The document discusses self-balancing ledgers, which are ledgers maintained separately for debtors, creditors, and general accounts. This allows for smooth record keeping and division of work in large businesses with many accounts. Specifically, it describes how a sales ledger tracks debtor accounts, a purchase ledger tracks creditor accounts, and a general ledger contains all other accounts. Adjustment accounts are used to balance each ledger and ensure the accuracy of postings between ledgers. Maintaining self-balancing ledgers provides advantages like easier error detection, verification of individual ledgers, and strengthening of internal controls.

1. Self-balancing
ledger

2. Ledger
A ledger is the principal book for recording and
totalling economic transactions measured in
terms of a monetary unit of account by account
type, with debits and credits in separate columns
and a beginning monetary balance and ending
monetary balance for each account.

3. 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.

4. Self-balancing
When a large number of debtors and
creditors are there in a business, it is
advantageous to maintain a separate
ledgers for smooth handling of the record-
keeping & function as well as to facilitate
division of work.

5. Self-balancing system
Generally, three self- balancing ledgers are
maintained in a large business, namely
• Sales Ledger or Debtors Ledger : 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.

6. • Purchase Ledger or Creditors Ledger: 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.

7. • 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.

8. In the debtor ledger, a general ledger adjustment
account is maintained to make it self-balancing.
In the creditor ledger also, a general ledger
adjustment account is maintained to make it self-
balancing. Lastly, in the general ledger, a
creditor ledger adjustment account and a debtor
ledger adjustment account are maintained which
give summary of the creditor ledger and debtor
ledger respectively and make the general ledger
self-balancing.

9. Advantages of self-balancing ledgers
• It is easy to locate mistake if ledgers are kept on
self-balancing system.
• It is possible to ascertain the accuracy of posting
of each ledger independently.
• 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.

10. • It is instrumental in strengthening the internal
check.
• 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.

11. By
Keerthana
BBM II year