Sales day book Date 1.2.XX. 5.2.XX. Totals Details M Hatter W Rabbit Folio SL SL Gross 120.00 240.00 360.00 VAT 20.00 40.00 60.00 Net 100.00 200.00 300.00 Let’s decide which general ledger accounts we are using here and which classes of accounts we are dealing with? Gross total sales are recorded in the sales ledger control account. This is an ASSET – money owed to the business which is expected to be paid and we’re increasing it, ask ALICE? It’s a DEBIT entry. DR General Ledger – Sales Ledger Control Account CR Date Details 28.2.XX. SDB £ Date Details £ 360.00 VAT total is recorded in the VAT account. Its money we’ve collected on behalf of the HMRC and we will have an obligation to pay it on to them. Since we owe it to them, this is considered a LIABILITY. We’re increasing the liability so ask ALICE? It’s a CREDIT entry in the VAT account. DR Account Date General Ledger – VAT CR Details £ Date Details 28.2.XX. SDB £ 60.00 Net total – this is SALES INCOME which we’re increasing therefore, according to ALICE, it’s a CREDIT entry in the sales account. DR Account Date General Ledger – Sales CR Details £ Date 28.2.XX. SDB Details £ 300.00 What about the customers’ individual accounts in the sales ledger? We need to record entries here to keep track of our debtors. It must be taken into account that each individual customer’s account is held in the sales ledger which is a subsidiary ledger outside of the general ledger accounts which we’ve looked at above. The sales ledger holds customers, customers are debtors, debtors are ASSETS. We are increasing the debt, so increasing the asset, and therefore, according to ALICE, it’s a DEBIT entry in the customer’s account. DR Hatter Date Sales Ledger – M CR Details 1.2.XX. SDB 5.2.XX. SDB Date Details £ Details £ 120.00 DR Rabbit Date £ Sales Ledger – W CR Details £ Date 240.00 Another name for a control account is a ‘totals’ account. It makes sense that the sales ledger control account reflects the total of all the different customers’ accounts in the subsidiary sales ledger. This way, all the individual customers’ accounts are represented by a single entry in the general ledger – the ‘sales ledger control account’. This single amount reflects the total debtors, receivables or trade receivables. If we didn’t use a control account you could end up with hundreds or even thousands of individual customer accounts clogging up the general ledger. Note: in the example above, the two totals add up to £360.00 – which is the same as the sales ledger control account balance in the general ledger and provides an opportunity to reconcile our transactions. FILL IN THE MISSING FIGURES A) ASSETS CAPITAL LIABILITY B) 3500 ? 12500 C) ? 44400 19300 D) 67300 55000 ?
