

89500 8950043 ICAI, 2013


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To be noted

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Treatment is same whether Transfer is From Debtors Ledger to creditors Ledger or

From creditors Ledger to Debtors Ledger

Amount is reduced from balance of Debtors and Creditors

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Provisions for Doubtful Debts

Discount on Debtors

Bad Debt Recovered

Trade Discount Allowed/Received

B/R Discounted or B/R Matured or B/P Paid

Cash Sales

Cash Purchases

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If in journal entry Debtors or creditors account is

debited or credited Only then Debtor Ledger adjustment or creditors ledger

adjustment account are effected, otherwise it does not

effect these account

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Entries in Books of Drawer &Drawee

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S

.

n

o.

Particulars B/R is

retained

B/R is

Discounte

d

B/R is

endorsed

B/R is

sent to

bank for

collection

BOOKS OF

DRAWEE

1 Sale of goods

on credit by

drawer(A) to

drawee(B)

Bs A/c Dr.

To

SalesA/c

Same Same Same Purchase Dr

To As a/c

2 Acceptance of a

B/E by the

Drawee

B/R A/c Dr.

To Bs

A/c

Same Same same As A/c Dr.

To B/P A/c

3 Discounting

Endorsement/Bills sent for

Collection by

Drawer

No Entry Bank A/c

Dr.Discount

A/c Dr.

To B/r

A/c

Cs A/c Dr

To B/RA/c

Bill Sent

forCollectio

n A/c Dr.

To B/R

A/c

No Entry

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4 B/E

honoured ondue date

Cash A/c

Dr.To B/R

A/c

No Entry No Entry Bank A/c

Dr.To Bills

sent for

collection

B/P A/c Dr.

To Cash A/c

5 Dishonor of

B/Eon due

date

(i)If noting

charges are

not paid

Bs A/c Dr.

To B/RA/c

Bs A/c

Dr.

To Bank

A/c

Bs A/c

Dr.

To Cs

A/c

Bs A/c

Dr.

To Bills

sent for

Collectio

n

B/P A/c Dr.

To As A/c

S.no.

Particulars B/R isretained

B/R isDiscounte

d

B/R isendorsed

B/R issent to

bank for

collection

BOOKS OFDRAWEE

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(ii) If noting

charges arepaid

Bs A/c Dr.

[B/R +

N.C.]

To B/R

To Cash

A/c [ N.C.]

BS A/C

Dr.

[ B/R

+N.C.]

To Bank

A/c

[B/R +N.C.]

BS A/c

Dr.

[B/R +

N.C.]

To Cs

A/c

Bs A/c

Dr.

[B/R +

N.C]

To Bills

Sent for

collectionA/c(B/R)

To Bank

B/P A/c Dr.

Noting Charge

A/c Dr.

To As A/c

S.

no.

Particulars B/R is

retained

B/R is

Discounte

d

B/R is

endorsed

B/R is

sent to

bank for

collection

BOOKS OF

DRAWEE

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6 Retirement of

a B/E at a

rebate byDrawee

Cash A/c Dr.

Rebate A/c

Dr.

To B/R A/c

No entry No Entry Bank A/c

Dr.

RebateA/c Dr.

To B/R

A/c

B/P A/c Dr.

To Cash A/c

To Rebate A/c

7 Renewal of aB/E(i)

Cancellation

of old B/E

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

Bs A/c Dr.To Bank

A/c

Bs A/c Dr.To Cs A/c

Bs A/c Dr.To Bill

sent for

collection

A/c

B/P A/c Dr.To As A/c

no. Particulars B/R is

retained

B/R is

Discounted

B/R is

endorsed

B/R is

sent tobank for

collectio

n

BOOKS OF

DRAWEE

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(ii) Interest

Charged byDrawer

Bs A/c Dr.

ToInterest A/c

Bs A/c

Dr.To

Interest

A/c

Bs A/c

Dr.To

Interest

A/c

Bs A/c

Dr.To

Interest

A/c

Interest A/c Dr.

To As A/c

(iii) Part

Payment by

Drawee

Cash A/c

Dr.

To Bs

A/c

Cash A/c

Dr.

To Bs

A/c

Cash A/c

Dr.

To Bs

A/c

Cash A/c

Dr.

To Bs

A/c

As A/c Dr.

To cash A/c


retained

B/R is

Discounted

B/R is

endorsed

B/R is

sent tobank for

collectio

n

BOOKS OF

DRAWEE

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(iv)Acceptan

ce of a new

B/E by

drawee

B/R A/c Dr.

To Bs A/c

B/R A/c

To Bs

A/c

B/R A/c

Dr.

To Bs

A/c

B/R A/c

Dr.

To Bs

A/c

As A/c Dr.

To B/p A/c

8 Insolvency

of theDrawee

(i) Dishonour

of B/E

BS A/c

Dr.To B/R

A/c

Bs A/c

Dr.To Bank

A/c

Bs A/c

Dr.To Cs

A/c

Bs A/c

Dr.To Bill

sent for

collection

A/c

B/P A/c Dr.

To As A/c


retained

B/R is

Discounte

d

B/R is

endorsed

B/R is

sent to

bank for

collectio

n

BOOKS OF

DRAWEE

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(ii) Receiptof amount

from the

Drawee as

Final

dividend

Cash Dr.Bad

Debts A/c

Dr.

To Bs A/c

Cash A/cDr. Bad

Debts A/c

Dr.

To Bs

A/c

Cash A/cDr.

Bad

Debts

A/c Dr.

To Bs

A/c

Cash A/cDr.

Bad

Debts

A/c Dr.

To Bs

A/c

As A/c Dr.To Cash A/c

To P/L A/c

Or deficiency

A/c

no. Particulars B/R isretained

B/R isDiscounte

d

B/R isendorsed

B/R issent to

bank for

collectio

n

BOOKS OFDRAWEE

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B/E Bills of Exchange; B/R Bills Receivable; B/P

Bills Payable; N/C- Noting

Charges;B=Debtor;C=Creditor

Sans Recourse means if Bill endorsed is

dishonored then there is no liability of the endorser.

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