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Hallo,
I am trying to make up a rule for the Dr and Cr sides of the receiv. and payab. ledger a/cs for individual customers and suppliers respectively, but I can’t. I see what goes where but can’t explain why. Is there some rule set about it?
E.g. Receiv. ledger
customer A
Dr Sales
Cr Bank
or
Dr Sales
Cr Sales Returns
or
Dr Sales
Cr Bad – debts written offand e.g. Payab. ledger
supplier Z
Dr Bank
Cr Purchases
or
Dr Purchase returns
Cr Purchases– what is the logic that I have to follow here, I tried if sth. is income or expense, but it made no sense?
Thank you for some logic!
MP
I am not sure that I understand the entries that you have listed (e.g. DR Sales CR bank makes no sense at all)
For receivables, you DR when they owe more (so when there have been sales on credit)
You CR when they owe less (when they have paid, or when they have returned, or when we have given a discount, or when an irrecoverable debt is written off, or when there is a contra with payables)For payables, you CR when we owe more (so when we have purchases on credit
You DR when we owe less (when we have paid, or when we have returned, or when we have received a discount, or when there is a contra with receivables)Hallo,
I should have shown the above entries as part of a T a/c as below, but what happened is that actually I hadn’t followed the principle that the customer was a receivable and supplier a payable, which is basic but I’ve skipped it here and consequently wondering what was going on, but now your explanation exactly matches as seen in the T a/c:
e.g.
Customer A (receivable)
——————————————-
Dr Sales (customer owes us more) | Cr Bank (cash received)Thank you for giving me the right direction!
MP
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