dbs1034 biz trx week 7 sales day book and ledger
DESCRIPTION
Sales day book, Credit ControlTRANSCRIPT
Sales day book and Sales day book and Sales ledgerSales ledger
Sales day book and Sales day book and Sales ledgerSales ledger
DBS3024 BUSINESS TRANSACTIONDBS3024 BUSINESS TRANSACTION
byStephen Ong
Visiting Fellow, Birmingham City University Business School
Visiting Professor, Shenzhen University
Today’s Overview Today’s Overview
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Learning objectivesLearning objectives To distinguish between a cash sale and a To distinguish between a cash sale and a
credit sale and between the way they are credit sale and between the way they are recorded in the accounting booksrecorded in the accounting books
To explain why, when credit card To explain why, when credit card payments are received at the time of sale, payments are received at the time of sale, details of the customer are not recorded details of the customer are not recorded even though a debtor is created at the even though a debtor is created at the same timesame time
Draw up a sales invoiceDraw up a sales invoice Explain why multiple copies are often Explain why multiple copies are often
made of each sales invoicemade of each sales invoice
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Learning objectives (Continued)Learning objectives (Continued) Make the appropriate entries relating to Make the appropriate entries relating to
credit sales in a sales day bookcredit sales in a sales day book Make the correct postings from the sales Make the correct postings from the sales
day book to the sales ledger and general day book to the sales ledger and general ledgerledger
Explain how trade discounts differ from Explain how trade discounts differ from cash discounts, both in nature and in the cash discounts, both in nature and in the way they are treated in the accounting way they are treated in the accounting booksbooks
Describe measures that may be taken to Describe measures that may be taken to exercise credit control over debtorsexercise credit control over debtors
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11Cash Sales Cash Sales
and and Cash BookCash Book
Diagram of accounting booksDiagram of accounting books
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Cash salesCash sales When goods are paid for When goods are paid for by by
cash, cheque or immediate cash, cheque or immediate transfertransfer, they are described as , they are described as ‘cash sales’.‘cash sales’.
For accounting purposes, we do For accounting purposes, we do not need to know the name and not need to know the name and address of the customer and address of the customer and there is there is no entry made in the no entry made in the sales day booksales day book..
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Credit card paymentsCredit card payments When someone pays by credit When someone pays by credit
card, we treat the card, we treat the customer as customer as though they are a cash though they are a cash customercustomer and do not note their and do not note their name or address.name or address.
However, a debtor does exist – However, a debtor does exist – the the credit card company credit card company – and – and we do we do set-up a debtor’s set-up a debtor’s account.account.
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Bank cash bookBank cash book Nowadays, many businesses have Nowadays, many businesses have only a small only a small
number of sales that are paid for with cashnumber of sales that are paid for with cash and and credit cards, cheques, and direct transfers are credit cards, cheques, and direct transfers are used. used.
In this case, a business may choose to run a In this case, a business may choose to run a petty cash book and a bank cash book, petty cash book and a bank cash book, meaning that all meaning that all cash payments are entered cash payments are entered into the petty cash book into the petty cash book and the bank cash and the bank cash book contains the book contains the bank and discount columns bank and discount columns only.only.
A bank cash book has an extra column to detail A bank cash book has an extra column to detail what has been banked.what has been banked.
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An example of a An example of a CASH DiscountCASH Discount
CASH CASH DISCOUNDISCOUN
TT
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Bank cash book (Continued)Bank cash book (Continued)
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22Credit Sales Credit Sales
and and Sales Day Book Sales Day Book (Sales Journal)(Sales Journal)
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Credit salesCredit sales The majority of businesses will make The majority of businesses will make
mostly credit sales. mostly credit sales. For each credit sale, an For each credit sale, an invoice is issuedinvoice is issued, ,
giving full details of the sale, and this is giving full details of the sale, and this is used to used to request paymentrequest payment from the from the customer.customer.
The business uses theThe business uses the invoice as a record invoice as a record of the saleof the sale and enters the and enters the details in the details in the sales day booksales day book, including date, customer , including date, customer name, invoice number and invoice name, invoice number and invoice amount.amount.
Diagram of accounting booksDiagram of accounting books
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An example of an An example of an INVOICEINVOICE
CASH CASH DISCOUNDISCOUN
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PURCHASEPURCHASE
ORDER ORDER
REFERENCEREFERENCE
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An example of the An example of the SALES Day BookSALES Day Book
CUSTOM
CUSTOM
ER NAME
ER NAME
DATDATE E
OF OF SALSAL
EE
INVOICINVOICE E
NUMBENUMBERR
FINAL FINAL AMOUNTAMOUNT
An example of the An example of the SALES Day BookSALES Day Book
GSGSTT
GENERAL GENERAL LEDGER LEDGER REFEREN
REFERENCECE
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Posting credit salesPosting credit salesFrom the sales day book:From the sales day book:
All credit sales are posted All credit sales are posted individually to the individually to the debit side debit side of of each each customer’s account in the customer’s account in the sales ledger.sales ledger.
The total of the The total of the credit sales credit sales is is posted to the posted to the creditcredit of the of the sales sales account in the general ledger.account in the general ledger.
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Posting credit sales (Continued)Posting credit sales (Continued)
Sales invoices – sequence of entriesSales invoices – sequence of entries
GSGSTT
GSGSTT
GSGSTT
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ActivityActivityPost the entries in the Post the entries in the Sales Day Book Sales Day Book to to the the customer accounts in the Sales Ledger customer accounts in the Sales Ledger and the and the sales account in the General sales account in the General LedgerLedger..
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Activity (Continued)Activity (Continued)
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33Trade DiscountsTrade Discounts
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Trade discountsTrade discounts Businesses often offer a trade Businesses often offer a trade
discount to certain customers.discount to certain customers. The trade discount is a The trade discount is a percentage percentage
figure, and will depend on the figure, and will depend on the amountamount the customer purchases. the customer purchases.
Trade discount is shown on an Trade discount is shown on an invoiceinvoice but but never ever appears never ever appears in in the double-entry bookkeeping the double-entry bookkeeping (unlike cash discounts).(unlike cash discounts).
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An invoice with trade discountAn invoice with trade discount
TRADE TRADE DISCOUNDISCOUN
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How the invoice will be recordedHow the invoice will be recorded
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Credit controlCredit control Any business should check that Any business should check that
debtors are paying their accounts on debtors are paying their accounts on time.time.
If cash is not received from debtors If cash is not received from debtors promptly, it can promptly, it can cause cash shortagescause cash shortages for the business.for the business.
No business can survive cash No business can survive cash shortagesshortages, no matter how , no matter how profitableprofitable they are.they are.
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Credit control proceduresCredit control procedures Set a Set a credit limit for each debtorcredit limit for each debtor, ,
dependent on the debtor’s circumstances dependent on the debtor’s circumstances and stick to it.and stick to it.
When a payment is due, check if the When a payment is due, check if the money has been received, and if it has not, money has been received, and if it has not, consider consider refusal to supply goods until refusal to supply goods until payment is received.payment is received.
Consider taking Consider taking legal action legal action if a payment if a payment is not forthcoming.is not forthcoming.
Make sure a Make sure a customer is aware customer is aware of what will of what will happen if amounts due are not paid.happen if amounts due are not paid.
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Learning outcomesLearning outcomesYou should have now learnt:You should have now learnt: That ‘sales day book’ and ‘sales journal’ That ‘sales day book’ and ‘sales journal’
are different names for the same bookare different names for the same book That cash sales are not entered in the That cash sales are not entered in the
sales day booksales day book That when credit card payments are That when credit card payments are
received at the time of sale, details of the received at the time of sale, details of the customer are not recorded even though a customer are not recorded even though a debtor is created at the same timedebtor is created at the same time
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Learning outcomes (Continued)Learning outcomes (Continued)
That the sales day book (or sales That the sales day book (or sales journal) contains information relation journal) contains information relation to each credit sale made in each to each credit sale made in each periodperiod
That the sales day book is used for That the sales day book is used for posting credit sales to the sales ledgerposting credit sales to the sales ledger
That the total of the sales day book for That the total of the sales day book for the period is posted to the credit of the period is posted to the credit of the sales account in the general ledgerthe sales account in the general ledger
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Learning outcomes (Continued)Learning outcomes (Continued) How to make the appropriate How to make the appropriate
entries relating to credit sales in a entries relating to credit sales in a sales day book and make the sales day book and make the correct postings from it to the correct postings from it to the sales ledger and general ledgersales ledger and general ledger
How to prepare a sales invoiceHow to prepare a sales invoice Why multiple copies are often Why multiple copies are often
made of each sales invoicemade of each sales invoice
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Learning outcomes (Continued)Learning outcomes (Continued) That no entry is made for trade That no entry is made for trade
discounts in the double entry discounts in the double entry accountsaccounts
That all businesses should That all businesses should operate a sound system of credit operate a sound system of credit control over their debtorscontrol over their debtors
Some measures that may be taken Some measures that may be taken to exercise credit control over to exercise credit control over debtors debtors
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44ActivityActivity
Resources : Core ReadingResources : Core Reading
Wood, Frank and Robinson, Sheila Wood, Frank and Robinson, Sheila (2009) (2009) Bookkeeping and Accounts Bookkeeping and Accounts ,7,7thth Edition, Pearson/ FT Prentice HallEdition, Pearson/ FT Prentice Hall
Wood, Frank and Sangster, Alan (2012) Business Accounting ,12th Edition, Pearson/ FT Prentice Hall
Fortes, Hilary (2011) Accounting Simplified , Pearson/ FT Prentice Hall
QUESTIONS?QUESTIONS?