AAT Level 2

Sales Ledger Control Accounts

Learning Outcomes

• Compare the detailed entries in the sales ledger control accounts

• Accounting for bad debts in the Sales ledger control account

• Complete a Sales ledger control account reconciliation

• Understand the use of an aged debtor analysis.

Sales ledger control account (SLCA)

The sales ledger control account replaces all the individual debtor accounts

The SLCA is in the Main Ledger

The SLCA contains the total value of all the invoices raised for customers and the total of all the cash received

The SLCA does not contain any detail

In Groups Identify the items that can be found on either side of the Sales Ledger Control A/C

Sales ledger control account (SLCA)

Sales ledger Control Account

Bal B/d X

Credit Sales X

Dishonoured Cheques X

X

Bal B/d X

Sales returns X

Payments received X

Discount Allowed X

Bad Debts Written off X

Bal C/D X

X

Missing items

Bal b/d – A debit balance as credit customers owe money

Credit Sales – The total figure that is posted from the invoice column in the SDB

Dishonoured Cheques – If a bank returns a cheque from a customer the original entry must be reversed by debiting the control account.

Sales Returns – This is the figure from the credit note column in the SDB

Payments received – This is the total figure from the sales ledger column from the CRB

Discounts Allowed – This is the figure from the discounts allowed in the CRB.

Bal c/d – The closing balance on the account is carried down from the credit side

Missing itemsSales ledger control account (SLCA)

Bad Debts

• When a sale is made to a credit customer, it is assumed that the customer will eventually pay the amount due.

• However it can occasionally happen that a customer will not pay the amount owing. This could be because they have now become bankrupt, or have simply disappeared.

• This is known as a BAD DEBT or also known as IRRECOVERABLE DEBT

Writing off a bad debt

• Can you work out what would be the double entry for the following bad debt expense?

• Bad Debt £100

• Vat on Bad Debt £20

Slide 7

Accounting For Bad Debts

• Bad debts must be removed from the accounting records as it is no longer a valid debtor.

The double entry is as follows:

DR Bad Debts (an expense account) with the Net amount

DR VAT control account with the VAT element

CR Sales Ledger Control Account with the invoice total

Sales Ledger Control account Reconciliation

• The SLCA figure will appear in the trial balance as the Debtors figure so it is important that this is accurate.

• If all entries are correctly carried out then the total of all the balances on the sales ledgers should equal the balance on the control account

• If the totals do not agree the discrepancies need to be identified, and corrected

What type of discrepancies may occur?

• Can you identify the types of errors that may happen either in the SLCA or Sales Ledger accounts?

Slide 10

Errors affecting the control account

• The SDB may have been under cast or over cast, so the incorrect total is posted to the control account

• Postings have been made to the wrong side of the control account

• The discounts allowed recorded in the cash book may have been incorrectly posted

• A bad debt may not have been recorded in the general ledger although it was written off in the sales ledger

Errors affecting the Sales Ledger balances

• An entry from the SDB is posted to the wrong account in the sales ledger

• Entries are posted to the wrong side of the Sales ledger account

• An entry may be posted as the wrong amount to the sales ledger account

• A balance on an account in the sales ledger may be included in the list of balances as the wrong amount or the wrong type of balance e.g. debit instead of credit

Preparing the Reconciliation

Step 1:

Sales Ledger Control Account

The total list of debtors equals to £13,777, giving a difference of £605 to be investigated

Balance b/d 14,382

Preparing the Reconciliation

Step 2 - Note the errors and omissions made

Step 3 – Adjust SLCA for any of the errors that you will identify that only affect the SLCA

Step 4 – Adjust the total of the list of balances from the sales ledgers by adding or deducting the errors that affect this total

The following errors have been identified

a) The total column on a page of the cash book (Debit side) has been overcast by £100 and has been posted to the SLCA

b) The total of the Sales Day book had been posted as £3,675 instead of £3,765

c) An irrecoverable debt of £240 has been written off in the individual customer account but not the main ledger

d) In invoice to Weller enterprise for £478 had been entered into the account of Dagwell enterprises

e) A cash receipt fro B Berry Ltd has been entered into the Sales Ledger as £256 instead of £265

f) A balance of £604 on one customers account has been omitted from the list of balances

g) A credit balance of £20 on a customer account had been included in the list of sales ledger balances as a debit balance

Slide 15

Correcting the SLCA

Sales Ledger Control Account

Slide 16

Balance b/d 14,382

Bank (a) 100

Sales (b) 90

14,572

Balance b/d 14,332

Bad debts (c) 240

Balance c/d 14,332

14,572

Step 4 adjust list of balances in Sales LedgerOriginal total 13,777

Less: additional cash receipts ( e ) (9)

Add: Balance omitted ( f ) 604

Less: credit balance included

As a debit balance ( g ) (40)

14,332

The amended total of the list of balances now agrees to the amended sales ledger control account. Of course the individual accounts will also need updating

Aged Debtor Analysis

• All businesses need cash in order to survive and so they are keen to monitor their debtors

• The business can easily tell from the sales ledger how much is on the balance of the different accounts, but these balances do not show how ‘old’ the debt is

• A schedule is produced showing how long a balance has remained unpaid

Aged Debtor AnalysisAGED DEBTOR ANALYSIS

Date: 31 October 20xx BALANCE ANALYSIS

Customer Code Account Name £ Current £

30-59 days £

60-89 days £

> 90 days £

SL03 Polygon Stores 2,593.29 2,593.29 0.00 0.00 0.00 SL15 Dagwell Ent 2,254.67 1,356.26 898.41 0.00 0.00 SL18 Weller Ent 2,154.72 1,118.36 637.28 399.08 0.00 SL30 G Thomas & Co 3,425.47 3,116.35 0.00 0.00 309.12

10,428.15 8,184.26 1,535.69 399.08 309.12

Aged Debtor Analysis

• The part of each balance that is analysed as current are invoices that have been sent out in the last 30 days so are not yet due for payment

• All other analysis columns represent invoices that are overdue in this case being two, three or more than three months old