Sales Ledger

If you only have one customer, you will not need a detailed sales ledger, just one account in the nominal ledger. Nor will you need a sales ledger if your sales are entirely for cash. On the other hand, businesses that sell on credit may have many customers.
For them, an efficient sales ledger outside the nominal ledger is essential.

Sales ledger structure

A sales ledger account looks very like a nominal ledger account. It is divided in the middle with debit on the left and credit on the right. There will be one account for each customer and the postings to it are:

  • Debit
  • invoices issued
  • Credit
  • Credit notes issued
  • Credit
  • cash received
  • Credit
  • invoices written off as bad debts

Normally the debits on each account will exceed the credits. This means that the account has a debit balance which the amount is owed to the business by the customers. This sum is represented by just one account (usually called the sales ledger control account) in the nominal system.

The bookkeeping system will be designed to ensure that the accounts in the sales ledger do actually add up to the balance of the control account. Sales ledger accounts ruled in the traditional way described may not be encountered too often, though they are still used. Many readers will only be familiar with computer printouts that do not look anything like the ledgers described. It is important to remember that a computer is just an efficient way of doing what could be done manually.

Some of the figures on the computer printout represent credits and some represent debits. They are just
presented differently. It is worth proving this to you by marking the debits and credits on a computerized sales ledger. A business needs to send out statements and operate credit control procedures. These are a by-product of the sales ledgers and a computerized system speeds up the process. A computerized system may operate on the open item principle. This means that cash payments are allocated to specific invoices, and customer statements only show unpaid invoices. A computerized system may readily give useful management information such as an ageing of the debts.

Sales ledger is the most useful book for shop accounting to do inventory stock control.

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