Sales and sales records

Chapter 6

1. Source Documents for Sales and Sales Records

1.1 The Purpose of Sales Invoice: Credit sale 1.2 Copies of Sales Invoice: Main copy to the customer, other copies

remain with the seller 1.3 When are sales Invoices Produced: Along with the goods or with the person providing the service, or delivery note is sent with goods and invoice is sent separately then, after the service is provided, and can be sent before the goods or service is provided. 1.4 Content of a Sales Invoice: Org name, address, contact, registration #, order #, Customer info, items, qty, unit price, total, grand total, VAT #, tax, tax point/date, terms 1.5 Settlement Term: Net 3 days, E & OE (Error and Omission excepted) having the right to amend errors, Ex Works (exclosive works) means delivery cost is not included in the invoice and must be paid by customer.

1. Source ..
1.6 Purpose of a Credit Note: Reverse of Sales invoice, to

show the customers no longers owe money for a certaing number of items. It is required for returns faulty and damage, not received, correcting error.
1.7 copies of credit notes: top copy to the customer others

kepped for recordings, accountign, controlling, references.

1.8 when are credit notes produce: customer is dissatisfied

the goods, regain customers goodwill.

1.9 content of a credit note: Company name and contact

info, invoince number, VAT, item #, detail, qty, discount, subtotal. VAT amount, net paid,

2. Types of Discount
2.1 Trading Discoing: is for persuading bulk purchase,

become regular customer

2.2 Settlement Discount: persuading the customer to

make the payment as soon as possible.

3. General Principles of VAT and Sales Taxes

UK prospective: when the sales of a business reaches a

certain value it must register for VAT. The business collects the tax for the government.
The business also gives tax when purchasing the goods

so the business can the amount of tax paid at the time of purchasing the goods from the tax collected from the customers.
An International Perspective: VAT is known as Sales Tax

the basic is the same business is collector for the tax. The rest of the principles for both approches UK and International.

3. General Principles of VAT ..

3.1 Basic Calculation of VAT (Sales Tax): when a VAT

registered Co. sells anything to its customers it must charge its customers VAT normally 17.5
3.2 VAT and Settlement Discount in the UK: VAT is

charged on the amount after the deduction of settlment Discount amount. It is considered that the customer will accept the settlement discount term.
3.3 VAT (Sales Tax) requirements VAT invoice: certain

information must be on the invoice for the purpose of VAT such as VAT Registration #, Tax Point/Date and Rate of VAT.

4. Preparing a Sales Invoice and Credit Note

4.1 Authorizing the preparation of an Invoice: at

appropriate time, after good is delivered, authorized person should confirm that the goods have been provided.
4.2 Finding Information for a Sales Invoice: from

Customer Purchase Order, price list sold by the business, sales order, copy of the price quotation sent to the customer.
4.3 Checking and Approving a Completed Invoice: Invoice

should be checked against the order, and make sure all the required information is provided.

4. Preparing a Sales Invoice

4.4 Obtaining Details for a Credit Note: is similar to the

invoice preparation. Details of the goods returned is important, some form of goods returned note is needed to record detail and the reason for being returned.
4.5 VAT (Sales Tax) on Credit Notes: when a credit note is

issued the amount of VAT payable is also reduced.

4.6 Authorization and Approval of Credit Notes: the credit

note should be prepared by signing or initialing the source document containing the detail of sales returns.

5. Methods of Coding Data

5.1 Coding required for sales invoice to ensure that: the

transaction will be properly recorded in nominal ledger, the account for sales, VAT, Customer account etc.
5.2 Coding Required for a Credit Note: to identify the

transaction as a sales return or return from a customer, for recording in nominal ledger and also the balance of the customer should be reduced.
5. 3 Coding Invoices and Credit Notes (Grid Stamp): on

commonly used method is grid stump, a small table like is stamped on the invoice or credit note and relevant codes will be written in the table. e.g Ledger A/c

Calculation Checked Credit note authorizaiton

6. Books of Prime Entry: Day Books

Sales Day Book Sales Return Day Book Purchase Day Book Purchase Return Day Book Cash Book Petty Cash Book Journal

7. Sales Day Book

7.1 What does a Sales Day Book look like?
Sales Ledger Account Number Settlement Discounts
VAT Total Sales Ledger account Customer Name Invoice # Date

7.2 Analysed Sales Day Book: Analized according ragions,

departments, items etc

Ragion 4 Ragion 3 Ragion 2 Ragion 1 20000 VAT Total Sales Ledger account S2175 Custome r Name Forks Ltd Invoice # Date

3500

2350 0

68

15/9/0 5

7.3 Entries in an Analized Sales day Book

8. Sales Returns Day Book

Contents: Date of Credit note Credit Note Number Customer Name Customer Account Reference Number (Ledger A/C) Credit Note Total Amount\ VAT (Sales Tax) Sub Total

9. Function of the Primary Records: Posting Transaction Details to Ledger

Step 1: Periodically totaled daily as the name implies but it

can be weekly or monthly depending on the requirements. Sales Day book lists all the credit sales
Step 2: The totals will be then posted to the ledger which

becomes part of the Double Entry. It will be done as following:

Debit:

Debitors (receivables) control account

Credit: Sales account Credit: VAT (Sales Tax)

Memorandum Accounts: These are the accounts used as

shortcuts showing any individual how much owe at any time.