Most of the debits to customers’ accounts are from the sales journal. Additional debits may be from the cash disbursements journal when cash payments are made as a rebate or a refund for overpayment or some other similar transactions; still others from the general journal for adjustments of various kinds. The debits to customers, however, for cash paid them are very few in number, because such adjustments usually are not made by means of cash payments. The sales journal, as usually operated, carries a column for credit sales, whose total represents in one amount the total of all detailed debits to customers’ accounts. The total of the credit sales column, therefore, controls the total debits to all customers on account of charge sales to them. In summarizing the sales journal the summary entry should show that this total is to be posted not only to the credit side of the Sales account but also to the debit of the controlling account in the ledger. This is so because the customers ledger has ceased to be an integral part of the general ledger, the controlling account having taken its place. Accordingly, the general ledger contains no record of either the debits or credits of the entire group of sales transactions until the end of the month, when this group must therefore be brought into the general ledger in summary form, both debit and credit.
Where the total sales in the sales journal include an analysis of sales into cash sales and credit sales, the following summary entry should be made:
- Accounts Receivable
- Cash
- Sales
The cash debit is set up only to show the equilibrium of the summary entry and is not posted, because it is entered also in the cash book and is posted from there. This debit posting to “Accounts Receivable” in the general ledger secures in one posting a debit amount equal to all individual debit postings to the customers ledger from this source. The controlling account in the general ledger is variously termed “Sales Ledger,” “Accounts Receivable,” “Trade Debtors,” “Customers,” etc.
The two other sources of debit posting to customers’ accounts are the general journal and the cash book. The debit side of the journal is provided with an Accounts Receivable analysis column in which, as explained in the previous chapter, debits to customers’ accounts are entered. At posting time the total of this Accounts Receivable column will therefore give in one figure a debit posting item to the general ledger Accounts Receivable account equal to all individual debit postings from the general journal to customers’ accounts in the customers ledger.
Usually it is not necessary to provide an Accounts Receivable column on the credit side of the cash book, since debit postings from there to customers’ accounts are very infrequent. Hence no total or controlling figure for entry in the Accounts Receivable account can be obtained. Every item which is posted from this source to the debit of a customer’s account must be also posted—item by item—to the debit of Accounts Receivable in the general ledger. This is of course a double debit posting, but one of these debits is to a subsidiary ledger which is no longer a part of the equilibrium scheme and therefore does not throw the general ledger out of balance. Great care must be exercised to make sure that each of these items is posted both to a customer’s account and also to the Accounts Receivable account.
Credits to the Controlling Account.—An analysis of the credits to customers’ accounts shows four main sources:
1. The cash receipts journal for payments made by customers.
2. The sales returns journal, if one is kept, for goods returned by customers.
3. The note journal for notes received in payment.