## **Learning Outcomes**

After reading this article, you will be able to explain the function of sales and purchases day books, describe how day book entries are posted to the general ledger, and identify the key steps involved in transferring totals using double-entry bookkeeping. You will also understand the role of ledgers in preparing financial statements and avoid common errors when posting from day books.

## **ACCA Maintaining Financial Records (FA2) Syllabus**

For ACCA Maintaining Financial Records (FA2), you are required to understand how sales and purchases transactions are recorded, summarized, and posted as part of the accounting process. In particular, focus your revision on:

- The purpose and content of sales and purchases day books (books of prime entry)
- The correct posting of sales and purchases day book totals to the general ledger
- The operation of double-entry bookkeeping relating to sales and purchases
- Recording returns and discounts within the accounting system
- The flow of accounting information from day books to individual ledger accounts
- The segregation between control accounts and subsidiary ledger accounts

## **Test Your Knowledge**

_Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision._

1. What is the main purpose of a sales day book in a business?
2. When posting totals from the purchases day book to the general ledger, which accounts are typically affected?
3. True or false? Individual credit sales are entered directly into the general ledger at the time of transaction.
4. What is the double-entry required when posting the total credit sales for a period from the sales day book?

## **Introduction**

Efficient recording of credit sales and purchases is an essential task in bookkeeping. Instead of posting every individual credit sale or purchase directly into the ledgers, businesses use day books (books of prime entry) to record multiple transactions. This intermediate stage saves time and helps keep the accounting system organized.

This article explains the role of sales and purchases day books, how to post their totals to the ledger accounts using double-entry, and the importance of accuracy when transferring data. You will see how this process maintains a clear record for credit transactions and supports the preparation of financial statements.

> **Key Term: day books**
> Books of prime entry used to record credit sales and credit purchases before posting totals to the general ledger.

## **Sales and Purchases Day Books**

Sales and purchases day books are central records where all credit sales and credit purchases are first listed before being transferred to the main accounting system.

### Recording Credit Transactions

- The **sales day book** lists all credit sales invoices issued to customers during a period.
- The **purchases day book** records all credit purchases invoices received from suppliers.

Cash transactions are entered directly into the cash or bank accounts, while only credit transactions are entered in the day books.

> **Key Term: sales day book**
> The book of prime entry where all credit sales invoices are recorded before posting to the accounts.
>
> **Key Term: purchases day book**
> The book of prime entry where all credit purchase invoices are recorded before posting to the accounts.

### Posting Totals to the Ledger

At the end of a period (usually weekly or monthly), the totals from each day book are posted to the general ledger using double-entry bookkeeping.

- The **sales day book total** is posted as:
  - Debit: Trade Receivables (to show amounts owed by customers)
  - Credit: Sales Revenue

- The **purchases day book total** is posted as:
  - Debit: Purchases (or appropriate expense/asset account)
  - Credit: Trade Payables (to show amounts owed to suppliers)

This ensures the general ledger reflects all relevant sales and purchases for the period.

> **Key Term: ledger**
> The set of accounts, organized by type, where all double-entry postings are made and summarized for reporting.

### **Worked Example 1.1**

A company’s sales day book shows total credit sales of \$18,000 for the month, and its purchases day book shows total credit purchases of \$7,000. No cash transactions are included.

**Question:** What are the general ledger entries required for these two totals?

> **Answer:**

- For credit sales:
  - Debit Trade Receivables \$18,000
  - Credit Sales Revenue \$18,000
- For credit purchases:
  - Debit Purchases \$7,000
  - Credit Trade Payables \$7,000

### Importance of Control Accounts

In larger accounting systems, **receivables control accounts** and **payables control accounts** summarize all credit sales and purchases posted from the day books. Individual customer and supplier accounts are tracked in subsidiary ledgers.

> **Key Term: control account**
> A general ledger account that summarizes totals for related subsidiary accounts (e.g., total receivables from all customers).

### Returns and Discounts

Returns inwards (sales returns) and returns outwards (purchases returns) are usually recorded in separate day books and posted similarly.

- Sales returns: Debit Sales Returns, Credit Trade Receivables
- Purchases returns: Debit Trade Payables, Credit Purchases Returns

Discounts allowed or received may be recorded in total or individually as relevant to the business’s accounting policy.

### **Worked Example 1.2**

The sales day book for the week shows \$4,000; a separate sales returns day book shows \$500 in returns. What entries are required?

> **Answer:**

- Debit Trade Receivables \$4,000 (sales), Credit Sales \$4,000
- Debit Sales Returns \$500, Credit Trade Receivables \$500

### **Exam Warning**

Always ensure you are posting **totals** from the day books, not individual invoice amounts, unless instructed otherwise. Remember to update both the relevant revenue/expense account and the control account or primary ledger account.

### Mistakes to Avoid

It is incorrect to post every invoice from the day book directly into the general ledger. This duplicates effort and undermines the purpose of the day book as a summary tool.

### **Revision Tip**

When preparing for exams, practice drawing schematic diagrams linking day books, ledger accounts, control accounts, and subsidiary accounts, to visualize the flow of information.

## **Summary**

Sales and purchases day books capture all credit transactions and streamline the accounting process by summarizing postings to the general ledger. Proper posting ensures accuracy, completeness, and efficient preparation of financial statements. Thorough understanding of the flow from day books to ledgers is fundamental to bookkeeping and double-entry principles for ACCA FA2.

## **Key Point Checklist**

_This article has covered the following key knowledge points:_

- Describe the purpose of sales and purchases day books as books of prime entry
- Identify which transactions are recorded in each day book
- Explain how to post day book totals to the general ledger using double-entry bookkeeping
- Distinguish between control accounts and subsidiary ledger accounts
- Show correct postings for returns and for discounts related to sales and purchases

## **Key Terms and Concepts**

- day books
- sales day book
- purchases day book
- ledger
- control account

Sales and purchases day books - Posting from day books to ledgers