Definition of Sold Ledger
The Sold Ledger, also known as the Debtors’ Ledger, is an accounting record used by businesses to track and manage all sales made on credit. This ledger details the amount owed by each customer, the dates of the transactions, and when payments are due. It is an essential part of a company’s financial records, helping to monitor accounts receivable and maintain customer payment histories.
Examples
Example 1: Retail Store
A retail store records a sale of $1,000 on January 1st to a customer who pays on February 1st. The transaction is entered into the sold ledger as follows:
- Date: January 1
- Customer: Customer A
- Invoice Number: INV001
- Amount: $1,000
- Payment Due Date: January 31
Example 2: Wholesale Business
A wholesale business sells goods worth $5,000 on credit to a client on March 15th, with payment due in 30 days. The entry in the sold ledger would be:
- Date: March 15
- Customer: Client B
- Invoice Number: INV002
- Amount: $5,000
- Payment Due Date: April 14
Frequently Asked Questions
What is the primary purpose of a sold ledger?
The primary purpose is to track all sales transactions made on credit, manage accounts receivable, and keep an accurate record of the amounts owed by customers.
How is the sold ledger connected to the general ledger?
The total of the sold ledger (debtor balances) is periodically summarized and posted to the accounts receivable account in the general ledger.
How often should transactions be recorded in the sold ledger?
Transactions should be recorded as soon as they occur to ensure current and accurate financial records.
What details are typically included in the sold ledger?
Typical details include the date of sale, customer name, invoice number, amount owed, and the payment due date.
Is the sold ledger used for cash sales?
No, the sold ledger is specifically for credit sales. Cash sales are recorded separately in the cash book or cash sales ledger.
Accounts Receivable
These are amounts due from customers for goods or services delivered on credit. Accounts receivable are posted to the general ledger and tracked through the sold ledger.
Creditor Ledger
An accounting record that tracks amounts the business owes to suppliers and other creditors. It is the opposite of the debtors’ ledger.
General Ledger
A complete record of all financial transactions of a business. It includes summaries of transactions from all subsidiary ledgers, including the sold ledger.
Online References
Suggested Books for Further Studies
- Intermediate Accounting by Donald E. Kieso, Jerry J. Weygandt, and Terry D. Warfield
- Accounting Principles by Jerry J. Weygandt, Paul D. Kimmel, and Donald E. Kieso
- Financial Accounting by Robert S. Kemp and Jeffrey R. Waybright
Accounting Basics: “Sold Ledger” Fundamentals Quiz
### What is the primary function of the sold ledger?
- [ ] Track cash sales.
- [x] Track credit sales.
- [ ] Record purchase transactions.
- [ ] Maintain inventory levels.
> **Explanation:** The primary function of the sold ledger is to track credit sales and keep a record of amounts owed by customers.
### Are cash sales recorded in the sold ledger?
- [ ] Yes, all types of sales are recorded.
- [x] No, only credit sales are recorded.
- [ ] Only part of cash sales are recorded.
- [ ] Cash sales and credit sales are recorded together.
> **Explanation:** Cash sales are not recorded in the sold ledger; it is specifically used for credit sales.
### What details are typically included in the sold ledger?
- [ ] Only the customer's name and date of sale.
- [x] Customer name, date of sale, invoice number, amount owed, and payment due date.
- [ ] Inventory details and total sales volume.
- [ ] Tax information and bank statements.
> **Explanation:** The sold ledger typically includes the customer name, date of sale, invoice number, amount owed, and the payment due date to ensure comprehensive tracking of credit sales.
### How does the sold ledger relate to the accounts receivable in the general ledger?
- [x] It summarizes credit transactions for individual customers, which are then posted to the accounts receivable account.
- [ ] It records cash transactions that get posted to accounts receivable.
- [ ] It is unrelated to accounts receivable.
- [ ] It summarizes inventory levels that get posted to accounts receivable.
> **Explanation:** The sold ledger summarizes credit transactions for individual customers, which are eventually posted to the accounts receivable account in the general ledger.
### How often should records be updated in the sold ledger?
- [x] As soon as transactions occur.
- [ ] Bi-weekly.
- [ ] Monthly.
- [ ] Annually during the fiscal inventory check.
> **Explanation:** Records in the sold ledger should be updated as soon as transactions occur to maintain up-to-date and accurate financial tracking.
### What type of sales is excluded from the sold ledger?
- [ ] Credit sales.
- [ ] Installment sales.
- [x] Cash sales.
- [ ] Online sales.
> **Explanation:** Cash sales are excluded and are recorded in separate ledgers like the cash book or sales ledger dedicated to cash transactions.
### Is it important to include the invoice number in the sold ledger?
- [x] Yes, for tracking and referencing transactions.
- [ ] No, it is optional.
- [ ] Only when requested by the customer.
- [ ] Only during end-of-year audits.
> **Explanation:** Including the invoice number in the sold ledger is crucial for accurate tracking and referencing of specific transactions.
### What element from the following is not typically part of the sold ledger entry?
- [ ] Date of sale
- [ ] Customer name
- [ ] Invoice number
- [x] Payment terms for suppliers
> **Explanation:** Payment terms for suppliers are not typically part of the sold ledger entry, which focuses on sales transactions and amounts owed by customers.
### What happens when a customer pays their outstanding amount?
- [x] The balance in the sold ledger for that customer is reduced.
- [ ] The balance in the sold ledger for that customer increases.
- [ ] The transaction moves to the inventory ledger.
- [ ] Nothing changes in the sold ledger.
> **Explanation:** When a customer pays their outstanding amount, the balance in the sold ledger for that customer is reduced, reflecting the receipt of payment.
### What document would you use to verify the details recorded in the sold ledger?
- [ ] Purchase order
- [x] Invoice
- [ ] Bank statement
- [ ] Tax return
> **Explanation:** The invoice is used to verify details recorded in the sold ledger, as it contains all necessary transaction details such as date, amount, and payment terms.
Thank you for embarking on this journey through our comprehensive accounting lexicon and tackling our challenging sample exam quiz questions. Keep striving for excellence in your financial knowledge!
