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The customers  pay for the goods  the business is providing based on the invoices that the business has sent to them.  As they pay up, the debtors’  list (Chapter 1 ) has to be updated. The following steps demonstrate how this can be done.

Step 1.      Once again get hold of the bank pay-in slips (Work Pack, page 42 ).  We will use the information on them to update the sales invoice list that you compiled in Chapter 1 .

Step 2.         In the sales invoice list, fill in the “Paid Amount” column with the amount paid.

Step 3.         In respect of the credit note for the customer who returned some of the goods,  put a dash in the  “Outstanding Amount” column as you are going to use this credit note to reduce the outstanding amount on the sales invoice.

Now go to the sales invoice row (Sales Invoice No. 1006) for which the credit note  was raised and on this row update the “Paid Amount” column with the gross amount of the credit note.

Step 4.        For each invoice listed, deduct the “Paid Amount” column from the “Gross ” amount column to get the balance outstanding and fill in the column headed “Outstanding Amount” column.

Step 5.         Total up the “Paid Amount” and the “Outstanding Amount” columns of the debtors’  list. Check the total “Outstanding Amount” is correct by deducting the total “Paid Amount” from the total “Gross ” amount. 

The total balance in the “Outstanding Amount” column is the updated list of sales invoices  not yet paid up. This column is your updated trade debtors’  balance. They are called trade debtors as they arise in the course of trading (as opposed to other debtors like loan debtors).

You need to do the above exercise with every batch  of sales invoices  that have been paid so that you know at any given time how much your customers  owe you.

As you can imagine, in a larger business with many transactions  and hundreds of customers , the list we have got would become so large that it would not be possible to keep track of individual customer balances easily.

To make the job easier, accountants create a list for each customer and call this a customer account . In here, they record all the sales invoices , cheques /cash received and credit notes relating to that customer in one place. And it is easier to track how much that customer owes at any given time.

These customer accounts are kept together in one book (ledger) called the trade debtors  ledger  (also called the sales ledger ).

The balance on all the customers’  accounts are added up to get the total balance that the customers owe the business. This balance is known as the trade debtors’  balance or debtors ledger balance  or sales ledger  balance or the accounts receivable balance .