In the absence of a sales day book or sales account, credit sales can be computed from ___
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Correct Answer: Option B
Explanation:
In the absence of a sales day book or a sales account, credit sales can be computed using the debtors' control account.
Here's why:
Debtors' Control Account:
- The debtors' control account records the total amount owed by customers for credit sales. It is a summary of all individual accounts in the accounts receivable ledger.
- The balance in the debtors' control account will include both credit sales (sales made on account) and payments received from customers. Changes in this account over a period can help calculate the amount of credit sales during that period.
Calculation Process:
1. Opening balance of the debtors' control account: This represents the amount owed by customers at the start of the period.
2. Closing balance of the debtors' control account: This represents the amount owed by customers at the end of the period.
3. Payments received: The amount received from debtors during the period, which reduces the balance of the debtors' control account.
4. Credit sales can be computed by using the following formula:
\[
\text{Credit Sales} = (\text{Closing Balance of Debtors} - \text{Opening Balance of Debtors}) + \text{Cash Received from Debtors}
\]
This formula shows that by knowing the change in the debtors' balance and the payments received, you can compute the credit sales made during the period.
In the absence of a sales day book or a sales account, credit sales can be computed using the debtors' control account.
Here's why:
Debtors' Control Account:
- The debtors' control account records the total amount owed by customers for credit sales. It is a summary of all individual accounts in the accounts receivable ledger.
- The balance in the debtors' control account will include both credit sales (sales made on account) and payments received from customers. Changes in this account over a period can help calculate the amount of credit sales during that period.
Calculation Process:
1. Opening balance of the debtors' control account: This represents the amount owed by customers at the start of the period.
2. Closing balance of the debtors' control account: This represents the amount owed by customers at the end of the period.
3. Payments received: The amount received from debtors during the period, which reduces the balance of the debtors' control account.
4. Credit sales can be computed by using the following formula:
\[
\text{Credit Sales} = (\text{Closing Balance of Debtors} - \text{Opening Balance of Debtors}) + \text{Cash Received from Debtors}
\]
This formula shows that by knowing the change in the debtors' balance and the payments received, you can compute the credit sales made during the period.