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Unit 8 Paper 1:Accounting CA SK Chhabra
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
An Intro.
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)
In the General Ledger, Two Accounts are prepared These ledger may be called by different names
Bought Ledger Sold Ledger
} Debtor Ledger Adjustment A/c (simply debtors account) Or Sales Ledger Adjustment A/c Or Sold Ledger Adjustment A/c (In reality it is similar to total debtors account)
} 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)
} Adjustment account are also known as control
accounts. For eg. ◦ Debtors Ledger Adjustment Account or ◦ Debtor’s Ledger control account means the same thing
In Debtors Ledger, following one account is prepared } General Ledger Adjustment Account (reverse to total debtors account)
In Creditors Ledger, following one account is
prepared } General Ledger Adjustment Account (reverse to
total creditors account)
} To prove the accuracy of the Sales Ledger we maintain a Total Debtor account in the General Ledger } Where accounts of Individual customer would be
maintained in the sales ledger, ◦ In General Ledger the Total Debtors Account would be
posted by the total of various transaction - Total Credit Sales, Cash Received, Total Discount Allowed etc.
} Balance in the Total Debtors Account ◦ Should be equal to the Total of Balance shown by the
Accounts of Individual Customers
• 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
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
Particulars Rs Particulars Rs
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
Particulars Rs Particulars Rs
To balance b/d
Cash(Paid)
To General Ledger Adjustment A/c
Bank(Issued)
B/P
B/R(Endorsed)
Purchase Returns
Discount Received
Rebate/Allowance
To balance c/d
By balance b/d
Credit Purchases
By General Ledger Adjustment A/c
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
Particulars Rs Particulars Rs
To balance b/d
Credit Purchases
To Creditor Ledger Adjustment A/c
Endorsed B/R Dishonored
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
} Transfer from Debtors Ledger to Creditors Ledger or from Creditors to Debtors Ledger ◦ Amount is reduced from Debtors and Creditors Balance
} If in journal entry Debtors or Creditor’s Account is Debited or Credited only then Debtor Ledger Adjustment or Creditors Ledger Adjustment Account are effected, otherwise it does not effect these account
} Provisions for Doubtful Debts, Provision for Discount on Debtors, Bad Debt Recovered, Cash Sales & Purchase ◦ Do not affect the Debtors Account
Comprehensive Problem May 1999
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
Particulars Rs Particulars Rs
To balance b/d
Credit sales
To General Ledger Adjustment A/c
B/R(Dishonored)
Sundry Charges
Cash Received
By General Ledger Adjustment A/c
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 1,60,100
Comprehensive Problem May 2000
Make the Debtors Ledger Adjustment Account in the General 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 than the total Credit sales
} Cash collections 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 Rs20,000
} Bills receivable drawn during the three months totalled 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 were dishonoured for non-payment as the party became insolvent his estate realized nothing } 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 } Sundry debtors as on 1.1.2012 stood at Rs.50000
Particulars Rs Particulars Rs
To balance b/d
Credit sales[100/120*(180000-4800)]
To General Ledger Adjustment A/c
Bank(Cheques Dishonored)
B/R
Creditors
Cash Received
By General Ledger Adjustment A/c
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
Comprehensive Problem May 2002
Prepare General Ledger Adjustment A/c in the Debtor’s and Creditor’s Ledger Balance 1.04.2011 Dr Cr
} Debtor’s Ledger 47,200 240 } Creditor’s 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
} 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 debtor’s Ledger to Creditor’s Ledger 1,100 } Transfer from Creditors Ledger to debtor’s Ledger 1,900 } Balance on 31.3.12 } Debtors’ Ledger (Cr.) 380 } Creditors Ledger (Dr.) 420
Particulars Rs Particulars Rs
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 Ledger To Creditor Ledger(1900+1100)
3000
1,62,080 1,62,080
Particulars Rs Particulars Rs
To balance b/d
Credit Purchases
To Creditor Ledger Adjustment A/c
Endorsed B/R Dishonored
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 94,720
Comprehensive Problem May 2003
} 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
Particulars Rs Particulars Rs
To balance b/d
Credit sales
To General Ledger Adjustment A/c
B/R(Dishonored)
Cash Paid to customer
To balance c/d
By balance b/d
Cash Received
By General Ledger Adjustment A/c
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
Comprehensive Problem Nov 2008
} Prepare the necessary adjustment accounts as they would appear in the General Ledger of 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.
Particulars Rs Particulars Rs
To balance b/d
Credit sales
To General Ledger Adjustment A/c
By balance b/d
Cash Received
By General Ledger Adjustment A/c
B/R(Drawn)
Discount Allowed 1500+500
Bad debts
By balance c/d(60000-discount)
49500
40000
Nil
20000
2000
5000
59500
3000
89500 89500
To be noted
} 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
} 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
} If in journal entry Debtors or creditor’s account is
debited or credited ◦ Only then Debtor Ledger adjustment or creditors ledger
adjustment account are effected, otherwise it does not effect these account
Entries in Books of Drawer & Drawee
S. no.
Particulars B/R is retained
B/R is Discounted
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)
B’s A/c Dr. To SalesA/c
Same Same Same Purchase Dr To A’s a/c
2 Acceptance of a B/E by the Drawee
B/R A/c Dr. To B’s A/c
Same
Same same A’s 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
C’s A/c Dr To B/R A/c
Bill Sent for Collection A/c Dr. To B/R A/c
No Entry
4 B/E honoured on due 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
B’s A/c Dr. To B/R A/c
B’s A/c Dr. To Bank A/c
B’s A/c Dr. To C’s A/c
B’s A/c Dr. To Bills sent for Collection
B/P A/c Dr. To A’s A/c
S. no.
Particulars B/R is retained
B/R is Discounted
B/R is endorsed
B/R is sent to bank for collection
BOOKS OF DRAWEE
(ii) If noting charges are paid
B’s A/c Dr. [B/R + N.C.] To B/R To Cash A/c [ N.C.]
B’S A/C Dr. [ B/R +N.C.] To Bank A/c [B/R + N.C.]
B’S A/c Dr. [B/R + N.C.] To C’s A/c
B’s A/c Dr. [B/R + N.C] To Bills Sent for collection A/c(B/R) To Bank
B/P A/c Dr. Noting Charge A/c Dr. To A’s A/c
S. no.
Particulars B/R is retained
B/R is Discounted
B/R is endorsed
B/R is sent to bank for collection
BOOKS OF DRAWEE
6 Retirement of a B/E at a rebate by Drawee
Cash A/c Dr. Rebate A/c Dr. To B/R A/c
No entry No Entry Bank A/c Dr. Rebate A/c Dr. To B/R A/c
B/P A/c Dr. To Cash A/c To Rebate A/c
7 Renewal of a B/E(i) Cancellation of old B/E
B’s A/c Dr. To B/R A/c
B’s A/c Dr. To Bank A/c
B’s A/c Dr. To C’s A/c
B’s A/c Dr. To Bill sent for collection A/c
B/P A/c Dr. To A’s A/c
no. Particulars B/R is retained
B/R is Discounted
B/R is endorsed
B/R is sent to bank for collection
BOOKS OF DRAWEE
(ii) Interest Charged by Drawer
B’s A/c Dr. To Interest A/c
B’s A/c Dr. To Interest A/c
B’s A/c Dr. To Interest A/c
B’s A/c Dr. To Interest A/c
Interest A/c Dr. To A’s A/c
(iii) Part Payment by Drawee
Cash A/c Dr. To B’s A/c
Cash A/c Dr. To B’s A/c
Cash A/c Dr. To B’s A/c
Cash A/c Dr. To B’s A/c
A’s A/c Dr. To cash A/c
no. Particulars B/R is retained
B/R is Discounted
B/R is endorsed
B/R is sent to bank for collection
BOOKS OF DRAWEE
(iv)Acceptance of a new B/E by drawee
B/R A/c Dr. To B’s A/c
B/R A/c To B’s A/c
B/R A/c Dr. To B’s A/c
B/R A/c Dr. To B’s A/c
A’s A/c Dr. To B/p A/c
8 Insolvency of the Drawee (i) Dishonour of B/E
B’S A/c Dr. To B/R A/c
B’s A/c Dr. To Bank A/c
B’s A/c Dr. To C’s A/c
B’s A/c Dr. To Bill sent for collection A/c
B/P A/c Dr. To A’s A/c
no. Particulars B/R is retained
B/R is Discounted
B/R is endorsed
B/R is sent to bank for collection
BOOKS OF DRAWEE
(ii) Receipt of amount from the Drawee as Final dividend
Cash Dr. Bad Debts A/c Dr. To B’s A/c
Cash A/c Dr. Bad Debts A/c Dr. To B’s A/c
Cash A/c Dr. Bad Debts A/c Dr. To B’s A/c
Cash A/c Dr. Bad Debts A/c Dr. To B’s A/c
A’s A/c Dr. To Cash A/c To P/L A/c Or deficiency A/c
no. Particulars B/R is retained
B/R is Discounted
B/R is endorsed
B/R is sent to bank for collection
BOOKS OF DRAWEE
} 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.