How do the sales, purchases and returns journals group credit transactions before they reach the ledger?
Prepare the sales, purchases and returns journals and post their totals to the ledger
A focused answer to the O-Level Principles of Accounts outcome on the day books. Recording credit sales, purchases and returns in the journals, and posting the individual entries and period totals to the ledgers.
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What this dot point is asking
SEAB wants you to prepare the sales, purchases and returns journals (the day books) and to post them to the ledgers. The central insight is that a journal is a book of prime entry - a list that gathers similar credit transactions from the source documents before posting - and the double entry is completed only when the journal is posted: each personal account individually, the total to the nominal account.
The answer
The day books
A day book (journal) lists one type of credit transaction in date order, taken from the source documents. There are four:
| Journal | Records | Source document |
|---|---|---|
| Sales journal | Credit sales | Sales invoices (copies) |
| Purchases journal | Credit purchases | Purchase invoices (received) |
| Returns inwards journal | Goods returned by customers | Credit notes issued |
| Returns outwards journal | Goods returned to suppliers | Credit notes received |
Cash transactions are not in these journals; they go in the cash book.
Why journals are used
Journals group similar transactions so the ledger is not cluttered with hundreds of separate entries, and they total the period's transactions so one figure can be posted to the nominal account. A journal is not part of the double entry itself; no debit or credit is made inside it.
Posting to the ledgers
When a journal is posted, the double entry is completed:
- Sales journal: debit each customer individually (sales ledger); credit the total to Sales (general ledger).
- Purchases journal: credit each supplier individually (purchases ledger); debit the total to Purchases.
- Returns inwards journal: credit each customer individually; debit the total to Returns inwards.
- Returns outwards journal: debit each supplier individually; credit the total to Returns outwards.
So the personal accounts are posted one by one, and the nominal account receives the single period total.
Examples in context
Example 1. A busy retailer's ledger stays tidy. A shop makes 200 credit sales in a month. Instead of 200 separate credits to the Sales account, it lists them in the sales journal and posts one total. The 200 customers are still debited individually, so each owes the right amount, but the Sales account shows a single clean monthly figure.
Example 2. Checking against a control account. The total of the sales journal that is posted to Sales also feeds the sales ledger control account. Because the same total drives both the individual customer accounts and the control account, the two can be compared to check that all the individual postings were made correctly.
Try this
Q1. Name the four day books and one source document for each. [4 marks]
- Cue. Sales journal (sales invoice copy); purchases journal (purchase invoice); returns inwards journal (credit note issued); returns outwards journal (credit note received).
Q2. A purchases journal totals \5,000$. State the posting to the Purchases account. [1 mark]
- Cue. Debit Purchases \5,000$ (the suppliers are credited individually).
Q3. Explain why credit sales are listed in a journal before being posted. [2 marks]
- Cue. To group similar transactions and total them, so the Sales account receives one figure while each customer is posted individually, keeping the ledger tidy.
Exam-style practice questions
Practice questions written in the style of SEAB exam questions on this dot point, with worked answer explainers. The year tag is the paper they imitate, not the source.
Original7 marksFrom the following credit transactions for June, prepare the sales journal and state the postings to the ledger: Jun 3 sold to Aziz \1\,200\; Jun 20 sold to Aziz \500$.Show worked answer →
| Sales journal | \$ |
|---|---|
| Jun 3 Aziz | 1,200 |
| Jun 12 Bala | 800 |
| Jun 20 Aziz | 500 |
| Total transferred to Sales account | 2,500 |
Postings:
- Individually, debit each customer's account in the sales ledger: Aziz \1,200\, Bala \800$.
- In total, credit the Sales account in the general ledger with \2,500$.
So each customer is debited individually (they owe the business) and the one total is credited to Sales. Aziz's account shows total debits of \1,700$.
Markers reward listing the journal entries with a period total, debiting each customer individually, and crediting Sales with the single total of \2,500$.
Original5 marksExplain why the sales journal is not part of the double-entry system itself, and how its figures enter the ledger.Show worked answer →
The sales journal is a book of prime entry: it is simply a list of credit sales taken from the sales invoices, used to gather them before they are posted. It is not part of the double entry because no debit and credit are made within it; it only records and totals the transactions.
Its figures enter the ledger in two ways: each customer's account is debited individually (they each owe the business), and the total of the journal is credited to the Sales account. The double entry is completed only at this posting stage, not in the journal itself.
Markers reward explaining that the journal is a list (a book of prime entry) with no double entry inside it, and that posting debits each customer individually and credits the period total to Sales.
Related dot points
- Identify the source documents for common transactions and explain their role in the accounting process
A focused answer to the O-Level Principles of Accounts outcome on source documents. The invoice, credit note, receipt, cheque counterfoil and others, and how each begins the recording process in the books of prime entry.
- Prepare a two-column and three-column cash book, including cash discounts and contra entries
A focused answer to the O-Level Principles of Accounts outcome on the cash book. The two-column and three-column cash book, cash discounts allowed and received, contra entries, and posting the discount totals.
- Use the general journal for non-routine entries and explain the division of the ledger
A focused answer to the O-Level Principles of Accounts outcome on the general journal and the ledger system. Journal entries with narratives, the uses of the journal, and the division into sales, purchases and general ledgers.
- Record credit purchases, credit sales and returns inwards and outwards using double entry
A focused answer to the O-Level Principles of Accounts outcome on recording trading transactions. Credit purchases and sales, trade receivables and payables, returns inwards and outwards, and carriage.