Learn business documents and day books by doing them

A credit sale is a sale where the customer pays later. Each step of it has its own document.

Quotation

the seller's price, offered before anything is agreed

Purchase order

the buyer's written order

Delivery note

goes with the goods, and is signed when they arrive

Invoice

the seller's request for payment

Credit note

reduces what the customer owes, when goods go back or an invoice charged too much

Statement of account

a list of everything between the seller and one customer for the month. It is a reminder, not a new charge

Remittance advice

sent by the customer with a payment. It lists the invoices and credit notes the payment covers

Only the documents that change what is owed reach the books. An invoice, a credit note and a payment are entered. A quotation, a purchase order and a delivery note are kept, but not entered.

Curlew Paper sells printed stationery on credit. A café orders goods with a list price of £685.00. It is a regular customer, and its trade discount on this order comes to £68.50.

The trade discount comes off before VAT, so VAT is worked out on £616.50. Only the reduced amount goes into the books. The list price and the trade discount are not recorded in any account.

• Put the documents of a credit sale in order, and say which ones reach the books.
• Read an invoice from the seller's side and from the buyer's: net, VAT and gross.
• Build an invoice from its line totals, with a trade discount or a bulk discount taken off before VAT.
• Work out a prompt payment discount, and record it when the customer pays early.
• Check a supplier's invoice against the purchase order and the delivery note before it is paid.
• Code an invoice, so that each figure goes to the right account.
• Write up the four day books, and total and check their columns.
• Post the totals to the general ledger, and each invoice to its customer's or supplier's account.
• Read a customer's account and an aged receivables report, and reconcile a supplier statement.

The rooms post entries from the first module on, so learn debit and credit first if they are new to you. Then take the modules in this order.

1. Business documents. The documents in a credit sale, how to read an invoice, credit notes, statements of account and remittance advices.
2. Invoices and discounts. An invoice total with VAT, trade, bulk and prompt payment discounts, and checking a supplier's invoice against the order and the delivery note.
3. Coding and the ledgers. The chart of accounts, customer and supplier codes, the general ledger and the two subsidiary ledgers, coding an invoice, and batch totals.
4. Sales day books. Writing up the sales day book and the sales returns day book with VAT, then posting them to the general ledger and to each customer's account.
5. Purchases day books. The same for purchases: the two day books, the postings, each supplier's account and a discount received.
6. Customers and suppliers. A customer's account, an aged receivables report, chasing a late payer, reconciling a supplier statement and deciding which suppliers to pay.

A prompt payment discount comes off the net amount and the VAT alike. To the seller it is an expense, kept in Discounts allowed. To the buyer it is income, kept in Discounts received.

A day book is a list of documents, not an account. Each invoice or credit note gets one line, with a net, a VAT and a gross column. Nothing is in the ledger until the totals are posted.

The net total plus the VAT total must equal the gross total. Curlew Paper's invoice goes into the sales day book as £616.50, £123.30 and £739.80.

Each invoice and credit note is also posted, at its gross amount, to the customer's or the supplier's own account. A sale or a purchase paid for at once is not in a day book. It goes in the cash book.

• Entering a quotation, a purchase order or a delivery note. None of them changes what is owed.
• Changing a wrong invoice. An invoice is never rubbed out or altered. It is corrected with a credit note.
• Working out VAT before the trade discount. The discount comes off first.
• Taking a prompt payment discount off when the invoice is raised. Nobody knows then if the customer will pay early.
• Debiting Purchases with the gross total. That counts the VAT as a cost.
• Posting the net amount to a customer's account. The customer owes the VAT as well, so the gross amount is posted.
• Paying a supplier's invoice unchecked. Pay only for what arrived, at the price that was agreed. A wrong invoice is queried with the supplier.
• Paying from a statement without checking it. Any difference from your own records is queried before paying.

Ledger Drill teaches the documents through questions, with no videos. A task shows an invoice, a day book or an account for one invented business, then asks you to work on it.

• Put the documents of a sale in order.
• Type the net, the VAT and the gross of an invoice after a discount.
• Find the one wrong line on an invoice or in a day book.
• Build the journal that posts a day book's totals.
• Sort documents into the day book each one belongs in.
• Type what a customer owes from their account.

Every answer is marked at once, with the rule or the working behind it.

The modules and rooms are listed below, in order. A room that costs nothing carries a Free tag.