Financial Accounting Concepts
What are the benefits of self-balancing systems?
A self-balancing system is a special kind of bookkeeping. Some of the common benefits of self-balancing systems are as follows:
- Easy to locate errors: If there is any error in any particular ledger, the related account to that ledger needs only to be checked. Hence, it makes error checking an easy process.
- Division of Work: Under this method, various accounts are maintained in three different ledgers. Hence, accounting work can be divided among various employees.
- Better Internal Control: In the self-balancing system, internal accounting control can be maintained with the help of adjustment accounts maintained in difference ledgers. Hence, changes in mistakes and frauds are minimised to a significant extent.
- Fixing of Responsibility: Different ledgers can be maintained by different employees in this method, hence fixing accountability of employees in case of any fraud or error is easy.
- Information of Debtors and Creditors Balance: Debtors ledgers adjustment account and creditors ledger adjustment account in general ledger contain details of transactions related to debtors and creditors respectively, Therefore, balances of these accounts are equal to the total of debtors and creditors.
- Early Preparation of Final Accounts: From the final trial balance drawn from the general ledger, final accounts can be easily drawn.
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