What is Self Balancing and Sectional Balancing System?

In Big businesses, one general is not sufficient to record the transactions. If the trial balance of such a business does not agree. The self-balancing and sectional balancing system books can easily be checked and errors can be located and rectified because the number of accounts in the ledger is less.

self balancing and sectional balancing system
self-balancing and sectional balancing system

When business growth and a large number of transactions take place.

Self-Balancing and Sectional Balancing System – Explained

In a large business, the maximum increases take place in trade debtors and trade creditors as the accounts of debtors and creditors are separated from other accounts.

So, the location of errors by checking each and every account will become very easy. and will save time in a large business the Sectional and Self-balancing ledgers are subdivided into the following ledgers:

  1. Sales ledger or debtors ledger.
  2. Purchase ledger or creditors ledger.
  3. General ledger.

1. Sales Ledger or Debtors ledger

Sales Ledger contains the accounts of trade debtors to whom goods have been sold on credit, with which the firm deals.

2. Purchase Ledger or Creditors ledger

The Purchase ledger contains the accounts of trade creditors from whom goods have been purchased on credit, in which the forms deal.

3. General Ledger

The general ledger contains all Real accounts, Nominal accounts, and Personal accounts except those of trade debtors and creditors. you can also check examples of the General ledger.

Therefore, the trial balance will be prepared by abstracting balances from all three ledgers.

So a trial balance prepared from any single ledger will not balanced because in general ledger accounts of debtors and creditors are not included. 

If the trial balance is taken from the debtor’s ledger. It has only debit balances and there is no credit balance.

In the same way, if the trial balance is taken from the creditor’s ledger, it is only credit balances and there is no Debit balance.

Therefore, if any mistake is committed in Ledger posting this system neither indicated the nature of the mistake know it enabled one to determine which ledger is affected.

So, finding out the error and the necessity of the scrutiny of all three ledgers.

Thus, it is desirable to adopt a system by means of which is ledger can be balanced independently of the other ledgers.

So, errors are localized and delay in balancing(Sectional and Self-balancing ledgers) is minimized. To achieve this two methods are used:

  1. Sectional balancing system
  2. Self-balancing system

These types of books’ self-balancing and sectional balancing systems are helpful for managing the accountings for big empires.

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