All 25 Sales & Purchase Ledgers questions
More in Sales & Purchase Ledgers
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 account for an irrecoverable (bad) debt in the sales ledger? How do you reconcile the sales ledger to the sales ledger control account? How do you handle a supplier statement reconciliation in the purchases ledger? How do you account for a provision (allowance) for doubtful debts affecting receivables? How is VAT bad-debt relief handled when writing off a receivable?
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Bookkeeping › Sales & Purchase Ledgers

How do you record interest charged to a slow-paying customer?

Intermediate

Answer

Interest charged on an overdue customer account is income: debit the customer's account in the sales ledger (increasing what they owe) and credit interest income (or a sundry income account). It also increases the receivables control account. It's usually recorded via the journal.
Charge 25 interest: Dr Customer (sales ledger) 25; Cr Interest Income 25.
Real-world example A late-paying customer is charged interest, increasing their balance and recording income.

Common follow-ups: Which account is credited? | Does it affect the control account?

Control Accounts Cash Book & Petty Cash Sales & Purchase Ledgers
All 25 Sales & Purchase Ledgers questions