2nd Edition by Edwin Olima FCCA
for the goods
business is providing based on the invoices that the business has
sent to them. As they
pay up, the debtors’
) has to be updated. The following steps demonstrate how this
can be done.
Once again get hold of the bank pay-in slips (Work Pack, page
will use the information on them to update the sales invoice list
that you compiled in Chapter
In the sales invoice
list, fill in the “Paid Amount” column with the amount paid.
In respect of the
credit note for the customer who returned some of the goods,
a dash in the “Outstanding
Amount” column as you are going to use this credit note to reduce
the outstanding amount on the sales invoice.
go to the sales invoice row (Sales Invoice No. 1006) for which the
raised and on this row update the “Paid Amount” column with the
gross amount of the credit note.
For each invoice
listed, deduct the “Paid Amount” column from the “Gross
” amount column to get the
balance outstanding and fill in the column headed “Outstanding
5. Total up the “Paid
Amount” and the “Outstanding Amount” columns of the debtors’
Check the total “Outstanding Amount” is correct by deducting the
total “Paid Amount” from the total “Gross
total balance in the “Outstanding Amount” column is the updated
list of sales invoices
yet paid up. This column is your updated trade
balance. They are called trade debtors as they arise in the course of trading
(as opposed to other debtors like loan debtors).
need to do the above exercise with every batch
have been paid so that you know at any given time how much your
you can imagine, in a larger business with many transactions
hundreds of customers
, the list we have got would
become so large that it would not be possible to keep track of
individual customer balances easily.
make the job easier, accountants create a list for each customer and
call this a customer account
. In here, they record
all the sales invoices
/cash received and credit notes
relating to that customer in one place. And it is easier to track
how much that customer owes at any given time.
customer accounts are kept together in one book (ledger) called the
called the sales ledger
balance on all the customers’
are added up to get the total balance that the customers owe the
business. This balance is known as the trade
balance or debtors ledger balance
or the accounts receivable
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