Sales Ledger

Article byAbhilash Ramachandran
Edited byAshish Kumar Srivastav
Reviewed byDheeraj Vaidya, CFA, FRM

What is a Sales Ledger?

A sales ledger is a ledger entry that records any sale in the book of records, even if the payment is received or not yet received. They record sales and sales returns, which is a negative entry since the product that was sold is returned. The typical sales ledger format contains information like the date of sale, invoice number, amount of sale, products sold, customer name, tax information, freight charges, etc. The general ledger records the cumulative amount, summarized systematically in the sales ledger; it is posted in the sales account. It records the sales and the cash as and when received and how much is owed to the business.

Example of Sales Ledger Format

Let’s take an example.

You can download this Sales Ledger Excel Template here – Sales Ledger Excel Template

Ryan’s Inc deals in industrial kitchen products business and only makes one product. A sales ledgerLedgerLedger in accounting records and processes a firm’s financial data, taken from journal entries. This becomes an important financial record for future reference. It is used for creating financial statements. It is also known as the second book of entry.read more  for Ryan’s inc is placed in the grid below. It shows the sales done between January to June. And the payments received and pending. All invoices except two (highlighted) have been settled by the end of June. A sales ledger format for these transactions is shown below:

Sales Ledger Example 1

The sales ledger format shows the date at which the sale was made, along with the actual sale amount and the VATVATValue-added tax (VAT) refers to the charges imposed whenever there is an accretion to a product's usefulness or value throughout its supply chain, i.e., from its manufacturing to its final selling point. It is an indirect tax levied on the product consumption.read more  information. It also shows the gross amount to be paid by the customer. The last column shows the date of receipt of payment from the customer for the products sold. The sales ledger in the above example shows the actual sale amount, which is $20445. It also shows the amount that the customers paid for the sold products, i.e., $16,215. The remaining $4,230 is still pending to be paid by the customer.

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This way, it becomes easy for a business to keep track of all its sales and accounts receivablesAccounts ReceivablesAccounts receivables is the money owed to a business by clients for which the business has given services or delivered a product but has not yet collected payment. They are categorized as current assets on the balance sheet as the payments expected within a year. read more owed to the business. Furthermore, this ledger enables the business to record the sale of its products along with the buyer’s information and the amount owed. In addition, it aims to provide detailed information regarding the sale and any information regarding sales returns, discounts, and payment information.

Advantages of Sales Ledger

Some of the advantages are as follows.

  • owed to the business. Furthermore, this ledger enables the business to record the sale of its products along with the buyer’s information and the amount owed. In addition, it aims to provide detailed information regarding the sale and any information regarding sales returns, discounts, and payment information.
  • Auditors can dig deep into this ledger and can verify if the sales reported by the business is legitimate.

Disadvantages

Some of the disadvantages are as follows.

  • It requires effort, knowledge, and skills to maintain it.
  • It records a transaction even before the payment is received; hence a pending payment is tracked until the customer makes payment.
  • The sales account has cumulative information on the sales ledger and, therefore, might not be worth the effort unless something goes wrong.

Important Points

Conclusion

  •  It contains all the information regarding any sale done, regardless of the payment status.
  • They also record information regarding sales returns; any sale that the customer has returned for whatsoever reason needs to be recorded in the sales ledger.
  • A sales account in the general ledger has a cumulative value or information regarding the actual sales ledger.
  • By looking at this ledger, detailed information regarding the revenues can be obtained.
  • It contains essential information like date of sale, invoice number, name of the customer, and amount of sale, to name a few.
  • They record sales, sales records, payments, and discounts.

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