Sales Day Book in Accounting
A business requires to record the key details for each individual credit sale of a customer. The sales day book is a ledger that is manually maintained and includes the following information:
Customer name
Invoice number
Invoice date
Invoice amount
All this information is added generally to a sales day book at the end of each business transaction, the recordings are done based on the company's copies of all customer invoices issued. The next step is to transfer the daily total of the sales that are listed in the sales day book into the sales ledger. Hence, the most detailed records of the credit sales are in the sales day book, and the daily totals of credit sales appears in the sales ledger.
The system of recording in sales day books is recorded in manual accounting systems. These recordings are absent in computerized accounting systems, as accounting software automatically stores and aggregates all the customer invoices prepared through the computer system only.
Sales Day Book and Sales Ledger
The Sales day book is also known as - Sales Book, Sales Journal, Sold Book etc. This is a type of subsidiary book, which is a book of original entry. Sales Day Book is a manually maintained account, with the purpose of recording all the credit sales of the business in one distinct place. All the credit sales of the firm are recorded in the sales day book. Here, no cash sales will be recorded, the cash sales are recorded in the cash book. While, only the sale of goods will be recorded here. The firm selling any asset or investment on credit, the transactions are recorded in the journal proper and not in the sales book.
A sales ledger is a detailed and accurate breakdown of all the sales that have taken place, this does not matter whether or not the same has been paid. Often the sales ledger will contain all the detailed information about the sale itself, including the invoice, amount of tax, and credit notes that are applied.
Items as these are recorded in the sales ledger are then transferred to the appropriate general ledger account at different intervals, this is done according to the nature of the business. The separation will help to keep the general ledger from getting weighed down with too many different accounts, while also maintaining the detailed records which might be required for auditing or reporting function. In the accounting software, the sales ledger is often simplified into several other reports, these can be viewed on the requirement of the concern.
Uses of Sales Day Book
The sales journal also known as the sales day-book, is a type of special journal which are used
To record the credit sales of the transaction.
The sales journal is a chronological list of the sales invoices. This is used to save the time by avoiding the cluttering of the general ledger with unnecessary detail.
This also allows for segregation of duties.
This should be noted that the sales journal includes the credit sales to the customers for merchandise, including cash sales, sale returns, or credit sales for non-merchandise items like the fixed assets. While the cash sales are included in another special journal known as the cash receipts journal, sale returns are included in the sale returns journal.
The use of the sales journal can be vividly detailed into a three-step process:
Information is recorded in the sales journal from the copy of sales invoices sent to the customers.
The journal line items are here used to update the accounts receivable ledger for each of the customers.
Then the journal totals are used to update each general ledger.
This is to be noted that, if the business maintains an accounts receivable ledger account in the general ledger, then the step 3 (above) is the part of the double entry book-keeping posting.
FAQs on Sales Day Book Overview
1. What is a Sales Day Book in accounting?
A Sales Day Book, also known as a Sales Journal, is a special type of subsidiary book used to record all transactions related to the credit sales of goods. It is a book of original entry, meaning transactions are recorded here first before being posted to the ledger.
2. Why do businesses maintain a Sales Day Book instead of just using the main Journal?
Maintaining a separate Sales Day Book helps in several ways:
- It prevents the main Journal from becoming too long and cluttered with repetitive sales entries.
- It allows for the division of accounting work, where one person can manage sales records.
- It makes it easier to find information about credit sales quickly without searching the entire journal.
- It simplifies the process of posting to the ledger, as only a periodic total is posted to the Sales Account.
3. What specific transactions are recorded in the Sales Day Book?
The Sales Day Book is exclusively for recording the credit sales of goods that the business regularly deals in. It is important to remember what is not recorded here:
- Cash sales of goods (these go into the Cash Book).
- Sale of assets like old furniture or machinery (this is recorded in the Journal Proper).
4. What is the standard format of a Sales Day Book?
A typical Sales Day Book has the following columns to capture all necessary details for a transaction:
- Date: The date of the credit sale.
- Particulars: The name of the customer (debtor) to whom goods were sold.
- Invoice No.: The unique number of the sales invoice issued.
- Ledger Folio (L.F.): The page number of the customer's account in the Sales Ledger.
- Amount: The total value of the goods sold on credit.
5. How are entries from the Sales Day Book transferred to the Ledger?
The process involves two steps. First, each individual entry is posted to the debit side of the respective customer's account in the Debtors' Ledger. Second, at the end of a period (like a month), the total of the Sales Day Book is posted as a single entry to the credit side of the Sales Account in the General Ledger.
6. What is the main difference between the Sales Day Book and the Sales Account?
The key difference lies in their function and type. The Sales Day Book is a book of original entry (a sub-division of the Journal) used to record the details of every credit sale transaction as it happens. In contrast, the Sales Account is a ledger account that provides a summarized view of all total sales (both cash and credit) over a period.
7. Why is a sales invoice considered the source document for the Sales Day Book?
A sales invoice is the primary source document because it serves as objective evidence that a credit sale has occurred. It contains all the essential information needed for the accounting entry, such as the date, customer's name, description of goods, quantity, rate, and the total amount due, ensuring the record is accurate and verifiable.
