2 Learning OutcomesCompare the detailed entries in the sales ledger control accountsAccounting for bad debts in the Sales ledger control accountComplete a Sales ledger control account reconciliationUnderstand the use of an aged debtor analysis.
4 Sales ledger Control Account Sales ledger control account (SLCA)In Groups Identify the items that can be found on either side of the Sales Ledger Control A/CSales ledger Control AccountBal B/d XCredit Sales XDishonoured Cheques XXSales returns XPayments received XDiscount Allowed XBad Debts Written off XBal C/D XX
5 Sales ledger control account (SLCA) Missing itemsMissing itemsSales ledger control account (SLCA)Bal b/d – A debit balance as credit customers owe moneyCredit Sales – The total figure that is posted from the invoice column in the SDBDishonoured Cheques – If a bank returns a cheque from a customer the original entry must be reversed by debiting the control account.Sales Returns – This is the figure from the credit note column in the SDBPayments received – This is the total figure from the sales ledger column from the CRBDiscounts Allowed – This is the figure from the discounts allowed in the CRB.Bal c/d – The closing balance on the account is carried down from the credit side
6 Bad DebtsWhen a sale is made to a credit customer, it is assumed that the customer will eventually pay the amount due.However it can occasionally happen that a customer will not pay the amount owing. This could be because they have now become bankrupt, or have simply disappeared.This is known as a BAD DEBT or also known as IRRECOVERABLE DEBT
7 Writing off a bad debtCan you work out what would be the double entry for the following bad debt expense?Bad Debt £100Vat on Bad Debt £20
8 Accounting For Bad Debts Bad debts must be removed from the accounting records as it is no longer a valid debtor.The double entry is as follows:DR Bad Debts (an expense account) with the Net amountDR VAT control account with the VAT elementCR Sales Ledger Control Account with the invoice total
9 Sales Ledger Control account Reconciliation The SLCA figure will appear in the trial balance as the Debtors figure so it is important that this is accurate.If all entries are correctly carried out then the total of all the balances on the sales ledgers should equal the balance on the control accountIf the totals do not agree the discrepancies need to be identified, and corrected
10 What type of discrepancies may occur? Can you identify the types of errors that may happen either in the SLCA or Sales Ledger accounts?
11 Errors affecting the control account The SDB may have been under cast or over cast, so the incorrect total is posted to the control accountPostings have been made to the wrong side of the control accountThe discounts allowed recorded in the cash book may have been incorrectly postedA bad debt may not have been recorded in the general ledger although it was written off in the sales ledger
12 Errors affecting the Sales Ledger balances An entry from the SDB is posted to the wrong account in the sales ledgerEntries are posted to the wrong side of the Sales ledger accountAn entry may be posted as the wrong amount to the sales ledger accountA balance on an account in the sales ledger may be included in the list of balances as the wrong amount or the wrong type of balance e.g. debit instead of credit
13 Preparing the Reconciliation Step 1:Sales Ledger Control AccountThe total list of debtors equals to £13,777, giving a difference of £605 to be investigatedBalance b/d ,382
14 Preparing the Reconciliation Step 2 - Note the errors and omissions madeStep 3 – Adjust SLCA for any of the errors that you will identify that only affect the SLCAStep 4 – Adjust the total of the list of balances from the sales ledgers by adding or deducting the errors that affect this total
15 The following errors have been identified The total column on a page of the cash book (Debit side) has been overcast by £100 and has been posted to the SLCAThe total of the Sales Day book had been posted as £3,675 instead of £3,765An irrecoverable debt of £240 has been written off in the individual customer account but not the main ledgerIn invoice to Weller enterprise for £478 had been entered into the account of Dagwell enterprisesA cash receipt fro B Berry Ltd has been entered into the Sales Ledger as £256 instead of £265A balance of £604 on one customers account has been omitted from the list of balancesA credit balance of £20 on a customer account had been included in the list of sales ledger balances as a debit balance
16 Sales Ledger Control Account Correcting the SLCASales Ledger Control AccountBalance b/d ,382Bad debts (c)Balance c/d ,33214,572Bank (a)Sales (b)14,572Balance b/d ,332
17 Step 4 adjust list of balances in Sales Ledger Original total ,777Less: additional cash receipts ( e ) (9)Add: Balance omitted ( f )Less: credit balance includedAs a debit balance ( g ) (40)14,332The amended total of the list of balances now agrees to the amended sales ledger control account. Of course the individual accounts will also need updating
18 Aged Debtor AnalysisAll businesses need cash in order to survive and so they are keen to monitor their debtorsThe business can easily tell from the sales ledger how much is on the balance of the different accounts, but these balances do not show how ‘old’ the debt isA schedule is produced showing how long a balance has remained unpaid
20 Aged Debtor AnalysisThe part of each balance that is analysed as current are invoices that have been sent out in the last 30 days so are not yet due for paymentAll other analysis columns represent invoices that are overdue in this case being two, three or more than three months old
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