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Sales must be recorded when invoiced, and presented in the profit and loss account of the company financial statements. The basic entry is: Dr Debtors in the balance sheet
Cr Sales in the profit and loss account
Receipts are recorded in the balance sheet and cancel out the debit recorded when the sale was recorded. The entry is:
Dr bank control in the balance sheet
Cr Debtors in the balance sheet
This should be done follows:
File your invoices in number order. List the invoices on a spreadsheet following the example below. Add up the columns from the beginning of the financial year to the end of the financial year. Prepare a separate spreadsheet for each year or for each month in the year depending on the volume of transactions. When the customer has paid, note it on the same line as the invoice in an "amount paid" column and note down how much is still owed in a "money owed" column.
| Sales invoices | | | Invoice number | Customer Name | Invoice Date | Date paid | Gross Amount | Amount paid | Money owed | VAT | Net |
Note on Vat
Gross includes VAT. Net is before VAT is added on. If your business is not registered for VAT or there is no VAT due on the sale or expense, then VAT is ignored and net will be the same amount as gross.
Journal entries
Post the total Gross column as a debit to debtors control in the balance sheet of the extended trial balance. Post the total of the VAT column to VAT control as a credit in the extended trial balance. Post the total of net sales to turnover in the profit and loss account as a credit in the extended trial balance. Agree the sum of the VAT and Net column totals to the Gross column total so that: Net (Cr) + VAT (Cr) = Gross
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