Sure no one asks as many questions as me!

System

I am just writing a list of sales and purchase ledger accounts and whether you debit or credit them. But surely this changes when something is paid (on both sides)???
Also is the cash account or sales account used to put the total to create the double entry?

Sorry!

System

Re:Sure no one asks as many questions as me!

Okay...

Say we make a sale on credit of £100 + £17.50 VAT. We would debit the sales ledger control account (plus the relevant subsidiary account) with £117.50. The double entry to this is credit sales account with £100 plus credit VAT account with £17.50.

When we receive the customer's payment, we will credit the sales ledger control account (plus the relevant subsidiary account) with £117.50 and debit either the Cash Received Book (CRB) or the bank account with £117.50.

When we make a purchase on credit of £100 + £17.50 VAT, we would credit the purchase ledger control account (plus the relevant subsidiary account) with £117.50. The double entry to this is debit purchases account with £100 plus debit VAT account with £17.50.

When we make the supplier's payment, we will debit the purchase ledger control account (plus the relevant subsidiary account) with £117.50 and credit either the Cash Paid Book (CPB) or the bank account with £117.50.

You will notice from the above examples that both of the control accounts - sales and purchase - will "tee off" and have zero balances. The VAT account will also "tee off" too with a zero balance. However, note that the sales and purchases accounts should only ever have credit and debit balances respectively in them and should never be "teed off"!!!

Remember for sales and purchase ledger control accounts, the primary entries are "debit the debtors and credit the creditors"...

Hope this helps a little.

Robert

System

Re:Sure no one asks as many questions as me!

yes thats great thank you, think i need a new book, set to confuse u!

System

Re:Sure no one asks as many questions as me!

blobbyh wrote:

However, note that the sales and purchases accounts should only ever have credit and debit balances respectively in them and should never be "teed off"!!!

Sorry to be a pain the the back side if I am wrong here - but I had another lesson last night and I thought that if we buy goods on Credit, they could still be returned to the supplier - thus we haven't got the goods anymore and we debit the purchase ledger which "Tees Off" the credit purchase... please let me know where I stand, I honestly thought I had the hang of it last night for the very 1st time I felt comfortable.

Thanks
Jamie

System

Re:Sure no one asks as many questions as me!

If we buy goods on credit we debit the Purchases A/c and credit the Purchases Control A/c. If we then return some of those goods to the supplier, we would credit the Purchase Returns A/c and Debit the Purchases Control A/c.

If I remember correctly........
Jackie

System

Re:Sure no one asks as many questions as me!

Took me a few times reading through that to fully understand it - don't worry, it isn't the way you explained it, it's the way my brain (or lack of) interprets it.

Thanks for the reply, you are dead right - I forgot about the seperate accounts for Returns on sales and purchases,

thanks
Jamie

System

Re:Sure no one asks as many questions as me!

You are half right Jamie in that goods can be returned, however I believe they should really be treated as follows;

Goods the customer is returning to us for £100 + £17.50 VAT; debit the sale returns account with £100, debit the VAT account with £17.50 and credit the sales ledger control account with £117.50 (don't forget the subsidiary too!).

Goods we are returning to our supplier for £100 + £17.50 VAT; credit the purchase returns account with £100, credit the VAT account with £17.50 and debit the purchase ledger control account with £117.50 (also not forgetting the subsidiary too!).

As you can see, the sales and purchases accounts themselves are unaffected by goods returns. It is very important that you do not adjust them since all the above figures will eventually go into the P&L and balance sheet which you will cover at intermediate.

Don't worry, it all becomes second nature after a while and you'll eventually do it without really even thinking!

Regards,

Robert

System

Re:Sure no one asks as many questions as me!

If unsure, keep asking. That's the purpose of these forums, we help each other when we can. Don't be concerned if you ask for more help than others as you could well be asking questions that others feel embarrased or just too shy to ask.

We are all here to try and help each other.