FRA Dec 09 exam TB

dpw

in the FRA Dec 09 exam,the trial balance in task 1.6 has the sales as £55,900.
But this includes the balance c/d of 6,300.
Why is it not just the receipts of £49,600?
Also why is it in as sales and not debtors?

sdv

I think that you are confusing your self by looking at the answers and assuming that you are looking at the "SALES" account, it is a SLCA (debtors) account.

This is an incomplte accounts task.

In order to find the sales of the year you need to contruct SLCA (debtors control) account.

Normally you'd have an opening balance b/d on the debit side, but because this is a new business there were no opening balance brought down. The balance of £6,300 c/d is the closing balance of debtors (SALES not yet paid for), and £49,600 is receipt from Debotrs for sales in this year.

therefore the total sales equals £49,600 (monies received from debtors for sales) and £6,300 (sales to debtors but as yet unpaid) = £ 55,900 (Total sales)

I hope this clears things for you.

dpw

But if that 6,300 has not been paid doesn't it count as an ASSET rather than INCOME?

Rinske

It is both.

It is a debtor on the balance sheet (SoFP) because you are expecting the money to come in and it is also considered sales, because the goods are sold in the period.

The double entry would be:
Debit Debtors
Credit Sales

dpw

Ah yes!
I see, thank you very much