A credit customer has overpaid their account by $95. How does this appear in the sales ledger control account?
Question 1 Report
A credit customer has overpaid their account by $95. How does this appear in the sales ledger control account?
Answer Details
The correct answer is: As a credit balance of $95.
Trade receivables (customers) normally have debit balances in the sales ledger, representing amounts they owe the business. When a customer overpays, the business owes money back to the customer. This reverses the normal position, creating a credit balance on that customer's account.
A debit balance would indicate the customer still owes the business, which is the opposite of an overpayment. The overpayment does appear in the control account because it affects the overall receivables position. It is not a contra entry, which involves setting off balances between the sales and purchases ledgers.
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