Questions regarding the Sales Ledger, customer accounts and application to e-commerce

soroem1 Registered Posts: 12
Hello all,

Recently completed Level 2 AAT and just started my Level 3. An eye opener for sure, which has helped a lot in my workplace - though has also generated many more questions for me to puzzle out! Please bear with me as I am trying to frame everything with a still-evolving knowledge of accountancy.

I am working with a great SME that is growing nicely and seeking to develop its financial and management accounting functions - hence supporting me through my AAT journey. However, I cant seem to find the right advice about the following:


We are planning to open an online shop which uses Magento and Sage Pay. We use Sage 50 internally.

No one seems to be able to tell me how taking online payments this will impact our internal processes (processing transactions on Sage, tracking customer accounts etc).

I need to know how, when a customer buys something online, that transaction will interact with and appear in our accounts?

I know we can get a plugin/add-on for Sage that will allow it and Magento to share data and I know that Sage Pay and Magento are rock solid systems. However, I am just trying to get my head around the workflow and accounting processes the software is going through as I have never encountered this in practice and am keen to make the transition as smooth as possible for the business.

Which brings me round to trying to tie in my limited knowledge:


When a brand new customer (one we have no history with or record of) comes online and purchases a product or service, they pay via card directly to our bank. Now, as they are not a credit customer and they have purchased their product/service immediately, how are the ledgers updated?

I can only assume the following process takes place:

1) Payment made by customer,
2) Transaction pushed to Sage via Magento/SagePay,
3) Ledgers automatically updated - In basic form, would it be: DR to BANK, CR to RELEVANT SALES CODE(S) (E.g. 4000 in Sage), CR to VAT ?

Q - How will the subsidiary ledgers work? The customer may not choose to register on our site, so an account will not be set up for them. Would the transaction be posted as a cash transaction? Technically, must we not record this as a prepayment? If so, when the customer receives the goods, what further postings need to be made to complete the accounting steps?

Q - Are customer accounts (and therefore the Sales Ledger) only for Credit Customers? What do we do when there is a non credit customer purchasing from us on an ad-hoc basis? We dont want Sage to be clogged with prospective customer data and will capture customer details in a custom CRM system. However, the sales transactions must obviously be handled in Sage.

In the scenario I have in my head, either the credit side of the Sales ledger would be ever growing due to online income, which can't be right as the customer has no account as is not purchasing on credit - or, the sales nominal codes are credit heavy - which cant be right as this wont match up with the SLCA?

Q - If the transaction is instant (as instant as a card payment can be) between the customer purchasing and money being received, are any transactions even posted to the SLCA? Is the SLCA for credit customers only?

I have a feeling this all hinges on technicalities - if the software auto raises an invoice and issues it directly to the customer upon purchase, then transactionally it could...

(2) CR VAT,
(3) DR then immediately CR the SLCA,
(4) DR BANK.

Does anyone have any experience of this process they can put into laymans terms? I had to take a wild guess there as I dont know how this software will work.

Really, really sorry for the essay. Thank you so much to whoever attempts to read and understand my issues and offer advice.

I've tried asking a lot of different people, only to be told that this is not their specialist area (which, according to the ethics module in Level 3 I have just taken, is spot on :) )

But if someone can shine a light on the accounting processes going on here, I can better understand how the team will tackle administration in future and you would be a fantastic help.




  • soroem1
    soroem1 Registered Posts: 12
    I'll assume this was too much of an ask here then. Sorry about that.

    Can anyone point me in the direction of any good resources regarding accounting for e-commerce or any information regarding the practicalities of implementing an online shop - perhaps even your own experiences?
  • CeeJaySix
    CeeJaySix Registered Posts: 645

    Q1 - this is a technical question rather than an accountancy one, the best person to tell you how the system works would be the IT firm implementing your solution. Your ledger postings appear correct for a cash purchase.

    Q2 - technically yes it would be deferred income until the goods are despatched (or maybe arrive with the customer, depending on your terms of sale and when the risks and rewards of ownership are transferred).

    Depending on how long from payment to dispatch/receipt, you may or may not need to account for this (eg. same day first class dispatch I wouldn't bother, as it's never going to be material unless you do a ridiculous amount of business on the period end).

    If the accounting system is linked into the stock processing system, it may have an automatic function to keep deferred income separate until marked as dispatch, then release it to sales; I doubt that functionality exists in Sage. Therefore the easiest way is probably to let the system just post the sales, and at each period end manually journal all the unfulfilled but paid orders out of sales into deferred income (after the first adjustment you can just post the movement on the deferred income amount, so it will likely be trivial anyway assuming fairly regular sales cycles).

    Q3 - these are cash sales: dr bank, cr sales, exactly as you allude to in Q2. Why would the SLCA ever marry up to the sales nominals? I assume you're thinking of reconciling customer turnover to sales, but this would only work if all sales are on credit. Have you asked the question you meant to ask?

    Q4 - as above, yes this is a cash sale. Technically the debtor you have is the card processing merchant; if you don't receive the credit to your bank account on the same day, it will still be a dr to your bank nominal, and all the credit card debits for the last day (or two) will go on your bank rec as a reconciling item.

    The alternative would be to dr debtors and cr bank so that Sage agrees to the bank statement, but frankly I think that's a waste of time, you don't do that for cheques whilst they're clearing do you?

    It seems to me that you're overcomplicating things, you're bringing in a system for cash sales whereby the system for taking cash automatically updates your ledgers for you. I think the only things you need to worry about are adjusting for deferred income at the period end if there are un-dispatched orders, and adding credit card receipts into your bank reconciliation process.

    And obviously making sure the system functions correctly!

  • soroem1
    soroem1 Registered Posts: 12
    Thank you CeeJay,

    Apologies for not responding in a timely manner here. I had long given up hope of a reply as it is a fairly technical query and a bit of a long one at that. But, decided to log on tonight out of interest and noticed you had taken the time to reply to me - much appreciated.

    I agree. I'm most likely over complicating things at the moment - though my doing so is a deliberately exploratory exercise. I'd like to pull apart the mechanics of what these systems are doing so I can better conceptualise the transactions - which helps develop the limited, yet growing knowledge that I do have. I also want to understand the accounting workflows in order to descipher where manpower will have to plug in/processes will need to change in the future. Wouldn't want to put the team through a hellish administrative routine due to lack of forethought.

    If you dont mind I'll digest what you've said and may have some follow up questions.

    Thanks again for your detailed response.
Privacy Policy