IMPORTANCE OF A SALES LEDGER

Hello, we will cover the importance of having a sales ledger in this article, so that you arm yourself with the necessary knowledge that an entrepreneur needs to know.

 This is a type of ledger which records the sales made on credit to the customers. This is very important because as the business expands, it will require that some goods be sold on credit terms.

1. When there are many sales transactions on credit basis, then it will be very difficult to master all sales transactions hence the need for a sales ledger in accounts which is used to record the details of various customers who have been given credit on goods. For example; If you are dealing with the sales of women's shoes and you buy them in large quantities, then you go ahead and sell the large quantities to your customers on credit basis. E.g. Customer x purchases women's shoes worth 200,000$ on credit. You will need to open for customer x an account under the sales ledger account and record the amount on the debit side of customer X's account. When customer X pays partially for the women's shoes, then you will post that amount on the credit side of X's account thus reducing what that customer owes you.
2. Figures that are posted on the debit side of various customers are used to determine sales on credit for a given period of time. This is used to determine the total sales of that financial period when you combine it or add it to the cash sales of the same financial period.
3. This account is also used to reconcile debtor’s control account, which produces the total debtors account receivable for a given period of time.
4. A sales ledger can also be used by the accounts auditors to detect teaming and lading.

 

I hope the information was of help to you and your business. I wish you all the best in your endeavors. In case of any queries, email me at cashincomes3@gmail.com.

LEDGER

Hello friend, today we shall tackle what a ledger is. So what is a ledger? Well a ledger is a book that is required for proper recording of transactions that affect the business e.g. If you want to start selling women’s shoes boots and you have saved up 50,000$ for the online business venture. When you eventually start the online business, you will have to make entries in your books of accounts and hence the book in which you record the capital (money or cash you want to start the business with) is recorded in the ledger account.

So what kinds of ledger are there? There are 2 main types of ledger available out there.

1. General or Nominal ledger; this ledger records information relating to the proprietor, purchases, sales and expenses. Who is a proprietor? A proprietor is you or the owner of the women’s shoes boots business. The money or cash which you shall have saved for a planned business venture, in this case, a women’s shoes boots business, or you would have borrowed from the bank, is recorded in the general ledger as Capital.

What is a purchase? Well, if you want to deal with women’s boots, you will purchase or buy women’s boots from the manufacturer. Therefore the women’s shoes boots bought are known as purchases and it is recorded in the general ledger; For example if you buy women’s boots worth 200,000$ , the figure will be posted to the purchases account. This will help you in determining which profit you have made after selling the women’s boots.

The sales part is when after purchasing or buying the women’s shoes, you will sell them to your customer. These sales you make will be posted to the sales account which is under the general ledger.

Expenses are amounts of cash or money spent in the course of doing the business. For example if you are dealing with women’s shoes or even women’s handbags, you will have to bring in the shoes or handbags from the factory to where you want to sell them. This is factoring in transport. The transport cost you incur is an expense which should be recorded in the transport expenses account.

2. Purchases ledger or Creditors ledger; this is the second type of ledger

There exists. This type of ledger account is used to record details of various creditors. For example; when you are dealing with women’s shoes or women’s handbags from different suppliers on credit, then the suppliers are referred to as your creditors. You may not be able to master or remember all this information when the numbers of your creditors increase. This will prompt you to record the details under the ledger known as the creditor’s ledger. Therefore when they supply you on credit, then you should enter such information in their respective accounts. For example; if x y z supplies you with women’s shoes or women’s handbags worth 200,000$ on credit, then you will be owing them 200,000$. In this event, you have to keep track of this credit from x y z under the purchase ledger account.

I hope that did help you, for more information you can email me at cashincomes3@gmail.com. Have a nice day!