The process of using sales ledger balance to cancel off purchases ledger balance is

The process of using sales ledger balance to cancel off purchases ledger balance is called set off. Set off is a process where the outstanding balance of two parties is offset against each other. In accounting, set off is commonly used to cancel out the balance in the sales ledger with the balance in the purchases ledger. This is done to simplify the settlement process between two parties and reduce the amount of money that needs to be exchanged. For example, if a customer owes a business money for goods purchased on credit and the same customer has also supplied goods to the business on credit, the two balances can be set off against each other, resulting in a reduced amount owed by one party to the other.