Double Entry for a Credit Sale II

When the customer eventually pays, the second stage of double entry is as follows:

Debit £200

Credit £200

Therefore, the two entries in the debtors account will eventually (hopefully!) cancel eachother out.  Since, in the first stage 9the actual sale), there was a debit of £200 and in the second stage (when payment is made), there is a credit of £200.

The overall effect is to just leave the CASH ACCOUNT and the SALES ACCOUNT in the same position as if the sale had been a cash one.

The method of double accounting for credit sales enables a business to see quite quickly, how much is owed to them in total and how much is outstanding for a particular customer (as, in practice, each customer would be set up with their own debtors account in the “books” of a company)


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