IGCSE Sales Ledger Control Account
We will understand what a sales ledger control account is; learn how to prepare the account, including contra entries between the sales ledger control account and the purchases ledger control account.
Related Lessons:
What Is Sales Ledger Control Account
Trade receivables are customers whom the business sells its goods or services on credit. The accounts of these customers are recorded in the sales ledger.
The sales ledger control account is a summary of the sales ledger.
It is therefore also known as the Total Trade Receivables Account and contains the same entries as individual trade receivable accounts.
As payment from these customers are to be received at a later date, trade receivables are current asset of the business.
Entries In Sales Ledger Control Account
The sales ledger control account is a debit nature account and contains the following information:
On the debit side of the T-account, it has:
- Credit sales recorded as “Sales income”
- Late payment fees recorded as “Interest income”
- Dishonoured cheque recorded as “Cash at Bank or Bank”
- Discount withdrawn due to returned cheque, recorded as “Discount allowed”
On the credit side of the T-account, it has:
- Goods returned recorded as “Sales return”
- Payment received recorded as “Cash or Bank”
- Cash discount given recorded as “Discount allowed”
- Debts written off recorded as “Irrecoverable debts”
- Offset against a trade payable recorded as “Purchase ledger control account”
A contra or offset transaction occurs when a trade receivable is also a trade payable of the business. The smaller balance between the two accounts is used as the offset amount.
The sales ledger control accounts obtain its information from the following sources:
- Sales Journal for sales income
- Sales Return Journal for sales return
- Cash Book for payment received or dishonoured cheques and the discount allowed given or withdrawn
- General Journal for late payment fees charged or debts written off
Illustration on Preparing Sales Ledger Control Account
You may want to pause the video and try to prepare the sales ledger control account to strengthen your understanding of the topic, before continuing with the explanation.