3) Receivable And Payable Subsidiary Ledgers

Question 1

Receivables ledger (sub-ledger receivables ledger)

Answer 1

Receivables ledger (sub-ledger receivables ledger)

.Maintained through individual customer accounts to
monitor which customer owes what.

.Not part of the double entry system and is maintained
only to provide a breakdown of the total in the
receivables ledger control account.

Question 2

Receivables ledger entries

Answer 2

Receivables ledger entries

.Sales = debit entry (money coming into the business).

.Sales returns = credit entry (money coming out of
business).

.Full gross value added = full amount the customer pays
on their account.

.Payments - when payment is made take off money from larger amount owing first. Check the date from payments as earlier invoices could have already been paid off in the month.

Question 3

Reconciling receivables ledger

Answer 3

Reconciling receivables ledger

Individual credit customer account has two sides

1) Left-hand side - records sales invoices that have been issued to the customer and show increases in the amount they owe (receivables balance).

2) Right-hand side -records sales credit notes sent to the customer and payments that they make to the business, so shows a reduction in the amount they owe.

Question 4

Statement of account

Answer 4

Statement of account

.Is sent to customers with an outstanding debt to remind them that the debt is due for payment.

.It is a procedure promoting good credit control.

.The statement of account details all outstanding invoices and credit notes at the statement date.

Question 5

NEGATIVE FIGURE IN A LEDGER ACCOUNT

Answer 5

NEGATIVE FIGURE IN A LEDGER ACCOUNT

.If you are trying to decrease one of the balances, simply
put the entry onto the opposite side of the ledger
account.

Question 6

BANK LEDGER ACCOUNT

Answer 6

BANK LEDGER ACCOUNT

.Has a large volume of transactions recorded.

.It is classified as an ASSET.

.Money PAID INTO BANK increases the BANK ASSET =
DEBIT ENTRY e.g. sales.

.Money PAID OUT OF BANK decreases the BANK ASSET =
CREDIT ENTRY e.g. rent.

.BANK ACCOUNT = CASH MUIST ALWAYS be a DEBIT
BALANCE NEVER A CREDIT FIGURE because all ASSETS
MUST BE DEBITS.

Question 7

Double entry RECEIVABLES LEDGER (CREDIT SALE)

Answer 7

Double entry RECEIVABLES LEDGER (CREDIT SALE)

MONEY OWED BY CUSTOMER
.Customer account = GROSS AMOUNT - DEBIT ENTRY
(MONEY OWED INTO THE BUSINESS = ASSET).
.Sales account = NET AMOUNT - CREDIT ENTRY
(GOODS GOING OUT OF THE BUSINESS).
.Vat account = VAT VALUE - CREDIT ENTRY (VAT VALUE
OWED OUT TO HMRC).

MONEY PAID BY CUSTOMER
.Customer account = GROSS AMOUNT - CREDIT ENTRY
(REDUCES AMOUNT OWED BY CUSTOMER)
.Bank/ Cash account = GROSS AMOUNT - DEBIT ENTRY (MONEY COMING INTO THE BUSINESS)

Question 8

Double entry PAYABLES LEDGER (CREDIT PURCHASE FOR RESALE)

Answer 8

Double entry PAYABLES LEDGER (CREDIT PURCHASE FOR RESALE)

MONEY OWED BY BUSINESS
.Supplier account = GROSS AMOUNT - CREDIT ENTRY
(MONEY OWED OUT OF THE BUSINESS).
.Purchases account = NET AMOUNT - DEBIT ENTRY
(GOODS COMING INTO THE BUSINESS).
. VAT account = VAT VALUE - DEBIT ENTRY (VAT VALUE
OWED IN FROM HMRC).

MONEY PAID BY BUSINESS
.Supplier account = GROSS AMOUNT - DEBIT ENTRY (REDUCES AMOUNT OWED TO SUPPLIER/ REDUCE LIABILITY).
.Bank/ Cash account = GROSS AMOUNT - CREDIT ENTRY (MONEY GOING OUT OF THE BUSINESS).

Question 9

Credit purchase of an ASSET

Answer 9

Double entry CREDIT PURCHASES OF AN ASSET

MONEY OWED BY BUSINESS
.Supplier account = GROSS AMOUNT - CREDIT ENTRY
(MONEY OWED OUT OF THE BUSINESS).
.Asset account = NET AMOUNT - DEBIT ENTRY
(ASSET COMING INTO THE BUSINESS).
.VAT account = VAT VALUE - DEBIT ENTRY (VAT VALUE
OWED IN FROM HMRC).

MONEY PAID BY BUSINESS
.Supplier account = GROSS AMOUNT - DEBIT ENTRY
(REDUCES AMOUNT OWED TO SUPPLIER).
.Bank/ Cash account = GROSS AMOUNT - CREDIT ENTRY
(MONEY GOING OUT OF THE BUSINESS).

Question 10

Supplier account code (payables)

Answer 10

Supplier account code (payables)

Question 11

Control accounts in the books

Answer 11

Control accounts in the books

.If it is the company policy to include the control accounts in the books then the personal accounts within the receivables and payable ledger will no longer form part of the double entry process, they are completed as MEMORANDUM accounts.

.A MEMORANDUM in accounting refers to a document with a short message to be entered in the general journal and the general ledger account. The message in the memorandum is entered in the ledger for tracking purposes of the updates made in the accounting record.