1. Chapter 14 Sales day book and sales ledger

2. Learning objectives
After you have studied this chapter, you should be able to:
Distinguish between a cash sale and a credit sale and between the way they are recorded in the accounting books
Explain why, when credit card payments are received at the time of sale, details of the customer are not recorded even though a debtor is created at the same time

3. Learning objectives (Continued)
Draw up a sales invoice
Explain why multiple copies are often made of each sales invoice
Make the appropriate entries relating to credit sales in a sales day book
Make the correct postings from the sales day book to the sales ledger and general ledger

4. Learning objectives (Continued)
Explain how trade discounts differ from cash discounts, both in nature and in the way they are treated in the accounting books
Describe measures that may be taken to exercise credit control over debtors

5. Cash sales
When goods are paid for by cash, cheque or immediate transfer, they are described as ‘cash sales’.
For accounting purposes, we do not need to know the name and address of the customer and there is no entry made in the sales day book.

6. Credit card payments
When someone pays by credit card, we treat the customer as though they are a cash customer and do not note their name or address.
However, a debtor does exist – the credit card company – and we do set-up a debtor’s account.

7. Credit sales The majority of businesses will make mostly credit sales.
For each credit sale, an invoice is issued, giving full details of the sale, and this is used to request payment from the customer.
The business uses the invoice as a record of the sale and enters the details in the sales day book, including date, customer name, invoice number and invoice amount.

8. An example of an invoice

9. An example of the sales day book

10. Posting credit sales From the sales day book:
All credit sales are posted individually to the debit side of each customer’s account in the sales ledger.
The total of the credit sales is posted to the credit of the sales account in the general ledger.

11. Posting credit sales (Continued)

12. Activity
Post the entries in the sales day book to the customer accounts in the sales ledger and the sales account in the general ledger.

13. Activity (Continued)

14. Trade discounts
Businesses often offer a trade discount to certain customers.
The trade discount is a percentage figure, and will depend on the amount the customer purchases.
Trade discount is shown on an invoice but never ever appears in the double-entry bookkeeping (unlike cash discounts).

15. An invoice with trade discount

16. How the invoice will be recorded

17. Credit control
Any business should check that debtors are paying their accounts on time.
If cash is not received from debtors promptly, it can cause cash shortages for the business.
No business can survive cash shortages, no matter how profitable they are.

18. Credit control procedures
Set a credit limit for each debtor, dependent on the debtor’s circumstances and stick to it.
When a payment is due, check if the money has been received, and if it has not, consider refusal to supply goods until payment is received.
Consider taking legal action if a payment is not forthcoming.
Make sure a customer is aware of what will happen if amounts due are not paid.

19. Learning outcomes You should have now learnt:
That ‘sales day book’ and ‘sales journal’ are different names for the same book
That cash sales are not entered in the sales day book
That when credit card payments are received at the time of sale, details of the customer are not recorded even though a debtor is created at the same time

20. Learning outcomes (Continued)
That the sales day book (or sales journal) contains information relation to each credit sale made in each period
That the sales day book is used for posting credit sales to the sales ledger
That the total of the sales day book for the period is posted to the credit of the sales account in the general ledger

21. Learning outcomes (Continued)
How to make the appropriate entries relating to credit sales in a sales day book and make the correct postings from it to the sales ledger and general ledger
How to prepare a sales invoice
Why multiple copies are often made of each sales invoice

22. Learning outcomes (Continued)
That no entry is made for trade discounts in the double entry accounts
That all businesses should operate a sound system of credit control over their debtors
Some measures that may be taken to exercise credit control over debtors