8 self balancing ledger

Self – Balancing Ledgers

Why Self Balancing In a big business organization the number of accounts are quite large. Therefore, instead of maintaining

all the accounts in one ledger, these are maintained in different ledgers. These accounts be

maintained by adopting any one of the following two systems:

(1) Self -Balancing System

(2) Sectional Balancing System.

Self – Balancing

System

Under this system a group of transactions are recorded in one ledger. In a trading organization following

ledgers are maintained:

(A) Sales Ledger or Debtors Ledger: In this ledger personal accounts of trade debtors are

maintained When goods are sold on credit, personal accounts of customers are required

to be maintained in the accounts books. These accounts will contain entries regarding

Credit Sale, Sales return, Cash received, Bad Debts, Discount allowed etc. Debtors

accounts other than trade debtors are not maintained in this ledger. These are maintained

in General Ledger.

(B) Purchase Ledger or Creditors Ledger: In this ledger personal accounts of trade

creditors are maintained. In a business organisation when goods are purchased on credit,

personal accounts of suppliers of material or goods are required to be maintained. These

accounts contain credit purchase, purchase return, cash paid, discount received. Such

personal accounts are maintained in creditors ledger. Personal accounts of creditors other

than trade creditors such as creditors for loan, creditors for expenses etc. are not

maintained in this ledger. These accounts are maintained in General Ledger.

(C) General Ledger: This ledger contains all accounts other than personal accounts of trade

debtors and trade creditors which are maintained in debtors ledger and creditors ledger

respectively. General Ledger contains real accounts, nominal accounts and non –trading

personal accounts.

Meaning of Self

Balancing

When a large number of debtors and creditors are there in a business, it is advantageous to maintain a

separate sales ledger and bought ledger for smooth handling of the record-keeping & function as well as

to facilitate division of work. Generally, three self- balancing ledgers are maintained in a large business,

namely

1. Bought ledger

2. Sales ledger and

3. General ledger

In the bought ledger, a general ledger adjustment account is maintained to make it self-balancing. In the

sales ledger also, a general ledger adjustment account is maintained to make it self-balancing. Lastly, in

the general ledger, a bought ledger adjustment account and a sales ledger adjustment account are

maintained which give summary of the bought ledger and sales ledger respect and make the general

ledger self-balancing. In the bought ledger, individual creditors’ account are maintained. In the sales

ledger, individual debtors’ accounts are maintained and in the general ledger, all other accounts

including summary of the sales ledger and bought ledger are maintained

Advantages Following are the advantages of self-balancing ledgers

1. It is easy to locate mistake if ledgers are kept on self-balancing system.

2. A complete trial balance can be compiled before the individual personal ledger balances are

abstracted.

3. It is possible to ascertain the accuracy of posting of each ledger independently.

4. Where it is not desired to reveal the content of the private ledger to the clerical staff the

balances on this ledger can be incorporated in total in the trial balance.

5. It is instrumental in strengthening the internal check.

6. The system is specially useful under the following two circumstances:

When there is a large number of customers and suppliers, who can be classified on some basis

regional basis or alphabetical basis, etc.

When it is desired to prepare final statement of accounts periodically.

Question Purchase Ledger Adjustment Account under sectional balancing system is also known as Creditors

Ledger Control Account.

Answer Under this system, only the total account for each of the subsidiary ledger is opened in the General

Ledger and no Control Account/ Adjustment Account/ Self Balancing Account is opened in the

subsidiary ledger. Since in the subsidiary ledger, a double entry is not completed, a separate trial

balance cannot be taken out from these ledgers. The main features of this system are as under:

(a) Accounts of individual customers are maintained in the Debtors Ledger and no control

Account is set up in the Debtors Ledger. Individual items are posted to these accounts without

completing the double entry in this ledger.

(b) Accounts of individual suppliers are maintained in the Creditor’s Ledger and no Control

Account is set up in the Creditor’s Ledger. Individual items are posted to these accounts

without completing the double entry in this ledger.

(c) Total Debtors’ Account and Total Creditors’ Account are maintained in the General Ledger.

(d) The accuracy of individual customer’s account may be checked by comparing the total of their

balances with the balance in the Total Debtors’ Account

(e) The accuracy of individual suppliers’ accounts may be checked by comparing the total of their

balances with the balance in the Total Creditor’s Account.

(f) A trial balance can be prepared only of General Ledger and not of Debtors’ Ledger or

Creditors’ Ledger since the double entry is completed in respect of General Ledger and not in

respect of Debtor’s Ledger and Creditor’s Ledger

Question 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.

Answer Sometimes, a business enterprise may purchase from and sales to the same person on credit. In that case,

the person is a creditor as well as the debtor or the businesses unit. There no separate ledger is

maintained, both credit purchases & credit sales are recorded in the same account. But in the case of the

self balancing ledgers, for such a person, two separate accounts are maintained to record credit

purchases & credit sales.

One account is maintained in the debtor ledger to record credit sales & another in the creditors ledger to

record credit purchases. Where this occurs it is the common practice to settle both accounts by

transferring the balance of the smaller account to the account with the higher balance. In effect, the

smaller account is closed. It should be noted that this transfer effects not only the two personal accounts

adjusted, but also debtors ledger adjustment account, creditors ledger adjustment account & the two

general ledger adjustments accounts.

Sectional Balancing

System

Under this system also personal accounts of trade debtors and trade creditors are maintained in separate

ledgers like Self-balancing system. Under this system also following three ledgers are maintained:

(i) General Ledger.

(ii) Sales Ledger or Debtors Ledger.

(iii) Purchase Ledger or Creditors Ledger.

Under this system trial balance is prepared only in General Ledger. Following Control Accounts are

opened in General Ledger to complete double entry.

(i) Total Debtors Account or Debtors Ledger Control Account.

(ii) Total Creditors Account or Creditors Ledger Control Account.

Difference between

Self and Sectional

Balancing System.

Both self balancing ledgers and sectional balancing ledgers serve the same purpose. Under both the

system control accounts have to be prepared. However there are certain points of distinction between the

two systems which can be described as follows:

Self Balancing Ledger Sectional Ledger

Control accounts are prepared in all the ledgers.

In the general ledger, debtors ledger adjustment

account and creditors ledger adjustment account

are prepared.

Control accounts are prepared in general ledger

only. The name of these control accounts are

total debtors accounts and total creditors

account. Personal ledgers namely debtors ledger

and creditors ledger have no control account.

A trial balance can independently be prepared

from each one of the ledgers.

A trial balance can be prepared only from the

general ledger.

All the ledgers form part of double entry system. Double entry system is completed in the general

ledger only. Debtors ledger and creditors ledger

serve only as memorandum books of account.

Question 1:-

Give journal entries (under self balancing) of following information. Also prepare ledger accounts.

Debtors Credit Sales

Rs.

Cash received

Rs.

Discount allowed

Rs.

B/R drawn

Rs.

A

B

C

D

15,000

12,000

6,000

7,500

7,000

9,000

5,000

7,300

500

300

100

200

3,000

1,000

--

--

40,500 28,300 1,100 4,000

Q.2. From the following information prepare Sales Ledger Adjustment Account and Bought Ledger Adjustment Account in

the general ledger:

On 1.4.1994 balance in bought ledger (Dr.) Rs. 10,000, Credit Rs. 96,000, Balance in Sales Ledger (Dr.) Rs. 1,41,880

& (Cr) Rs. 2,240.

31.3.1995 Rs. 31.3.1995 Rs.

Purchases

Purchases return

Total sales

Cash sales

Sales return

Cash received from customers

Bought Ledger Balance (Dr.)

Sales Ledger Balance (Dr.)

Transfer from sales to bought ledger

5,40,000

20,000

7,68,000

40,000

10,000

6,24,000

10,400

1,83,200

20,800

Discount received

Bills receivable received

Bills payable issued

Reserve for doubtful debts

Cash paid to customers

Bills receivable dishonoured

Discount allowed

Cash paid to suppliers

7,200

40,000

22,400

9,160

1,840

6,000

11,200

4,80,000

Q.3. The following is extracted from a set of books for the half-year ended 30th June 1996:

Sales

Purchases

Returns Outward

Cash Received from Debtors

Bills Payable Accepted

Returns Inward

Cash Paid to Creditors

Bills Receivable Received

Discounts Received

Bad Debts Written-off

Discount Allowed

Transfer from Purchases Ledger

Rs.

5,63,000

3,22,000

7,600

1,84,200

1,20,000

16,800

1,80,200

1,60,000

4,200

12,000

10,800

6,800

The total of the Sales Ledger Balances on 1st Jan. 1996 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.

Q.4. Write-up the Sales Ledger Adjustment Account as it would appear in the General Ledger from the following particulars:

Opening Balance of Debtors (Dr.)

Do (Cr.)

Sales

Returns

Cash Received

Discount Allowed

Rs.

25,200

800

62,400

6,340

40,100

2,600

Bad Debts Written-off

Reserve for Bad Debts

Bad Debts previously written-off now recovered

Allowances

Bills Receivable

Bills Dishonoured

Trade Discount

Transfer from Bought Ledger

Closing balances of Debtors (Dr.)

Do (Cr.)

7,420

11,000

600

840

2,600

1,000

300

2,400

27,980

2,480

Q.5. From the following information prepare necessary Adjustment Accounts under Self-Balancing System:

(a) Sundry Debtors – Opening Balance

Debit

Credit

(b) Cash and Cheques receipts

(c) Credit Sales

(d) Discount Allowed

(e) Returns Inward

(f) Bad Debts

(g) Bills Receivable Received

(h) Bills Receivable discounted

(i) Provision for Bad Debts

(j) Bad Debts recovered

(k) Transfer from Debtors Ledger to Creditors Ledger

(l) Transfer from Creditors Ledger to Debtors Ledger

(m) Closing Credit Balance in Sundry Debtors

Rs.

2,00,000

10,000

8,00,000

10,00,000

30,000

20,000

15,000

1,00,000

40,000

10,000

5,000

5,000

6,000

30,000

Q.6. The following information is extracted form a set of books for the half—year ended 30th June, 1996:

Rs.

Sales 5,63,000

Purchases 3,22,000

Return Outward 7,600

Cash Received from Debtors 1,84,200

Bills Payable Accepted 1,20,000

Return Inward 16,800

Cash Paid to Creditors 1,80,000

Bills Receivable Received 1,60,000

Discount 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 January, 1996 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.

Q.7. From the following particulars prepare Customers Control Account in General Ledger:

Rs.

Debtors balance on 1.3.1998 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

Q.8. The following is a summarized analysis of the accounts of the outstanding debtors of a firm at the date of the annual closing

as appearing in one of their ledger:

Debtors Goods Sold

during the year

Goods returned

during the year

Cash and Cheque received

during the year

Discount

Allowed during

the year

Bills of Exchange

received during the year

A

B

C

D

E

F

G

Rs.

2,763

6,514

3,987

5,762

9,385

8,426

4,931

Rs.

--

23

15

--

117

--

82

Rs.

1,500

3,200

2,000

4,100

6,300

5,900

2,200

Rs.

--

130

40

--

93

--

49

Rs.

1,000

3,500

2,200

--

3,500

2,300

3,800

There was an outstanding balance of the debtors to the extent of Rs. 3,985 at the beginning of the year.

Out of the above receipts, a bill for Rs. 700 given by B was dishonoured and the charges amounted to Rs. 5.

Show how would you proceed to agree the Trial Balancing according to Self-Balancing System.

Solution:

In the Debtors Ledger

General Ledger Adjustment Account

To Balance b/d

To General Ledger Adjustment A/c

To Sales

To Bills Dishonoured

To Charges

Rs.

3,985

41,768

700

5

By General Ledger Adjustment A/c:

By Cash and Cheque

By Discount Allowed

By Bills Receivable

By Returns inward

By Balance c/d

Rs.

25,200

312

16,300

237

4,409

46,458 46,458

To Balance b/d 4,409



To Debtors Ledger Adjustment A/c:

To Cash and Cheque

To Discount Allowed

To Bills Receivable

To Returns Inward

To Balance c/d

Rs

25,200

312

16,300

237

4,409

By Balance b/d

By Debtors Ledger Adjustment A/c:

By Sales

By Bills Dishonoured

By Charges

Rs

3,985

41,768

700

5

46,458 46,458

By Balance b/d 4,409

Q.9. Prepare the General Ledger Adjustment Accounts as will appear in the Debtors’ and Creditors’ Ledger, from the

information given below:

Balances on 1.4.98 Dr. (Rs.) Cr. (Rs.)

Debtors’ Ledger 47,200 240

Creditors’ Ledger 280 26,400

Transactions for the year ended 31.3.99 Rs.

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 from Creditors 5,500

Bills Payable Matured 8,000

Bills Accepted by Customers 20,100

Bills Receivable Dishonoured 1,500

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 31.3.99

Debtors’ Ledger (Cr.) Rs. 380

Creditors’ Ledger (Dr.) Rs. 420

Ans.

In Debtors Ledger

Dr. General Ledger Adjustment Account

Cr.

Date Particulars Rs. Date Particulars Rs.

1.4.98 To Balance b/d


Bank 58,200

Discount 800

Returns 2,600

Bills Receivable 20,100

Bad debts w/o 2,500


Transfer from

Debtors Ledger to

Creditors Ledger 1,100

Transfer from

Creditors Ledger to

Debtors Ledger. 1,900

To Balance c/d

(Balancing figure)

240

84,200

3,000

74,640

1.4.98

31.3.99

By Balance b/d

By Debtor’s Ledger Adjustment :

Sales on Credit 1,12,000

Bills Receivable

b/d dishonoured 1,500

Endorsed Bills

Receivable

dishonoured 1,000

By Balance c/d

47,200

1,14,500

380

1,62,080 1,62,080

In Creditors Ledger

Dr. General Ledger Adjustment Account

Cr.

Date Particulars Rs. Date Particulars Rs.

1.4.98 To Balance b/d

To Creditors Ledger

Adjustment Account:

Purchases

Endorsed Discounted

Bills Receivable

Dishonoured

To Balance c/d

67,000

1,000

26,300

68,000

420

1.4.98 By Balance b/d

By Creditor’s Ledger

Adjustment Account:

Bank

Received

Returns

Bills Payable

Bills Receivable endorsed

By Creditor’s Ledger--------

Adjustment Account:

Transfer from

39,500

500

1,800

5,500

4,000

280

51,300

Debtor’s Ledger

to Creditor’s Ledger

Transfer from Creditor’s

Ledger to Debtor’s

Ledger

By Balance, c/d

(Balancing figure)

1,000

1,900

3,000

40,140

94,720 94,720

Q.10. Mr. Mrinal Sen maintains his ledger on self-balancing system. The transactions from January 1 to April 30, 1989 are given

below. You are required to prepare the General Ledger Adjustment Account as will appear in Debtors ledger:

(1) Opening Balance (January 1, 1989):

Debtors ledger Rs. 76,000

(2) Cash Sales Rs. 12,000 (being 10% of total sales)

(3) Collection from customers (other than collections on Bills Receivables) amounted to Rs. 1,10,000 which included the

following:

(a) A sum of Rs. 3,000 realized from the estate of an insolvent customer (at 0.60 p. per rupee).

(b) Rs. 6,500 received from a customer as advance for sale.

(c) Rs. 4,000 received from a Debtor after adjustment of an advance of Rs. 2,000 made in December, 1989.

(d) Rs. 1,250 received from a party whose account was written-off in earlier years.

(4) Interest charged to customers on overdue account Rs. 2,600.

(5) Bills Receivable drawn during the period Rs. 18,500.

(6) Bills Receivable collected during the period Rs. 10,600 (including Rs. 5,900) collected on Bills Receivable drawn

during November and December, 1988.

(7) Bills Receivable dishonoured on maturity Rs. 1,700.

(8) Bills Receivable endorsed to suppliers Rs. 6,000. Out of which Bills Receivable for Rs. 2,000 was discounted by

Creditors at 5% duly met at maturity. Bills Receivable for Rs. 3,000 was dishonoured on maturity (noting charge being

Rs. 20) and Bills Receivable amounting to Rs. 1,000 will mature in May 1989.

(9) Returns Inward Rs. 11,600.

(10) Transfer from Creditors Ledger to Debtors Ledger Rs. 6,900.

Solution:



1989

Jan 1

Dec 31

To Balance b/d

To Debtors Ledger

To Adjustment A/c:

To Cash (Rs. 1,10,000 – Rs. 1,250)

To Bad Debtors

(Rs. 3,000 × 40/60)

To Bills Receivable

To Return Inward

To Transfer from Creditors Ledger

To Balance c/d

Rs.

2,000

1,08,750

2,000

18,500

11,600

6,900

50,070

1989

Jan 1

April 30

By Balance b/d

(Rs. 76,000 × Rs. 2,000)

By Debtors Ledger

By Adjustment A/c:

By Sales

(Rs. 12,000 × 90/10)

By Interest

By B/R Dishonoured

By B/R Dishonoured

(endorsed including noting

charges)

By Balance c/d

Rs.

78,000

1,08,000

2,600

1,700

3,020

6,500

1,99,820 1,99,820

1989

May 1

To Balance b/d

6,500

1989

May 1

By Balance b/d

50,070

Q.11. From the following particulars, prepare the Creditors Ledger Adjustment Account as it would appear in General Ledger

and General Ledger Adjustment Account as it would appear in creditors ledger for the year ended 31st March 1986:

Sundry Creditors (on 1.4.1985) Cr.

Do Dr.

Purchases (including Cash Purchases Rs. 10,000)

Rs.

60,000

2,000

70,000

Returns Outward

Cash and Cheques paid to Creditors

Discount allowed by Creditors

Trade Discount

Price reduction allowed on damaged goods

Bills Receivable endorsed to Creditors

Bills Payable issued during the year

Bills Payable matured

Bills Payable dishonoured

Bills Payable renewed

Interest on Bills Payable renewed

Sundry charges paid for dishonor of Bills Payable

Total of set-off in Debtors Ledger

Sundry Creditors (on 31.3.1986) Dr.

Do Cr.

10,000

30,000

6,000

1,000

2,000

5,000

8,000

1,000

2,000

1,000

50

50

4,000

1,000

55,100

Solution:

In the General Ledger

Creditors Ledger Adjustment Account

1985

April 1

1986

Mar. 31

To Balance b/d

To General Ledger

To Adjustment A/c:

To Returns Outward

To Cash and Cheque

To Discount Received

To Allowances

To Bills Receivable

To Bills Payable

To Bills Payable (renewed)

To Transfer

To Balance c/d

Rs.

2,000

10,000

30,000

6,000

2,000

5,000

8,000

1,000

4,000

55,100

1985

Apr 1

1986

Mar 31

By Balance b/d

By General Ledger

By Adjustment A/c:

By Purchases

By Bills payable Dishonoured

By Interest

By Sundry Charges

By Balance c/d

Rs.

60,000

60,000

2,000

50

50

1,000

1,23,100 1,23,100

1985

Apr 1

To Balance b/d

1,000

1986

Apr 1

By Balance b/d

55,100

In the Creditors Ledger


1985

Apr 1

1986

Mar 31

To Balance b/d

To Creditors Ledger

To Adjustment A/c:

To Purchases

To Bills Payable Dishonoured

To Interest

To Sundry charges

To Balance c/d

1985

Apr 1

1986

Mar 31

By Balance b/d

By General Ledger

By Adjustment A/c:

By Returns Outward

By Cash and Cheque

By Discount Received

By Allowances

By Bills Receivable

By Bills Payable

By Bills Payable (renewed)

By Transfer

By Balance c/d

Rs.

2,000

10,000

30,000

6,000

2,000

5,000

8,000

1,000

4,000

55,100

1,23,100

1986

Apr 1

By Balance b/d

55,100

1986

Apr 1

To Balance b/d

1,000

Notes:

1. Cash Purchase will not appear in creditors ledger.

2. Bills Payable matured will also not affect creditors ledger.

Q.12. Prepare the Sales Ledger Adjustment Account and Purchases Ledger Adjustment Account from the following particulars:

Debit balance as on 1.1.93

Credit balance as on 1.1.93

Credit sales and purchases

Cheque received and paid

Advance paid to creditors

B/R received and B/P accepted

Discounts allowed and received

Returns

Transfer from Purchases to Sales Ledger

Bad Debts

Reserve for discounts

B/R B/P dishonoured

Debit Balances as on 30.6.93

Credit Balance as on 30.6.93

Sales Ledger

Rs.

1,50,000

200

4,00,000

4,50,000

--

50,000

5,000

10,000

10,000

2,000

10,000

5,000

30,000

?

Purchase Ledger

Rs.

1,000

1,25,000

3,80,000

3,50,000

20,000

50,000

3,000

5,000

10,000

--

5,000

5,000

?

72,000

Solution:

In the Books of………


Sales Ledger Adjustment Account

1993

Jan 1

June 30

To Balance b/d

To General Ledger Adjustment A/c—

To Sales

To B/R dishonoured

To Balance c/d

Rs.

1,50,000

4,00,000

5,000

2,200

1993

Jan 1

June 30

By Balance b/d

By General Ledger Adjustment

A/c—

By Cheque received

By B/R received

By Discount Allowed

By Returns Inward

ByTransfer from Purchases Ledger

By Bad Debts

By Balance c/d

Rs.

200

4,50,000

50,000

5,000

10,000

10,000

2,000

30,000

5,57,200 5,57,200

Purchases Ledger Adjustment Account

1993

Jan 1

June 30

To Balance b/d


To Cheques paid

To Advance paid

To B/P accepted

To Discount received

To Returns outward

To Transfer to sales ledger

To Balance c/d

Rs.

1,000

3,50,000

20,000

50,000

3,000

5,000

10,000

72,000

1993

Jan 1

June 30

By Balance b/d

By General Ledger Adjustment A/c

By Purchases

By B/P dishonoured

By Balance c/d

Rs.

1,25,000

3,80,000

5,000

1,000

5,11,000 5,11,000

Note: Reserve for discounts does not appear in the Debtors ledger.

Q.13. EssBee Ltd. have three Ledgers in use, viz., a Debtors Ledger, a Creditors Ledger and a Nominal Ledger which are all kept

on the system of Self-Balancing. From the following particulars, prepare (i) The Debtors Ledger Adjustment Account, and (ii)

Creditors Ledger Adjustment Account in the Nominal Ledger:

Jan 1, 1982

June 30, 1982

Balance of Sundry Debtors

Balance of Sundry Creditors

Credit Purchases

Credit Sales

Cash Sales

Paid to Creditors

Discount allowed by them

Cash Received from Debtors

Discount allowed to them

Bills Payable accepted

Rs.

32,000

37,000

9,000

19,600

1,500

19,750

650

15,600

400

3,000

Bills Receivable received

Returns Inward

Returns Outward

Rebate allowed to Debtors

Rebate allowed by Creditors

Provision for Doubtful Debts

Bad Debts

Bills Receivable dishonoured

6,000

1,750

1,200

550

300

320

900

750

Solution:

In the Nominal Ledger

Debtors Ledger Adjustment Account

1982

Jan 1

June 30

To Balance b/d

To Nominal Ledger Adjustment A/c:

To Sales

To Bills Receivable

To Dishonoured

Rs.

32,000

19,600

750

1982

June 30

By Nominal LedgerAdjustment A/c:

By Cash Received

By Discount Allowed

By Bills Receivable

By Returns Inward

By Rebate Allowed

By Bad Debts

By Balance c/d

Rs.

15,600

400

6,000

1,750

550

900

27,150

52,350 52,350

1982

July 1

To Balance b/d

27,150



1982

June 30


To Cash paid

To Bills Payable


To Returns Outward

To Rebate Received

To Balance c/d

Rs.

19,750

3,000

650

1,200

300

21,100

1982

Jan 1

June 30

By Balance b/d

By Nominal Ledger Adjustment A/c

By Purchases

Rs.

37,000

9,000

46,000 46,000

1982

July 1

By Balance b/d

21,100

Q.14. The following information is extracted from the books of Shri Hari for the year ended 31st March, 2001:

Sales

Purchases

Returns Outward

Cash received from debtors

Bills payable accepted

Returns inward

Cash paid to creditors


Discount received

Bad Debts written-off

Reserve for discount to debtors

Discount allowed

Transfers from purchases ledger

Rs.

3,80,800

3,26,000

14,000

1,78,200

1,22,000

17,600

1,86,000

1,36,000

4,000

24,000

2,000

1,800

26,600

The total of the Sales ledger balances on 1st April 2000 was Rs. 90,600 and that of the Purchase Ledger balances on the

same date was Rs. 78,600.

Prepare Sales Ledger and Ledger Adjustment Accounts from the above information.

Solution:


2000

Apr 1

To Balance b/d

To General Ledger Adjustment :

Rs.

90,600

2000

Apr 1

By General Ledger Adjustment :

By Cash

Rs.

2001

Mar 31

To Sales 3,80,800 By Returns Inward

By Bills Receivable

By Bad Debts written-off

By Discount Allowed

By Transfer from Purchase Ledger

By Balance c/d

1,78,200

17,600

1,36,000

24,000

1,800

26,600

87,200

4,71,400 4,71,400

Purchases Ledger Adjustment Account

2000

Apr 1

2001

Mar 31

To General Ledger

To Adjustment Account:

To Cash

To Returns Outward

To Bills Payable


To Transfer to Sales Ledger

To Balance c/d

Rs.

1,86,000

14,000

1,22,000

4,000

26,600

52,000

2000

Apr 1

2001

Mar 31

By Balance b/d

By General Ledger

By Adjustment Account:

By Purchases

Rs.

78,600

3,26,000

4,04,600 4,04,600

Q.15. From the following information prepare Sales Ledger Adjustment Account and Bought Ledger Adjustment Account in the

General Ledger:

On 1.4.1994 Balance in Bought Ledger (Dr.) Rs. 10,000, Credit Rs. 96,000, Balance in Sales Ledger (Dr.) Rs.

1,41,880, (Cr.) Rs. 2,240:

31.3.1995

Purchases

Purchases return

Total sales

Cash sales

Sales return

Cash received from customers

Discount allowed

Cash paid to suppliers

Transfer from sales to bought ledger

Rs.

5,40,000

20,000

7,68,000

40,000

10,000

6,24,000

11,200

4,80,000

20,800

31.3.1995

Discount received


Bills payable issued

Reserve for doubtful debts

Cash paid to customers

Bills receivable dishonoured

Bought Ledger Balance (Dr.)

Sales Ledger Balance (Dr.)

Rs.

7,200

40,000

22,400

9,160

1,840

6,000

10,400

1,83,200

Solution

In the Books of……..



1994

Apr 1

1995

Mar 31

To Balance b/d


To Sales (Cr.)

(7,68,000-40,000)

To Cash paid to customers

To Bills Receivable dishonoured

To Balance c/d

Rs.

1,41,880

7,28,000

1,840

6,000

13,720

1994

Apr 1

1995

Mar 31

By Balance b/d


By Sales Returns

By Cash from customers

By Discount allowed

By Transfer to Bought Ledger

By Bill Receivable recv.

By Balance c/d

Rs.

2,240

10,000

6,24,000

11,200

20,800

40,000

1,83,200

8,91,440 8,91,440

Bought Ledger Adjustment Account

1994

Apr 1

1995

Mar 31

To Balance b/d


To Purchases returns

To Cash paid

To Transfer from Sales Ledger


To Bills Payable accepted

To Balance c/d

Rs.

10,000

20,000

4,80,000

20,800

7,200

22,400

86,000

1994

Apr 1

1995

Mar 31

By Balance b/d


By Purchases

By Balance c/d

Rs.

96,000

5,40,000

10,400

6,46,400 6,46,400

Note: Reserve for Doubtful Debts and Cash Sales will not appear in Debtors Ledger Adjustment Account.

Q.16. From the following particulars, prepare a Debtors Ledger Adjustment Account and Creditors Ledger Adjustment Account

as they would appear in the General Ledger:

Jan 1, 1989

Balance of Debtors Ledger – (Dr.)

Balance of Debtors Ledger – (Cr.)

Balance of Creditors Ledger – (Cr.)

Balance of Creditors Ledger – (Dr.)

Dec. 31, 1989 Credit purchases

Credit sales

Cash received from Debtors

Discount allowed to Debtors

Cash paid to Creditors

Discount received from Creditors

Bad debts written-off

Bad debts previously written-off now recovered

Bill Receivable received


Dishonoured cheques included in total cash received from Debtors

Cash discount which had been allowed on dishonoured cheques (above)

Refunded to Debtors against Credit balances

Transfer from Purchase ledger to Sales ledger

Balance of Debtors Ledger – (Cr.)

Balance of Debtors Ledger – (Dr.)

Balance of Creditors Ledger – (Dr.)

Balance of Creditors Ledger – (Cr.)

Rs.

40,000

1,000

20,000

700

12,000

60,000

45,000

4,000

15,000

1,000

500

1,000

5,000

1,000

750

50

100

1,000

800

?

500

?

Solution:



1989

Jan 1

Dec 31

To Balance b/d

To General Ledger Adjustment A/c:

To Sales

To Bills Received

To Dishonoured

To Dishonoured cheques

To Discount Disallowed

To Cash (Refunded)

To Balance c/d

Rs.

40,000

60,000

1,000

750

50

100

800

1989

Jan 1

Dec 31

By Balance b/d

By General Ledger Adjustment A/c:

By Cash

By Discount Allowed

By Bad Debts

By Bills Receivable

By Transfer

By Balance c/d

Rs.

1,000

45,000

4,000

500

5,000

1,000

46,200

1,02,700 1,02,700

1990

Jan 1

To Balance b/d

46,200

1990

Jan 1

By Balance b/d

800

In General Ledger


1989

Jan 1

Dec 31

To Balance b/d

To General Ledger

To Adjustment A/c

To Cash


To Transfer

To Balance c/d

Rs.

700

15,000

1,000

1,000

14,800

1998

Jan 1

Dec 31

By Balance b/d

By General Ledger

By Adjustment A/c

By Purchases

By Balance c/d

Rs.

20,000

12,000

500

32,500 32,500

1990

Jan 1

To Balance b/d

500

1990

Jan 1

By Balance b/d

14,800

Q.17. Prepare the General Ledger Adjustment Accounts as will appear in the Debtors and Creditors Ledger from the information

given below:

Balance on 1.4.98 Dr. Cr.

Rs. Rs.

Debtors Ledger 47,200 240

Creditors Ledger 280 26,300

Transactions for the year ended 31.3.99

Total Sales

Cash Sales

Total Purchases

Credit Purchases

Creditors paid-off (in Full Settlement of Rs. 40,000)

Received from Debtors (in Full Settlement of Rs. 59,000)

Returns from Debtors

Returns to Creditors

Bills Accepted for Creditors

Bills Payable Matured

Bills Accounted by Customers

Bills Receivables Dishonoured

Bills Receivables Discounted

Bills Receivables Endorsed to Creditors

Endorse Bills Dishonoured

Bad Debts Written-off (after Deducting Bad Debts Recovered Rs. 300)

Provision for Doubtful Debts

Transfer from Debtors Ledger to Creditors Ledger

Transfer from Creditors Ledger to Debtors Ledger

Balances on 31.3.99

Debtors Ledger (Cr.)

Creditors Ledger(Dr.)

Rs.

1,20,000

8,100

89,500

67,000

39,500

58,200

2,600

1,800

5,500

8,000

20,100

1,500

5,000

4,000

1,000

2,200

550

1,100

1,900

380

420

Solution:

In the books of ….

In Debtors Ledger


1998

Apr 1

1999

Mar 31

To Balance b/d

To Debtors Ledger Adjustment :

To Bank

To Discount

To Returns

To Bills Receivable

Bad Debts written-off

To Transfer

To Transfer

By Balance c/d

Rs.

240

58,200

800

2,600

20,100

2,500

1,100

1,900

74,640

1998

Apr 1

1999

Mar 31

By Balance b/d

By Debtors Ledger Adjustment :

By Sales (on credit)

By Bills Receivable dishonoured

Endorsed Bills

By Receivable dishonoured

By Balance c/d

Rs.

47,200

1,12,000

1,500

1,000

380

1,62,080 1,62,080

In Creditors Ledger


1998

Apr 1

1999

Mar 31

To Balance b/d

To Creditors’ Ledger Adjustment :-

To Purchases

To Endorsed Bills

To Receivable

To dishonoured

To Balance c/d

Rs.

26,300

67,000

1,000

420

1998

Apr 1

1999

Mar 31

31.3.99

By Balance b/d

By Creditors Ledger Adjustment :-

By Bank

By Discount Received

By Returns

By Bills Payable

By Bills Receivable endorsed

By Transfer

By Transfer

By Balance c/d

Rs.

280

38,500

500

1,800

5,500

4,000

1,100

1,900

40,140

94,720 94,720

The following items will neither affect Debtors Ledger nor Creditors Ledger:

(a) Cash Sales; (ii) Bills Payable Matured; (iii) Bills Receivable Discounted; (iv) Bad Debts Recovered; (v) Provision for

doubtful Debts.

Q.18. From the following information available from the books of a Trader from 1.1.2000 to 31.3.2000, 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 Xerox Machine for Rs. 4,800 (Book value Rs. 8,000).

The total cash sales were 80% less than the total Credit sales.

(b) Cash collection 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 totaled 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) Cheques received from customers Rs. 8,000 were dishonoured, a sum of Rs. 2,000 was irrecoverable; Bad debts

written-off in the earlier years realized Rs. 11,000.

(e) Sundry debtors as on 1.1.2000 stood at Rs. 50,000.

Solution:



2000

Jan 1

Mar 31

To Balance b/d

To General Ledger Adjustment Account

To Sales [100/120 × (1,80,000 – 4,800]

To Creditors Bill Receivable

dishonoured

To Bank Cheques dishonoured

Rs.

50,000

1,46,000

6,000

8,000

2000

Mar 31


To Collection –Cash and Bank

(70% of Rs. 1,96,000)

To Discount Allowed

To Bills Receivable

To Bad Debts

(6,000 + 2,000)

To Balance c/d

Rs.

1,37,200

20,000

30,000

8,000

14,800

2,10,000 2,10,000

Q.19. The net balance of the Sales Ledger Control Account (Rs. 53,837) of a trader, as on Dec. 1986, does not tally with the net

total of the balances of the Sales Ledger Accounts.

The following errors are subsequently discovered and the necessary adjustments balanced the books:

(1) Debit Balance in the Sales Ledger to the total of Rs. 1,768 has not been included in the list of sales ledger balances.

(2) A bad debt of Rs. 372 written-off in the Sales Ledger has not been entered in the Control Account or debited to Bad

Debt Account.

(3) Discount of Rs. 415 allowed to a customer had been duly entered in the books. It had subsequently been disallowed and

debited to the customer’s account but entered in the discount received column of the Cash Book.

(4) Rs. 693 has been transferred from a customer’s account in the sales ledger to his account in the Purchase ledger, but no

entry had been made in the Control Account.

Draft the necessary adjustment entries in the Journal and show the adjustments in the Sales Ledger Control Account.

Solution:

In the books of ………

Journal Entries

1986

Dec 31

(1) Rs. 1,768 should be included with sales ledger balances and it will not effect

Control Account

Dr.

Rs.

--

Cr.

Rs.

--

(2) Bad Debts A/c

Dr.

To Sales Ledger Control A/c

(Bad Debts written-off without recording Bad Debts Account and also not

recorded in general ledger, now rectified)

372

372

(3) (i) Discount Received A/c 415

Dr.

To Purchases Ledger Control A/c

(ii) Sales Ledger Control A/c

To Discount Allowed A/c

(Cancellation of discount previously allowed which was wrongly entered in

discount received account, now rectified)

415

415

415

(4) Purchases Ledger Control A/c

Dr.

To Sales Ledger Control A/c

(Transfer of a customer’s balance from sales ledger to his account in the

purchase ledger not recorded, now rectified)

693

693


Sales Ledger Control Account

1986

Jan 1

Dec 31

To Balance b/d

To Discount Allowed A/c

Rs.

53,837

415

1986

Dec 31

By Bad Debts A/c

By Purchase Ledger Control A/c

By Balance c/d

Rs.

372

693

53,187

54,252 54,252

1887

Jan 1

To Balance b/d

53,187

Q.20. Total accounts are employed in the business of Elite & Co. in relation to the Sales Ledger of X and Y. The following are

the material details:

Opening Balances Dr.

Cr.

Sales as per Sales Day Book

Returns as per Returns Day Book

Cash received as per Cash Book

Discount allowed as per cash book

Bad Debts written-off as per journal

Provision for Bad Debts as per journal

Bad Debts, previously written-off now received as per Cash Book

Allowances as per Allowances Book

Bills Receivable as per Bill Book

Bills dishonoured as per Cash Book

Cash Sales

Closing Credit balances

X

Rs.

12,500

300

31,200

3,170

20,050

1,300

3,710

5,000

300

420

1,300

500

2,000

720

Y

Rs.

31,000

--

43,100

2,050

51,200

2,700

4,250

6,00

—

370

--

--

--

210

The transfer journal contains a correcting entry in respect of Rs. 1,200 sales which had been entered in error in x ledger

analysis column in the Sales Day Book instead of in the Y ledger analysis column, although the item had been posted to the

correct ledger account in Y ledger.

Prepare total Accounts in the Nominal Ledger and Debtors Ledger.

Solution:



To Balance b/d


To Sales


To Transfer

To Balanced c/d

X

Rs.

12,500

31,200

500

--

720

Y

Rs.

31,000

43,100

--

1,200

210

By Balance b/d

By Nominal Ledger Adjustment A/c:

By Returns

By Cash

By Discount

By Bad Debts

By Allowances

By Bills Receivable

By Transfer

By Balance c/d

X

Rs.

300

3,170

20,050

1,300

3,710

420

1,300

1,200

13,470

Y

Rs.

--

2,050

51,200

2,700

4,250

370

--

--

14,940

44,920 75,510 44,920 75,510

To Balance b/d 13,470 14,940 By Balance b/d 720 210


Nominal Ledger Adjustment Account

To Balance b/d


To Returns

To Cash

To Discount

To Bad Debts

To Allowances

To Bills Receivable

To Transfer

To Balance c/d

X

Rs.

300

3,170

20,050

1,300

3,710

420

1,300

1,200

13,470

Y

Rs.

--

2,050

51,200

2,700

4,250

370

--

--

14,940

By Balance b/d


By Sales


By Transfer

By Balanced c/d

X

Rs.

12,500

31,200

500

--

720

Y

Rs.

31,000

43,100

--

1,200

210

44,920 75,510 44,920 75,510

To Balance b/d 720 210 By Balance b/d 13,470 14,940

Note: Provision for Bad Debts and Recovery of Bad Debts will not appear in Debtors Ledger since they have no connection with

Debtors Ledger.

Q.21. In order to facilitate the balancing of his books a businessman divides his sales ledger alphabetically into two sections (A –

M and N—Z, respectively), each being Self-Balancing Ledger by means of an adjustment account in the private ledger.

On 1.4.1985, these accounts showed the following balances:

A—M Adjustment A/c

N—Z Adjustment A/c

Dr.

Rs.

65,680

47,860

Cr.

Rs.

2,250

583

The following is an analysis of the transactions affecting the ledger during the period ending 31.3.1986, as extracted

from the books of accounts:

Credit Sales

Return

Cash Received

Cash received in respect of accounts already written-off as bad included in the above

Discount Allowed

Bills of exchange received

Bills of exchange dishonoured

Bad debts written-off

A—M

Rs.

5,15,620

10,216

4,20,500

1,420

5,620

30,500

5,000

4,120

N—Z

Rs.

4,22,315

6,713

3,75,020

590

4,075

9,400

2,000

5,780

During the period Miss Davar, a customer, whose account then showed a debit balance of Rs. 1,250, married Mr.

Shroff and her account was, therefore, transferred in the other ledger. On 31.3.1986 the total credit balances standing in the A—

M ledger amounted to Rs. 6,250 and in the N—Z ledger to Rs. 4,250.

Write up the two adjustment accounts bringing down the balances.

Solution:



1985

Apr 1

1986

Mar 31

To Balance b/d

To General Ledger

Adjustment A/c:

To Sales

To Bad Debts recovery (for

cancellation)


To Transfer

To Balance c/d

A—M

Rs.

65,680

5,15,620

1,420

5,000

--

6,250

N—Z

Rs.

47,860

4,22,315

590

2,000

1,250

4,250

1985

Apr 1

1986

Mar 31

By Balance b/d

By General Ledger

Adjustment A/c:

By Returns

By Cash

By Discounts

BY Bills Receivable

By Bad Debts

By Transfer

By Balance c/d

A—M

Rs.

2,250

10,216

4,20,500

5,620

30,500

4,120

1,250

1,19,514

N—Z

Rs.

583

6,713

3,75,020

4,075

9,400

5,780

--

76,694

5,93,970 4,78,265 5,93,970 4,78,265

1986

Apr 1

To Balance b/d

1,19,514

76,694

1986

Apr 1

By Balance b/d

6,250

4,250

In the A—M Debtors Ledger


1985

Apr 1

1986

Mar 31

To Balance b/d


To Returns

To Cash

To Discounts

To Bills receivable

To Bad Debts

To Transfer

To Balance c/d

Rs.

2,250

10,216

4,20,500

5,620

30,500

4,120

1,250

1,19,514

1985

Jan 1

1986

Mar 31

By Balance b/d


By Sales

By Bad Debts recovery (for

cancellation)


By Balance c/d

Rs.

65,680

5,15,620

1,420

5,000

6,250

5,93,970 5,93,970

1986

Apr 1

To Balance b/d

6,250

1986

Apr 1

By Balance B/d

1,19,514

In the N—Z Debtors Ledger


1985

Apr 1

1986

Mar 31

To Balance b/d


To Returns

To Cash

To Discounts

To Bills Receivable

To Bad Debts

To Balance c/d

Rs.

583

6,713

3,75,020

4,075

9,400

5,780

76,694

1985

Jan 1

1986

Mar 31

By Balance b/d


By Sales

By Bad Debts recovery (for

cancellation)


By Transfer

By Balance c/d

Rs.

47,860

4,22,315

590

2,000

1,250

4,250

4,78,265 4,78,265

1986

Apr 1

To Balance b/d

4,250

1986

Apr 1

By Balance b/d

76,694

Q.22. Rectify the following errors under self-balancing system—

(a) Sales Books was undercast by Rs. 100.

(b) Goods sold to Mr. X for Rs. 1,000 was recorded in the books as Rs. 100.

(c) Goods purchased from Mr. B for Rs. 500 was posted to C’s Account as only Rs. 50.

(d) Debit balance of Rs. 100 in P’s account in sales ledger was set-off against his account in the creditors ledger.

(e) Purchased a Plant for Rs. 4,000 passed through the invoice book.

Solution:

In the books of ………….

Journal Entries

(a) (i) Suspense A/c Dr.

To Sales A/c

(It rectified the Sales A/c)

(ii) Debtors Ledger Adjustment A/c Dr.

(In General Ledger)


(In Debtors Ledger)

(Sales book was undercast)

Dr.

Rs.

100

100

Cr.

Rs.

100

100

(b) (i) Mr. X A/c

Dr.

To Sales A/c

(It rectifies the undercasting)

900

900

900

(ii) Debtors Ledger Adjustment A/c

Dr.

(In General Ledger)


(In Debtors Ledger)

(Undercasting affects the total)

900

(c) (i) Suspense A/c Dr.

C’s A/c Dr.

To B’s A/c

(Since it does not affect the total, 2nd type of entry is not needed. Only C and

B’s accounts are to be corrected)

450

50

500

(d) (i) P (In C.L.A) A/c Dr.

To P (D.L.A) A/c

(It makes the transfer effective)

(ii) Creditors Ledger Adjustment A/c Dr.

(In General Ledger)


(In Creditors Ledger)

(iii) General Ledger Adjustment A/c Dr.

(In Debtors Ledger)

To Debtors Ledger Adjustment A/c

(In General Ledger)

(Transfer from one ledger to another affects both the ledger and, as such, 2nd

type of entries are needed)

100

100

100

100

100

100

(e) (i) Plant A/c Dr.

To Purchase A/c

(Purchase of Plant wrongly debited to Purchase A/c, now rectified)

(ii) Party A/c Dr.

(In Creditors Ledger)

To Party A/c

(In General Ledger)

(It closes the supplier’s account in creditors ledger and response his account in

General Ledger)

(iii) Creditors Ledger Adjustment A/c Dr.

(In General Ledger)


(In creditors ledger)

(It cancels the old entry)

4,000

4,000

4,000

4,000

4,000

4,000

Q 23. The following is the Debtors’ Ledger Adjustment Account which has been prepared in the General Ledger Company as on

31st March 2004:

Debtor’s Ledger Adjustment Account

(In General Ledger)

To Balance b/d

To General Ledger Adjust. A/c:

Sales

Endorsed B/R dishonoured

90,000

5,60,000

8,500

By General Ledger Adjust. A/c:

Collection of Debtors

Discount allowed

Returns Inward

Bad Debt

B/R

Transfer to Creditors Ledger

By Balance c/d

4,86,500

9,000

12,000

2,000

24,000

5,000

1,20,000

6,58,500 6,58,500

Additional Information:

(a) Cash Sales for the year amounted to Rs. 80,000.

(b) Sundry Creditors: Opening Balance Rs. 1,10,000.

Closing Balance Rs. 96,000.

(c) A B/R for Rs. 1,500 was endorsed to a creditor at the end of March, 2003 and returned dishonoured in April, 2003.

(d) Interest Charged by suppliers Rs. 1,200.

(e) Purchase Return Rs. 10,000

(f) Cash purchases during the year amounted to Rs. 45,000.

(g) Bill payable accepted during 2003-2004 amounted to Rs. 30,000 which includes Rs. 10,000 discounted by the creditor

for Rs. 9,500. The bill became dishonoured at maturity, the creditor paying noting charges Rs. 60.

(h) Creditors allowed 10% cash discount for early payment.

(i) Goods are sold at cost plus 25%. There was opening stock of Rs. 50,000 and Closing Stock of Rs. 75,000.

(j) All the endorsed bills have been dishonoured.

You are requested to prepare the Creditors ledger. Adjust. Account in General Ledger as on 31st March, 04.

Solution:

Creditors ledger Adjustment A/c


Cash paid

Discount Received

Purchase Return

Bills Payable

B/R endorsed

Transfer

To Balance c/d

4,26,744

47,416

10,000

30,000

7,000

5,000

96,000

By Balance b/d


Purchases

Interest Charged

Bills payable Dishonour

Noting charges

Endorsed B/R dishonoured

1,10,000

4,92,400

1,200

10,000

60

8,500

6,22,160 6,22,160

Working Notes:

(1) Calculation of Credit Purchases:

Cash Sales 80,000

Credit Sales 5,60,000

6,40,000

Less: Sales Return 12,000

Net Sales 6,28,000

Less: Gross Profit 25% on cost or 20% on sales 1,25,000

Cost of goods sold 5,02,400

Add: Closing Stock 75,000

5,77,400

Less: Opening Stock 50,000

Purchase (Net) 5,27,400

Add: Purchase Returns 10,000

Gross Purchases 5,37,400

Less: Cash Purchases 45,000

Credit Purchases 4,92,400

(2) Calculation of Cash paid to creditors and Discount Received:

Balancing figure of Creditors Ledger Adjustment A/c is Rs. 4,74,160. Out of this 10% is discount and 90% is cash paid

to creditors.

(3) Calculation of B/R Endorsed:

Endorsed B/R dishonoured as per Debtors Ledger Adjustment A/c are Rs. 8,500. Out of this bills for Rs. 1,500 were

endorsed in previous year. Therefore, B/R endorsed during the year will be (8,500 – 1,500) = Rs. 7,000.

Q 24 . The following errors were discovered in the books of National Gas Co. who maintain its books on the self balancing

system:-

(a) A bill of exchange from M/s Shah & Co. for Rs. 1,600 was debited to Allowances Account on dishonor.

(b) Cash received, Rs. 350, from Shah & Co., a customer, was posted to the debit of Shah & Shah as Rs. 530 in the

Creditors Ledger.

(c) A return of goods, Rs. 340, from Mohan & Co., was entered in the Returns Outwards Account. Give journal entries to

rectify the above noted errors.

Solution

Journal of National Gas Co.

Dr. (Rs) Cr. (Rs)

(a) M/s Shah & Co. Dr.

To Allowances Account

1,600

1,600

(For the dishonoured bill debited to Allowances A/c instead of to Shah & Co.)

Sales Ledger Adjustment Account (In General Ledger) Dr.

To General Ledger Adjustment Account (In Sales Ledger)

(Correction of the entry in total or control accounts relating to Shah & Co.)

1,600

1,600

(b) Credit Shah & Co. (In Sold Ledger)

Credit Shah & Shah (In Bought Ledger)

(Cash received from Shah & Co., a customer wrongly posted to the debit of Shah &

Shah, a creditor; error now corrected.*)

340

340

(c) Returns Inward Account Dr.

Returns Outward Account Dr.

To Mohan & Co. (In Sales Ledger)

To Mohan & Co. (In Bought Ledger)

(Correction of the entry by which returns from Mohan & Co. were wrongly treated as returns to

them. Presumably from Returns Outwards Book, Mohan & Co. were debited in the Bought

Ledger.)

General Ledger Adjustment Acount (In Bought Ledger)—Dr.

To Bought Ledger Adjustment Account (In General Ledger)

(Correction resulting from the above relating to the Bought Ledger.)

General Ledger Adjustment Account (In Sold Ledger)----- Dr.

To Sold Ledger Adjustment Account (In General Ledger)

(Correction resulting from the above relating to the Sold Ledger)

340

340

340

340

Sectional Balancing

Q 25. From the following particulars, write up the savings Ledger Control Account in the Ledger of the City Bank Ltd:-

Rs.

Balance (Opening)

Cash deposited by clients

Cheques deposited by clients

Cash withdrawn

Cheques presented through the Clearing House

Charges in respect of outstation cheques

Other charges debited

Interest credited

Cheques deposited by customers returned unpaid

25,13,040

1,96,700

4,37,350

1,37,500

1,53,850

1,200

2,350

5,700

6,800

Solution:

Books of City Bank Ltd.

Saving Ledger Control Account

Rs. Rs.

To Cash

To Charges

To Other Charges

To Cheques dishonoured

To Cheques presented through the clearing

house

To Balance c/d

1,37,500

1,200

2,350

6,800

1,53,850

28,51,090

By Balance b/d

By Cash deposited by clients

By Cheques deposited by clients

By interest

25,13,040

1,96,700

4,37,350

5,700

31,52,790 31,52,790

By Balance b/d 28,51,090

Q 26 . From the following information, prepare a Total Debtors Account as on 31st December, 2003:-

Rs

Debtors on 1st December, 2003

Bills Receivable (received during the month)

Sales

Cash paid

Cash received

Discount allowed

8,965

4,500

36,041

68

30,550

1,319

Returns

Credit Transfers to Bought Ledger


181

87

1,300

The balances extracted from the Sales Ledger on 31st December, 2003 amounted to Rs. 9,800 and the Company’s Trial Balance

on that date showed a difference of Rs. 63. What conclusion would you draw from this difference?

Solution

In General Ledger

Total Debtors Account

2003 Rs. 2003 Rs.

Dec 1

Dec 31

To Balance b/d

To Sales Account

To Cash

To Bills Receivable

(Dishonoured)

8,965

36,041

68

1,300

Dec 31 By Bills Receivable Account

By Cash

By Discount Account

By Sales Returns Account

By Total Creditors A/c (Transfers)

By Balance c/d

4,500

30,550

1,319

181

87

9,737

46,374 46,374

2004

Jan 1

To Balance b/d 9,737

In the trial balance, the balance Rs. 9,737 shown by Total Debtors Account must have been included. This results in a difference

of Rs. 63 suggesting that the total (Rs. 9,800) of the schedule of debtors is correct. Perhaps in Total Debtors Account returns of

Rs. 118 have been recorded as Rs. 181.

Q 27 . Following particulars have been received from the subsidiary books of Anand Bali. Prepare Purchase Ledger Control A/c

and Sales Ledger Control A/c under sectional balancing system:

July 1

July 31

Opening Balance of Creditors

Opening Balance of Debtors

Credit Purchases

Credit Sales

Purchase Return

Sales Return

Paid to Creditors

Discount received

Cash received from Debtors

Discount allowed to Debtors

Bills payable accepted

B/R Received

Bad Debts

B/R dishonoured

B/P dishonoured

Transferred from purchase ledger to Sales Ledger.

4,700

6,050

12,320

12,670

480

761

6,550

244

6,695

368

4,600

6,375

485

860

545

315

Solution:

Purchases Ledger Control A/c

July 31 To Purchase Return

To Cash Paid to creditors


To Bills Payable

To Transfer to Sales Ledger

To Balance c/d

480

6,550

244

4,600

315

5,376

June 1

July 31

By Balance b/d

By Purchases (credit)

By B/P dishonoured

4,700

12,320

545

17,565 17,565

Aug 1 5,376

Sales Ledger Control A/c

July 1

July 31

To Balance b/d

To Sales (Credit)

To B/R dishonoured

6,050

12,670

860

July 31 By Sales Returns

By Cash Received

By Discount allowed

By B/R received

By Bad debts

By Transfer from Purchase

Ledger

By Balance c/d

761

6,695

368

6,375

485

315

4,581

19,680 19,580

Aug 1 4,581

8 self balancing ledger

Documents

creditors ledger

debtors ledger

general ledger selfbalancing

c general ledger

sales ledger respect

separate sales ledger

b purchase ledger

personal accounts of