All 25 Sales & Purchase Ledgers questions
More in Sales & Purchase Ledgers
What is a purchase invoice checked against before posting? How is a customer's account in the sales ledger written up? How is a supplier's account in the purchases ledger written up? What is a contra between the sales and purchases ledgers (set-off)? What is an aged receivables (debtors) analysis and why is it used? How is a refund to a customer or from a supplier recorded? How is an early-settlement discount received from a supplier recorded? How do you record goods taken by the owner from inventory (drawings in kind)? What is the difference between the memorandum ledger balance and the control account balance? How do you record interest charged to a slow-paying customer?
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How do you deal with a credit balance in the sales ledger?

Intermediate

Answer

A credit balance on a customer's account (a debtor with a credit balance) arises from overpayment, a payment in advance, or a credit note exceeding invoices. It represents money owed back to the customer—effectively a payable. At period end such balances are reclassified and shown under payables, not netted against other debtors.
Real-world example A customer who overpaid has a credit balance in the sales ledger, reported as a liability at year-end.

Common follow-ups: What causes a customer credit balance? | How is it presented at year-end?

Control Accounts Trial Balance Sales & Purchase Ledgers
All 25 Sales & Purchase Ledgers questions