Quick answer: In self-balancing ledgers, errors that affect the total of a subsidiary book need two entries: a rectifying entry and an adjustment entry between the adjustment accounts. Errors inside one ledger that do not affect any total need only a rectifying entry. Errors where an amount went to the wrong ledger need a transfer entry plus adjustment entries.
| Type of error | Entries needed |
|---|---|
| Error in book totals | Rectifying entry + adjustment entry |
| Error within one ledger | Rectifying entry only |
| Error between ledgers | Transfer entry + adjustment entries |
Under the self-balancing (sectional) system, the debtors ledger and the creditors ledger each carry a General Ledger Adjustment Account, and the general ledger carries a Debtors Ledger Adjustment Account and a Creditors Ledger Adjustment Account. Because each ledger balances on its own, the first step in rectifying an error is to decide what kind of error it is. There are three kinds, and each needs a different number of entries.
How to Rectify the Errors Affecting the Self-Balancing Ledgers
1. Errors that affect the total of a subsidiary book
These are mistakes in totalling the sales book, purchases book, returns inward or outward book, bills receivable or bills payable book, or the debtor and creditor columns of the cash book. Because these totals are also posted to the adjustment accounts, two entries are needed: the usual rectifying entry and a self-balancing (adjustment) entry.
Example: the sales book is undercast by ₹1,000. Individual debtors were posted correctly, but the Sales Account and the adjustment accounts are ₹1,000 short.
- Rectifying entry: Suspense A/c Dr ₹1,000 To Sales A/c ₹1,000
- Adjustment entry: Debtors Ledger Adjustment A/c (in general ledger) Dr ₹1,000 To General Ledger Adjustment A/c (in debtors ledger) ₹1,000
2. Errors within one ledger that do not affect any total
If an amount is posted to the wrong personal account inside the same ledger, totals are unaffected, so only the usual rectifying entry is needed. Example: ₹500 received from Ram was credited to Shyam’s account in the debtors ledger. Entry: Shyam A/c Dr ₹500 To Ram A/c ₹500. No adjustment entry is required.
3. Errors involving a transfer from one ledger to another
If an amount is posted to an account in the wrong ledger, the balances of two ledgers are affected, so a transfer entry plus adjustment entries are needed. Example: ₹600 received from Mohan, a customer, was credited to Mohan’s account in the creditors ledger.
- Transfer entry: Mohan (creditors ledger) Dr ₹600 To Mohan (debtors ledger) ₹600
- Adjustment entry: Creditors Ledger Adjustment A/c Dr ₹600 To Debtors Ledger Adjustment A/c ₹600 (general ledger), with matching entries in the General Ledger Adjustment Accounts of the two subsidiary ledgers
Summary: errors in book totals need a rectifying entry plus an adjustment entry; errors inside one ledger need only a rectifying entry; errors between ledgers need a transfer entry plus adjustment entries. Related reading: advantages of the sectional and self-balancing system and the self-balancing ledger system guide.