Bookkeeping Transactions - Sales Account and Sale Control Account

Laura82
Laura82 Registered Posts: 4
Hi have picked the books back up in the last while and the one thing I cannot get my head around is when there is a credit sale and we are recording that sale into sales ledger control account, I understand that is a Debit in there as it is money owed to us and therefore increasing an asset. We then do the opposite of that, entering it as a credit in the Sales Account and Vat account, but I don't understand WHY in real life terms? Surely its still increasing an asset by sales going up?

I learn better when I can understand why something is the way it rather, rather than "this is just the rule". Can anyone help. I understand DEAD CLIC, so is it just that income has gone up, therefore its a credit. But what differentiates it between an asset and income?

Comments

  • Gaz
    Gaz Registered, AAT Student Posts: 9
    The sale still has to be recorded as a sale as if it was a cash sale, but we cannot debit the bank acct cos the money hasn't arrived yet. So instead of debiting the bank acct we debit the SLCA. When the money comes in we debit the bank acct and credit the SLCA and it now looks like it was a cash sale!
  • Pian32
    Pian32 MAAT Posts: 473 Dedicated contributor 🌟 🐵 🌟
    To expand on what Gaz has put the system we use is a double entry system, so there will always be a debit and a credit entry.

    You are comfortable with DEAD CLIC so I'd think of things like this.

    Where has the money come from (Credit)
    Where has the money gone to (Debit)

    In what you've stated you have received money from a sale (credit) and it has gone into your SLCA (debit)
    when the money is paid it comes from the SLCA (credit) and goes into the bank account (debit).

    Credits aren't always owed income being a good example. It's more to do with where something comes from, if you take out a loan money has come from (credit) the loan account as a liability. When you pay it off you put money in (debit) to the account.

    You're essentially a middle man taking money from one person and passing it to another whoever you take the money from gets credits whoever you give it to gets debits,
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