B1: 5.01 Posting the Sales, Sales Returns & Discounts Allowed Day Books to the General Ledger

At the end of an accounting period, which could be the end of a day, a week, a month or a quarter, an accountant or bookkeeper will add up columns of a business’ books of prime entry. The totals of these columns will then be posted to the General Ledger.

[Note: Alternatively, a business could post each individual transaction from these books of prime entries. In a manual set of books this is rarely done due to the amount of time it would take.]

In this section we shall look at how three of the books of prime entry are posted to the General Ledger; first the Sales Day Book (“SDB”), then the Sales Returns Day Book (“SRDB”) and lastly, the Discounts Allowed Day Book (“DADB”). These have been chosen as they all affect the amount of money owed to the business from its credit customers.

DAY BOOK	INFORMATION RECORDED IN THE DAY BOOK
SDB	Information from sales invoices issued to credit customers
SRDB	Information from sales credit notes issued to customer
DADB	Information about prompt payment discounts granted/allowed to credit customers

a) The Sales Day Book (“SDB”)

The column totals of the SDB record changes in the following assets, liabilities and income of the business:

The total of the gross column records an increase in the business’ assets, specifically the amount of money owed to it by its credit customers
The total of the VAT column records an increase in the business’ liabilities, specifically the amount of VAT owed by the business to HMRC
The total of the net column(s) records an increase in the business’ income, specifically its sales for the period

Posting list from the SDB to the General Ledger

The column totals will be posted as follows to the General Ledger

The Gross column total will be recorded on the Debit side of the Sales Ledger Control Account (i.e. the account where we calculate how much is owed to the business by its credit customers)
The VAT column total will be recorded on the Credit side of the VAT Account (i.e. the account where we calculate how much the business owes in VAT to HMRC)
The Net column will be recorded on the Credit side of the Sales Account (i.e. the account where we calculate the value of the business’ sales in a period)
- Note that if the net sales in the sales day book is split between different types of sales then the total of each type of sales will be credited to different sales accounts in the General Ledger. For example a business that splits its net sales in the SDB between Shop Sales and Online Sales would post the Shop Sales total to its Shop Sales Account and the Online Sales to the Online Sales Account.

Illustration

The totals of the columns of the above SDB would be posted to the General Ledger. The posting list would be as follows:

Note: The postings record the date the totals were calculated up to

The entries in the General Ledger accounts would appear as shown below. Note the way each entry has been described in the ledger accounts and that “SLCA” is an abbreviation of “Sales Ledger Control Account”.

b) The Sales Returns Day Book (“SRDB”)

The column totals of the SRDB record changes in the following assets, liabilities and income of the business:

The total of the gross column records a decrease in the business’ assets, as the amount of money owed to it by its credit customers has fallen
The total of the VAT column records a decrease in the business’ liabilities, specifically the amount of VAT owed by the business to HMRC
The total of the net column(s) records a decrease in the business’ income, which will be recorded as sales returns for the period

Posting list from the SRDB to the General Ledger

The column totals will be posted as follows to the General Ledger

The Gross column total will be recorded on the Credit side of the Sales Ledger Control Account
The VAT column total will be recorded on the Debit side of the VAT Account
The Net column will be recorded on the Debit side of the Sales Returns Account (i.e. the account where we calculate the value of sales returns from credit customers in a period)
- NB. Some accountants and bookkeepers will debit the Sales Account rather than use a Sales Returns Account but it can be useful to keep track of the total value of sales returns

Illustration (continued)

The totals of the columns of the above SRDB would be posted to the General Ledger. The posting list would be as follows:

The dates used are the dates the totals were calculated up to in the SRDB

These postings would then appear in the General Ledger accounts as shown below. [Note that the entries from the SRDB are shown in blue and the entries from the SDB are shown in black]

c) The Discounts Allowed Day Book (“DADB”)

The column totals of the DADB record changes in the following assets, liabilities and expenses of the business:

The total of the gross column records a decrease in the business’ assets, as the amount of money owed to it by its credit customers has fallen
The total of the VAT column records a decrease in the business’ liabilities, specifically the amount of VAT owed by the business to HMRC
The total of the net column(s) records an increase in the business’ expenses, specifically the prompt payment discounts allowed to credit customers in the period

Posting list from the DADB to the General Ledger

The column totals will be posted to the General Ledger accounts as follows:

The Gross column total will be recorded on the Credit side of the Sales Ledger Control Account
The VAT column total will be recorded on the Debit side of the VAT Account
The Net column will be recorded on the Debit side of the Discounts Allowed Account

Illustration (continued)

The totals of the columns of the above DADB would be posted to the General Ledger. The posting list would be as follows:

The dates used are the dates the totals were calculated up to in the DADB

These postings would then appear in the General Ledger accounts as shown below. [Note that the entries from the DADB are shown in blue and the entries from the SDB and SRDB are shown in black]