Hillside Provisions, a corner shop, supplies The Blue Anchor Cafe on credit. These transactions took place during May. Date Transaction $ 1 May Balance owin...

(a) The Blue Anchor Cafe account in the sales ledger of Hillside Provisions [10]

This is a credit customer's personal account, so it is an asset account. Amounts that increase the debt are debited, and anything that reduces it, whether goods returned, money received or discount allowed, is credited.

Working: debits are $340 plus $1,260 plus $520, which is $2,120. Credits before balancing are $180 plus $300 plus $1,000 plus $25, which is $1,505. The balance carried down is $2,120 less $1,505, that is $615, and because the debits are the larger side it is brought down on the debit side on 1 June.

Note the treatment of 29 May. The cafe settled $1,025 of its debt with only $1,000 of money because Hillside allowed a $25 cash discount, so both the bank entry and the discount allowed entry are credited to close that part of the account. Discount allowed is then debited to the discount allowed expense account in the general ledger.

(b) What the balance brought down represents [2]

The $615 debit balance on 1 June is the amount The Blue Anchor Cafe still owes Hillside Provisions for goods already supplied but not yet paid for. It is an asset of Hillside Provisions and forms part of trade receivables in the statement of financial position.

(c) One advantage of keeping a separate sales ledger [3]

Any one developed advantage earns the marks. For example: keeping every credit customer's personal account in one ledger, away from the general ledger, means the amount owed by any individual customer can be found immediately, so overdue debts can be chased and credit limits monitored. A sales ledger control account can then be prepared from the day book totals to check the arithmetic of the whole ledger independently. Other acceptable developments include the division of work between bookkeepers, which speeds up the recording and makes fraud harder to conceal, and the reduction in the size of the general ledger, which makes it easier to locate errors.