How to write up and post a sales day book

The sales day book is a list of the invoices sent to credit customers, in the order they were raised. It is a book of prime entry: the first place a sale is written down.

Each invoice gets one line, with three money columns.

Net

The price of the goods before VAT.

VAT

The tax added. Copy the amount shown on the invoice.

Gross

Net plus VAT: what the customer must pay.

A sale paid for on the spot is not entered here. It goes in the cash book.

A credit note is not entered here either. Credit notes sent to customers have a day book of their own, the sales returns day book.

The day book is only a list. Nothing is in the ledger until it is posted.

The postings go to two ledgers.

General ledger

The accounts for assets, liabilities, capital, income and expenses. The double entry is made here.

Sales ledger

One account for each credit customer. It shows who owes the money.

The column totals go to the general ledger, once, at the end of the period. Each invoice also goes, on its own, to the customer's account in the sales ledger.

The entry in the customer's account is the detail behind the Trade receivables total. It is not a second double entry.

Write the day book up from the invoices as they are raised. Total and post it at the end of the period.

1. Put the invoices in number order. A gap in the numbers means an invoice is missing, so find it before you go on.
2. Write one line for each invoice: its number, the date, the customer, the net amount, the VAT and the gross amount. Copy each figure from the invoice.
3. At the end of the period, add up each money column.
4. Check the totals against each other. The net total plus the VAT total must equal the gross total. Put any mistake right before anything is posted.
5. Post the three totals to the general ledger. Debit Trade receivables with the gross total. Credit Sales with the net total. Credit VAT with the VAT total.
6. Post each invoice to the debit side of its customer's account in the sales ledger, at the gross amount.
7. Add up the debits you posted to the sales ledger. They must come to the gross total.

Customers owe the gross total, so that is the debit. Only the net total is the business's own income. The VAT is collected for HMRC, so it is owed, and a liability goes up on the credit side.

Eastgate Paper sells paper and card on credit to shops and schools. In May it raises four invoices.

The net column adds up to £1,460.00, the VAT column to £292.00 and the gross column to £1,752.00. £1,460.00 plus £292.00 is £1,752.00, so the totals agree.

The three totals are posted to the general ledger.

Then each invoice is posted to its customer's account in the sales ledger, at the gross amount.

Abbey Stationers has two invoices, so its account is debited with £324.00 and £222.00, which is £546.00 in all. The debits to the three accounts come to £1,752.00, the figure debited to Trade receivables.

• Entering a cash sale. Only sales made on credit go in the sales day book.
• Entering a credit note as a line with a minus figure. It goes in the sales returns day book.
• Crediting Sales with the gross total. The VAT is not the business's income, so Sales takes the net total.
• Posting the net amount to the customer's account. The customer owes the VAT as well, so the gross amount is posted.
• Posting every invoice to the Sales account as well as the total. Only the three totals go to the general ledger.
• Posting before the totals are checked. A column added up wrongly then reaches the ledger.
• Copying a figure wrongly from the invoice. Both the debit and the credit are posted from the day book, so both are wrong and the trial balance does not show it.

• The net total plus the VAT total equals the gross total.
• In the general ledger, the one debit equals the two credits added together.
• The debits posted to the sales ledger add up to the gross total.
• The invoice numbers in the day book run in order, with no gap.
• Each line agrees with its invoice.

One more check comes later. The balances of all the customers' accounts, added together, should equal the balance on Trade receivables in the general ledger.