Concept:When the same person appears on both the sales ledger and the purchases ledger, their mutual balances can be offset against each other.
Explanation:A sales ledger contains amounts owed by customers to the business.
A purchases ledger contains amounts the business owes to suppliers.
If a customer is also a supplier, the business may owe that person money in the purchases ledger and also be owed money by them in the sales ledger.
Instead of making two separate payments, the business cancels the smaller balance against the larger one.
This process of using one ledger balance to cancel off the other ledger balance is known as “set off”.
For example, if a customer owes ₦5,000 and the business owes the same customer ₦3,000, then ₦3,000 is set off and only ₦2,000 is payable.
Balancing simply finds the difference in an account.
Reconciliation compares two sets of records to ensure they agree.
Cancelling is a general term, but the exact accounting term for this mutual settlement is set off.
Answer:B. Set off