In the sectional balancing system, only a section of the group of ledgers is self-balanced. under the system, the only general ledger is made to balance.
Sectional Balancing System with Examples
This is done by inserting two additional accounts in the general ledger.
- Total Debtors account / Debtors control account or Sales Ledger Adjustment Account.
- Total Creditors account or Creditors control account or Purchase Ledger Adjustment Account.
Sectional Balancing System Explanation with Examples and Advantages
These Accounts are posted in totals, Whereas the individual Accounts of Customers and Suppliers are posted with their relative transactions in sales ledger and purchase ledger respectively. also, Read Types of Financial Statements For Reporting.
Generally, These total accounts are used to check the correctness of the posting of the individual accounts of the two ledgers.
Thus, the balance of total debtors accounts on any date should always be equal to the total of the individual balance of customers accounts for the sales ledger on the date.
- Self Balancing Ledger System: Definition, Examples, Diagram
- Sectional Balancing System Practical Examples (Explained)
Similarly, The balance of total Debtors Account should always be Equal to the total of the individual balances of suppliers’ accounts of the Purchase Ledger.
So, if this is so the sales and purchase ledgers can be taken is correct.
Thus, in this system, the trial balance is prepared from the General ledger only because double entry is complete in this Ledger.
Total Debtors account / Sales ledger Adjustment Account
Total debtors account and total creditors account are prepared with the help of journals under the Sectional Balancing System some additional columns are down in journals(subsidiary books). So, That the analysis of each entry Pertaining to the specific ledger is also given in the analysis Column.
Thus, under sectional balancing system the Performa/Template of Total Debtors Account and journals or subsidiary books will be as follows:
The Following Items will not appear in the total Debtors account:
- Cash sales.
- bad debts recovered.
- Provision for discount on debtors.
- bill Receivable with the bank.
- provision for bad and doubtful Debt.
- Bill Receivable discounted with the bank.
- Bill receivable endorsed by creditors.
- The credit sale of assets.
- Bills receivable encashed on maturity.
Total Creditors Account or Purchase Ledger Adjustment Account
The following items will not appear in total creditors account:
- Cash purchases.
- provision for discount on creditors.
- Bill payable paid.
- Credit purchase of assets.
- Bill payable withdrawal before the due date of the rebate.
Checking the Accuracy of Posting in Ledger
Generally, if the trial balance of general ledger will Tally and the balance of total Debtors/Creditors account will not Tally with the total of the individual balances of customers or suppliers account of the sales or purchase ledger.
Thus, it means mistakes have been committed to sales and purchase ledgers. If the balances of total debtors account and total creditors account tally with the total of the individual balance of customers and suppliers accounts of the sales ledger and purchase ledger, It shows mathematically accuracy in sales ledger and purchase ledger.
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