What is Sectional Balancing System (With Illustrations)

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.

examples of sectional balancing system
examples of sectional balancing system

The sectional balancing system can be explained with some practical examples.

Sectional Balancing System

This is done by inserting two additional accounts in the general ledger.

  1. Total Debtors account / Sales Ledger Adjustment Account.
  2. Total Creditors account or Purchase Ledger Adjustment Account.

Sectional Balancing System Example 1

From the following particulars prepare a total debtors account and appear in the general ledger in the books of Mr. Jonshan brothers.

Debit balance of debtors Accounts as on 1 January 2010 87,200. and credit balance 600 transactions for 6 months and had 30 June 2010.

  1. Total sales – 94000
  2. Cash sales  – 4000
  3. Bill received – 26000
  4. Noting charges paid – 60
  5. Cheques received from debtors – 60000
  6. Cash received from debtors – 48000
  7. Bill receivable dishonored – 6000
  8. Cheque dishonored – 800

Out of the Bill receivable received and included in 26,000 above, bills of 5,000 were endorsed to suppliers. Bad debts written off during the period were 1,000.

The discount allowed for prompt payment was 700. Bad debts are written off in 2008 and are now recovered from debtors amount of 9,00.

The interest debited for the delay in payment was 1,250. On 30 June 2010 provisions for doubtful debts were created for 2,100.

Therefore, David Agencies’ account Appeared in the debtor’s ledger and also in the Creditors’ ledger.

The balance in the Creditors’ ledger was 900 and the same was transferred to the debtors’ ledger. Goods of 2,760 were rejected by the customers and a cash refund of 600 was.

Total Debtors Account

sectional balancing system illustration
sectional balancing system illustration 1

There is some difference in the self-balancing ledger system.

Sectional Balancing System Example 2

The following information is received from the books of a Trader from 1st January 2010 to 31st March 2010.

  1. Total shares amount to 16,000 including the sales of old furniture for 1,200 (Book value 3,500) the total cash sales were 80% less than the total credit sales.
  2. Cash collection debtors amounted to 60% of the aggregate of the opening debtors and the credit sale for the period debtors were allowed a cash discount of 2,600.
  3. Bill receivable drawn during the three months totaled 6,000 of which bills amounting to 3,000 were endorsed in favor of Creditors. But out of these endorsed bill receivables, bills receivables of 600 were Dishonoured for non-payment, as the party becomes insolvent, His state realizing nothing.
  4. Purchases totaled 16,000 of which 10% was for cash.
  5. Cheques received from debtors for 6,000 Dishonoured. A sum of 500 is irrecoverable, bad debts are written off in the earlier I Realised 2,500
  6. Debtors as on 1st January 2010 stood at 40,000.

Thus, Prepare the total debtors account.

Total Debtors Account

practical sectional balancing system illustration
practical sectional balancing system illustration 2

Thus, now we can understand the sectional balancing system with these practical examples.

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