Really need some help please

IkklewabbitIkklewabbit Settling In NicelyRegistered Posts: 16
Hi Guys

OK. I have set aside this afternoon to nail the DR/CR and have hit a brick wall. I am doing past exam PLB December 2007.

Now working on the PEARLS explaination of DR/CR sales should be on the credit side but on the answers sheet subsiduary accounts, each sale is on the debit side and on the sales control account that too is on the debit side. WHY?

Help! Thanks very much

A very confused Ikkle xx

:confused1:

Comments

  • Paul24Paul24 Experienced Mentor Registered Posts: 578
    When the sale is made on credit, a debtor is created, an asset to the business, and is therefore a debit in sales or debtor control. When money is received the credit you are referring to is the amount that goes to the income statement as sales or revenue.
  • sexy_annsexy_ann Just Joined Registered Posts: 1
    Hi Ikkle,

    I just had a look at the answers to the paper and it looks like on the SLCA they have summerised all of the subsidiary sales into the slca to
    Dr SLCA
    Cr Sales
    then you get your PEARLS concept of the sales being a credit.
    i hope i ve helped rather than confused!
    I can totally sympothise with you..i was in the same place this time last year!


    Sexy ann
  • IkklewabbitIkklewabbit Settling In Nicely Registered Posts: 16
    But why? It clearly says sales are on the credit side. This is why i don't understand it.
  • blobbyhblobbyh Font Of All Knowledge Registered Posts: 2,415
    Hi Ikkle,

    I don't like the PEARLS acronym as I couldn't grasp it at the time either. Essentially, the Sales Ledger Control Account is an Asset on the Balance Sheet and Sales are a credit entry (denoting income) on the Profit & Loss, two components of the financial statements that you will study at the intermediate level.

    An easy way to remember your Control Accounts at Foundation is to "Debit the Debtors" (Customers) and "Credit the Creditors"(Suppliers). If you can remember these, the opposite entries are much easier.

    Debtors Control Account = Sales Ledger Control Account; this is an Asset account and is the total of your credit Sales to customers
    Creditors Control Account = Purchase Ledger Control Account; this is a Liability account and is the total of your credit Purchases from suppliers

    When you make a sale of £100 you debit the Debtors Control Account (and subsidiary account) and credit the Sales account

    When you buy a product for £100 you credit the Creditors Control Account (and subsidiary account) and debit the Purchases account

    This is very, very simplified but trust me when I say it all sinks into place eventually and in time, you'll wonder how you you were ever once confused!
  • Paul24Paul24 Experienced Mentor Registered Posts: 578
    Double entry by definition requires each entry to have an opposite or corresponding entry / entries

    Sale on credit

    Dr Debtors Control (Asset to business)
    Cr VAT (liability to business on receipt)
    Cr Sales (amount taken to income statement)
  • IkklewabbitIkklewabbit Settling In Nicely Registered Posts: 16
    But why? It clearly says sales are on the credit side. This is why i don't understand it.

    Hi Ann

    That's what I would have expected. SLCA debit and sales on subsiduary and VAT on CR. Now the VAT is on the CR but on the subsiduary it is on the debit.

    Appreciate your help by the way.

    Thanks

    Ikkle
  • IkklewabbitIkklewabbit Settling In Nicely Registered Posts: 16
    Hi Robert

    Would you please have a look at the paper and tell me where I'm going wrong! I'm gonna cry in a minute if I don't nail this.

    Many thanks

    Ikklewabbit
  • Paul24Paul24 Experienced Mentor Registered Posts: 578
    Hi Ann

    That's what I would have expected. SLCA debit and sales on subsiduary and VAT on CR. Now the VAT is on the CR but on the subsiduary it is on the debit.

    Appreciate your help by the way.

    Thanks

    Ikkle

    See my breakdown above
  • blobbyhblobbyh Font Of All Knowledge Registered Posts: 2,415
    I have to get back to work now Ikkle but Paul's a CIMA student and I'm sure will sort it for you if you ask him nicely! Do say which specific parts though as he's not gonna want to search through the whole paper without an ikkle direction!
  • IkklewabbitIkklewabbit Settling In Nicely Registered Posts: 16
    Paul24 wrote: »
    Double entry by definition requires each entry to have an opposite or corresponding entry / entries

    Sale on credit

    Dr Debtors Control (Asset to business)
    Cr VAT (liability to business on receipt)
    Cr Sales (amount taken to income statement)



    Hi Paul

    Thank you for your help. But on the answer sheet it is saying

    Dr Debtors Control
    Cr VAT
    Dr Sales

    And this is why I am confused.

    Ikklewabbit
  • IkklewabbitIkklewabbit Settling In Nicely Registered Posts: 16
    Hi Robert

    Thank you once again my friend. Have agood day at work you lucky thing.

    Ikklewabbit x
    (Claire)
  • Paul24Paul24 Experienced Mentor Registered Posts: 578
    Forgive my audacity but that is wrong! Without looking at the paper, if you follow it through to the P&L is it a typo?
  • katie2008katie2008 Trusted Regular Registered Posts: 294
    hi,

    I think it should be

    sales day book
    DR SLCA, (GROSS)
    CR VAT (VAT)
    CR SALES (NET)

    sales returns day book
    CR SLCA
    DR VAT
    DR SALES

    I think that there is an error on that exam paper. Im doing the exam in about 2 weeks time and i think that is the first one i picked.

    Can i suggest you download another, apply the theory to the above, and see what you come up with. Remember the postings are opposite for purchases.

    Two months ago i was panicking as i couldnt get any trial balances to agree. now i have perfected it! and there is still time for you to!

    Hope i helped

    Katie
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    Hi Ann

    That's what I would have expected. SLCA debit and sales on subsiduary and VAT on CR. Now the VAT is on the CR but on the subsiduary it is on the debit.

    Appreciate your help by the way.

    Thanks

    Ikkle

    It would be on the debit side on the subsidiary accout - the SLCA is the total of each individual customers account which is in the subsidiary ledger. The subsidiary ledger doesn't form part of the double-entry system (or main/nominal ledger), it is just a memo account.
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