[tayowms]

Hi Suhrab,

The sales ledger sits in the profit and loss account and is a record of the sales that the company has made during the course of the year (records Sales income).

The sales ledger control account sits in the balance sheet (as does all other control accounts because they record balances). Another name for the sales ledger control account is trade debtors account, and is a list/ record of balances of amounts that customers who have been given credit (days to pay) owe the company.

for example:
(i’ve excluded VAT to keep it simple)

If a wholesaler sells 10 pairs of lovely Christian Louboutin shoes on a 30 days credit agreement to a retailer for £10,000, their accountant would:

Credit: Sales Ledger £10,000 (profit & loss) – business has made a sale, so sales figure for the year increases.

Debit: Sales ledger control account £10,000 (balance sheet) – but customer owes money

(If the retailer paid immediately with a card you will be debiting the bank account instead of the sales ledger control account).

29 days after the sale the retailer pays £8000 to the company via bank transfer, so the accountant did the following:

Debit: Bank Account £8,000 (balance sheet)
Credit: Sales ledger control account £8000 – this is going to reduce the balance of the amount that the customer owes.

Therefore the sales ledger control account will contain a balance of £2000 for this particular customer, which is expected to be paid in a days time (the 30th day from date of sale) otherwise it becomes an aged debtor.

I hope this helps..

All the best of luck.

Tayo

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