At the end of March the sales ledger of a corner shop holds one account with a credit balance of $85, left there by a customer who paid twice for the same w...
Question 1 Report
At the end of March the sales ledger of a corner shop holds one account with a credit balance of $85, left there by a customer who paid twice for the same weekly bread order. Every other account carries a debit balance. Identify what the $85 represents.
Answer Details
The account was debited once with the $85 invoice and credited twice with $85, so the customer has paid $170 for an $85 order. The account is left with a credit balance of $85, and a credit balance in the sales ledger means the business owes the customer rather than the other way round. The $85 therefore represents an amount the shop must repay to that customer.
It cannot be an unpaid debt, because the invoice was cleared by the first payment. It is not a discount, since the entries are two full payments rather than a deduction from one. Nor is it an irrecoverable debt, which arises only where a customer with a debit balance cannot pay. In the statement of financial position this $85 is shown among current liabilities and is not netted off against the debit balances of the other customers.
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