Dbs1034 biz trx week 7 sales day book and ledger

Sales day book, Credit Control

1. 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
by
Stephen Ong
Visiting Fellow, Birmingham City
University Business School
Visiting Professor, Shenzhen
University

2. Today’s Overview Today’s Overview

3. 1 - 3
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

4. 1 - 4
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

5. 1 - 5
11
Cash Sales Cash Sales
and and
Cash BookCash Book

6. Diagram of accounting booksDiagram of accounting books

7. 1 - 7
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..

8. 1 - 8
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.

9. 1 - 9
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.

10. 1 - 10
An example of a An example of a CASH DiscountCASH Discount
CASH CASH
DISCOUNDISCOUN
TT

11. 1 - 11
Bank cash book (Continued)Bank cash book (Continued)

12. 1 - 12
22
Credit Sales Credit Sales
and and
Sales Day Book Sales Day Book
(Sales Journal)(Sales Journal)

13. 1 - 13
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.

14. Diagram of accounting booksDiagram of accounting books

15. 1 - 15
An example of an An example of an INVOICEINVOICE
CASH CASH
DISCOUNDISCOUN
TT
PURCHASE
PURCHASE
ORDER
ORDER
REFERENCE
REFERENCE

16. 1 - 16
An example of the An example of the SALES Day BookSALES Day Book
C
U
ST
O
M
C
U
ST
O
M
E
R

E
R

N
A
M
E
N
A
M
E
DATDAT
E E
OF OF
SALSAL
EE
INVOICINVOIC
E E
NUMBENUMBE
RR
FINAL FINAL
AMOUNTAMOUNT

17. An example of the An example of the SALES Day BookSALES Day Book
GSTGST
G
E
N
E
R
A
G
E
N
E
R
A
L

L

L
E
D
G
E
R

L
E
D
G
E
R
R
E
F
E
R
E
R
E
F
E
R
E
N
CE
N
CE

18. 1 - 18
Posting credit salesPosting credit sales
From 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.

19. 1 - 19
Posting credit sales (Continued)Posting credit sales (Continued)

20. Sales invoices – sequence of entriesSales invoices – sequence of entries
GSTGST
GSTGST
GSTGST

21. 1 - 21
ActivityActivity
Post 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..

22. 1 - 22
Activity (Continued)Activity (Continued)

23. 1 - 23
33
Trade DiscountsTrade Discounts

24. 1 - 24
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).

25. 1 - 25
An invoice with trade discountAn invoice with trade discount
TRADE TRADE
DISCOUNDISCOUN
TT

26. 1 - 26
How the invoice will be recordedHow the invoice will be recorded

27. 1 - 27
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.

28. 1 - 28
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 of what
will happen if amounts due are not paid.will happen if amounts due are not paid.

29. 1 - 29
Learning outcomesLearning outcomes
You 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

30. 1 - 30
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

31. 1 - 31
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

32. 1 - 32
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

33. 1 - 33
44
ActivityActivity

34. Resources : Core ReadingResources : Core Reading
Wood, Frank and Robinson, Sheila Wood, Frank and Robinson, Sheila
(2009) (2009) Bookkeeping and Accounts Bookkeeping and Accounts ,7,7
thth

Edition, Pearson/ FT Prentice HallEdition, Pearson/ FT Prentice Hall
Wood, Frank and Sangster, Alan
(2012) Business Accounting ,12
th

Edition, Pearson/ FT Prentice Hall
Fortes, Hilary (2011) Accounting
Simplified , Pearson/ FT Prentice Hall

35. QUESTIONS?QUESTIONS?