How to record credit transactions in books?
You might have a manual method to see how much your customers owe you. You must have a filing system to file a copy of your sales invoices and send the original to the customer. Then transfer to another file once you have received payments for the invoices. Fair enough, you control your receipts that way, but an accounting system needs to be implemented if the business grows; for that, you need a proper sales ledger.
By maintaining a sales ledger and sales daybook, you will have all the details of all your customers and the amount each one owes you. Then again, know the total sales done for a specified period.
How do I know that I have done it correctly?
The answer is a control account used to monitor all the entries made in the sales ledger. The total sales receipts in the cashbook column and the total sales from the sales day book are transferred to the control accounts.
Credit sales
| Date | Sales day book | ||
| Inv.no | |||
| April | John | 1 | 500 |
| Peter | 2 | 200 | |
| William | 3 | 100 | |
| Peter | 4 | 400 | |
| 1200 |
| Date | Sales Ledger account | ||
| April | Debit | Credit | |
| Apr-30 | Total inv no 1,2 & 3 | 1200 | |
| Cash book | 1100 | ||
| Balnce c/f | 100 |
| Cash book | ||
| April | ||
| Invoice no1 | 500 | |
| Invoice no 4 | 400 | |
| Invoice no 3 | 100 | |
| Invoice no 2 | 100 | |
| 1100 |
Large businesses made several copies of invoices, sent to their customers, and one sent to the accounts department to prepare the sales daybook. The details in the invoice, like the date, name of the customer, and the net amount entered in the sales daybook. If a discount is allowable, deducted there, the net amount is posted to the debit of the customer’s ledger account. At the end of the month, the total sales are credited to the sales account in the general ledger, taken as the income in the profit and loss account.
In any system, the sales daybook is used only for credit, customers, and gross cash; sales are directly credited to the sales account in the general ledger. Monies received from the sale of assets or fittings are not added to total sales and are treated separately in the accounting of that type of sale.
How to record credit transactions in books?
More columns in daybooks are added to suit the type of business if there is more than one department for sales. It is essential to have different columns to enter transactions from various departments. Therefore, it will show the revenue from each department separately. That helps to prepare the separate trading profit and loss accounts with the appropriate contributions of the stocks to each department. Then it becomes easy to compare the profits to find which department makes the best profit. Thereby making it easy to calculate the outstanding debtor’s amounts as well.
When the credit customer returns the goods, the sales figure is reduced, and the debtor will not owe that money to the supplier. The bookkeeping procedure will be to minimize debit sales and credit accounts receivable account in the general ledger.