Sales day book & Sales ledger Chapter 14

Recap… When goods are paid for immediately they are described as ‘_________ sales’. We have received the ___________ instantly from them. Therefore we do not need to enter the __________________ in to the sales day book. The sales day _________ is only for credit transactions. When _____________ pay by credit card, this transaction is treated as if it were a cash transaction. Don’t get confused! Most business _________ credit when selling their products to other businesses. In each transaction, the selling business will give the _______________ business a document called an _______________. transaction / Cash / money / customers / book / buying / give / invoice

Making entries in the sales day book From the invoices, the seller enters the transaction details in the sales day book. This book is a list of details relating to each credit sales. It is merely a summary of all the credit sales.

Invoice Sales Ledger A’s a/c Sales X B’s a/c Sales X C’s a/c Sales X Step 1 Step 2 Step 3 Sales Day Book Goods VAT Total ABCABC XXX A+B+C (TOTAL ) General Ledger Sales a/c Credit Sales For month XX VAT a/c SDB:VAT XX Step 4 A+B+C (TOTAL )

Posting credit sales Once the invoices have been entered into the ales day book the next step is to put each invoice into the individual customer’s account in the sales ledger. At the end of each month the totals in the sales book are then posted to the ‘Sales Account’ in the General Ledger. 1.Debit each customer’s a/c in the sales ledger with the total of each individual invoice (the goods go ‘IN’ to their a/c) 2.Credit the sales a/c with the total net sales (the goods go out of the business) 3.Credit the VAT account with the total VAT charged (this is a liability and is owed to the government)

Trade discounts A trade discount is a simple way of calculating sales prices, no double entry for trade discounts should be made. They are different from cash discount because: Trade discounts never show in double entry accounts, nor in the income statement Cash discounts always show in double entry accounts and in the profit & loss account (income statement).

Credit control If debtors are not paying the amount they owe, our business could run short on cash. This could be very bad because we might not be able to pay our creditors. therefore: to ensure this doesn’t become a problem: Each debtor is given a credit maximum, this is the a specific limit on the total amount of money they can owe us at any one time, this will depend on many factors such as the size and risk of the business. Set a date for the payment to be made and stick to it if payment still isn't made, take the appropriate legal action, i.e sue the customer. Keep the customer up dated regularly with how much they owe, and the consequences of not paying.