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Sales and sales recordsChapter 6
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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 goodsand 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.
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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,
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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 goodsso 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 SalesTaxthe basic is the same business is collector for the tax. The
rest of the principles for both approches UK and
International.
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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 ischarged 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: certaininformation must be on the invoice for the purpose of VAT
such as VAT Registration #, Tax Point/Date and Rate of
VAT.
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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: fromCustomer 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: Invoiceshould be checked against the order, and make sure all
the required information is provided.
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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 sourcedocument containing the detail of sales returns.
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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
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7. Sales Day Book
7.1 What does a Sales Day Book look like?
Sales Ledger Account Number
Settlement Discounts
7.2 Analysed Sales Day Book: Analized according ragions,departments, items etc
7.3 Entries in an Analized Sales day Book
Ragion 4 Ragion3
Ragion 2 Ragion1
VAT Total SalesLedgeraccount
Customer Name
Invoice # Date
20000 3500 23500 S2175 ForksLtd 68 15/9/05
VAT Total Sales Ledger account
CustomerName
Invoice # Date
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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
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9. Function of the Primary Records: PostingTransaction Details to Ledger
Step 1: Periodically totaled daily as the name implies but itcan 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 asfollowing:
Debit: Debitors (receivables) control account
Credit: Sales account
Credit: VAT (Sales Tax)
Memorandum Accounts: These are the accounts used asshortcuts showing any individual how much owe at any time.