Sales ledger control account format

The standard format

1. Opening balance (debit)
2. Add: credit sales
3. Less: receipts from customers
4. Less: discount allowed
5. Less: sales returns and irrecoverable debts
6. Closing balance

Filled example

Notes

• Credit sales increase the balance; receipts, discounts and returns reduce it.
• The closing balance should equal the total of the individual customer accounts.

Building and reading this format

The sales ledger control account summarises everything that happened to the total owed by all credit customers. It behaves like one big customer account. Trade receivables are an asset, so the account has a debit balance.

Anything that makes customers owe more goes on the debit side. Anything that makes them owe less goes on the credit side.

On the debit side, start with the opening balance of receivables, for example RM8,400 owed on 1 January. Add total credit sales for the period. This is usually the largest debit.

Then add the smaller items that increase the debt, such as cheques from customers that were dishonoured, and interest charged on overdue accounts.

The credit side lists the reasons the total owing fell. These are money received from customers, sales returns, irrecoverable debts written off and contra entries. They also include discount allowed, a reward for prompt payment that settles part of the debt without cash.

A contra entry sets off a balance when the same firm is both a customer and a supplier. The closing balance is the figure that balances the account. It is carried down, and it should agree with the total of the list of customer balances.

The two sides tell a story. Large credit sales with small receipts mean the business is selling well but collecting slowly, so receivables are rising.

Large discounts allowed suggest customers pay early to earn them. If the control account and the customer list agree, the sales ledger is arithmetically sound.

Most marks are lost by putting items on the wrong side. Discount allowed feels like a cost, so students put it on the debit side. It reduces what customers owe, so it goes on the credit side.

A dishonoured cheque restores a debt, so it goes on the debit side. Students often wrongly net it off against receipts.

A contra entry reduces receivables, so it is a credit here, but it is a debit in the purchases ledger control account. Cash sales never create a receivable, so leave them out completely.

Ask one question of every item: does this make customers owe more or less? More goes on the debit side and less goes on the credit side. Label every line, show "balance c/d" and "balance b/d", and make both sides total the same figure.

If you keep placing items on the wrong side of a control account, we can help. One of our teachers can work through past-paper questions with you and give you a simple test for each item. Book a trial class

Related how-to

• How to prepare a sales ledger control account

These formats are standard accounting practice with our own figures. Check your board's exact requirements on the exam boards page.