Sales & Purchase Ledgers Interview Questions & Answers

Q: What is the sales ledger?

The sales ledger (debtors ledger or accounts receivable ledger) contains a personal account for each credit customer, showing invoices (debits), and returns, receipts, and discounts (credits), and the balance owed. It's a memorandum ledger—its total is reconciled to the sales ledger control account in the nominal ledger.

Q: What is the purchases ledger?

The purchases ledger (creditors ledger or accounts payable ledger) contains a personal account for each credit supplier, showing invoices (credits), and returns, payments, and discounts (debits), and the balance owed to them. Like the sales ledger, it's a memorandum ledger reconciled to the purchases ledger control account.

Q: What is the difference between the sales ledger and the sales account?

The sales account is a nominal (income) account in the general ledger recording total sales revenue. The sales ledger is a set of personal accounts, one per customer, tracking who owes what. Sales revenue hits the sales account; amounts owed by customers sit in the sales ledger, controlled by the receivables control account.

Q: How is a customer's account in the sales ledger written up?

Debit the customer with invoices (from the sales day book). Credit them with sales returns (credit notes), cash/cheques received, discounts allowed, and any bad debt written off. The balance (usually a debit) shows how much they still owe. Entries come from the day books and cash book.

Q: How is a supplier's account in the purchases ledger written up?

Credit the supplier with invoices (from the purchases day book). Debit them with purchases returns, payments made, and discounts received. The balance (usually a credit) shows how much is still owed to them. Entries come from the purchases day book, returns day book, and cash book.

Q: What is a debtor and a creditor?

A debtor (trade receivable) is someone who owes the business money, typically a credit customer—an asset. A creditor (trade payable) is someone the business owes money to, typically a credit supplier—a liability. Their balances live in the sales and purchases ledgers respectively.

Q: What is a contra between the sales and purchases ledgers (set-off)?

A contra/set-off occurs when the same party is both a customer and a supplier. The amount owed can be offset: debit the purchases ledger account and credit the sales ledger account for the lower balance, so only the net is settled. A corresponding entry adjusts both control accounts.

Q: How do you deal with a credit balance in the sales ledger?

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.

Q: What is a statement of account sent to customers?

A statement of account is a periodic summary sent to a credit customer listing opening balance, invoices, credit notes, payments received, and the closing balance owed. It reminds customers of amounts due, helps them reconcile, and supports collection. It's produced from the customer's sales ledger account.

Q: How do you account for an irrecoverable (bad) debt in the sales ledger?

When a customer's debt is deemed uncollectible, write it off: debit bad debts expense (and reverse the VAT if bad-debt relief applies) and credit the customer's account in the sales ledger to remove the receivable. This is recorded via the journal and reflected in the receivables control account.

What is the sales ledger?

Beginner

The sales ledger (debtors ledger or accounts receivable ledger) contains a personal account for each credit customer, showing invoices (debits), and returns, receipts, and discounts (credits), and the balance owed. It's a memorandum ledger—its total is reconciled to the sales ledger control account in the nominal ledger.

Real-world example Each customer has an account in the sales ledger showing what they've been invoiced and paid.

Common follow-ups: Is the sales ledger part of double entry? | What does each customer account show?

Control Accounts Books of Prime Entry Sales & Purchase Ledgers

What is the purchases ledger?

Beginner

The purchases ledger (creditors ledger or accounts payable ledger) contains a personal account for each credit supplier, showing invoices (credits), and returns, payments, and discounts (debits), and the balance owed to them. Like the sales ledger, it's a memorandum ledger reconciled to the purchases ledger control account.

Real-world example Each supplier has an account in the purchases ledger showing amounts owed and paid.

Common follow-ups: What is a creditor's normal balance? | What reconciles the purchases ledger total?

Control Accounts Books of Prime Entry Sales & Purchase Ledgers

What is the difference between the sales ledger and the sales account?

Beginner

The sales account is a nominal (income) account in the general ledger recording total sales revenue. The sales ledger is a set of personal accounts, one per customer, tracking who owes what. Sales revenue hits the sales account; amounts owed by customers sit in the sales ledger, controlled by the receivables control account.

Real-world example Total revenue is credited to the sales account, while individual customer balances live in the sales ledger.

Common follow-ups: Which records revenue? | Which tracks individual customers?

Control Accounts Books of Prime Entry Sales & Purchase Ledgers

How is a customer's account in the sales ledger written up?

Intermediate

Debit the customer with invoices (from the sales day book). Credit them with sales returns (credit notes), cash/cheques received, discounts allowed, and any bad debt written off. The balance (usually a debit) shows how much they still owe. Entries come from the day books and cash book.

Customer account:
  Dr Invoices 1,200
  Cr Receipt 1,000, Discount allowed 20, Return 60
  Balance c/d 120 (still owed)

Real-world example A customer's account is debited for a new invoice and credited when they pay or return goods.

Common follow-ups: What is credited to a customer account? | What does a debit balance mean?

Control Accounts Cash Book & Petty Cash Sales & Purchase Ledgers

How is a supplier's account in the purchases ledger written up?

Intermediate

Credit the supplier with invoices (from the purchases day book). Debit them with purchases returns, payments made, and discounts received. The balance (usually a credit) shows how much is still owed to them. Entries come from the purchases day book, returns day book, and cash book.

Supplier account:
  Cr Invoices 900
  Dr Payment 600, Discount received 15, Return 85
  Balance c/d 200 (still owed)

Real-world example A supplier's account is credited when their invoice arrives and debited when paid or when goods are returned.

Common follow-ups: What is debited to a supplier account? | What does a credit balance mean?

Control Accounts Cash Book & Petty Cash Sales & Purchase Ledgers

What is a debtor and a creditor?

Beginner

A debtor (trade receivable) is someone who owes the business money, typically a credit customer—an asset. A creditor (trade payable) is someone the business owes money to, typically a credit supplier—a liability. Their balances live in the sales and purchases ledgers respectively.

Real-world example A customer who bought on credit is a debtor; a supplier awaiting payment is a creditor.

Common follow-ups: Is a debtor an asset or liability? | Where is each recorded?

Control Accounts Trial Balance Sales & Purchase Ledgers

What is a contra between the sales and purchases ledgers (set-off)?

Intermediate

A contra/set-off occurs when the same party is both a customer and a supplier. The amount owed can be offset: debit the purchases ledger account and credit the sales ledger account for the lower balance, so only the net is settled. A corresponding entry adjusts both control accounts.

Party owes us 500 (sales ledger) and we owe them 300 (purchases ledger):
  Dr Purchases Ledger (their supplier a/c) 300
      Cr Sales Ledger (their customer a/c) 300
  Net: they owe us 200.

Real-world example A firm both buys from and sells to the same company, so the smaller balance is set off, leaving a net amount.

Common follow-ups: When is a contra used? | How are the control accounts affected?

Control Accounts Correcting Errors Sales & Purchase Ledgers

How do you deal with a credit balance in the sales ledger?

Intermediate

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

What is a statement of account sent to customers?

Beginner

A statement of account is a periodic summary sent to a credit customer listing opening balance, invoices, credit notes, payments received, and the closing balance owed. It reminds customers of amounts due, helps them reconcile, and supports collection. It's produced from the customer's sales ledger account.

Real-world example At month-end each customer receives a statement summarizing their invoices and the balance to pay.

Common follow-ups: What information does a statement contain? | Which ledger produces it?

Cash Book & Petty Cash Control Accounts Sales & Purchase Ledgers

How do you account for an irrecoverable (bad) debt in the sales ledger?

Advanced

When a customer's debt is deemed uncollectible, write it off: debit bad debts expense (and reverse the VAT if bad-debt relief applies) and credit the customer's account in the sales ledger to remove the receivable. This is recorded via the journal and reflected in the receivables control account.

Write off 400 bad debt:
  Dr Bad Debts Expense 400
      Cr Trade Receivables (customer) 400

Real-world example After a customer becomes insolvent, their outstanding balance is written off to bad debts expense.

Common follow-ups: Which account is debited on a write-off? | How is VAT bad-debt relief handled?

Control Accounts Correcting Errors Sales & Purchase Ledgers