The accounting system — common mistakes

Examiners frequently test the link between books of prime entry and control accounts. Remember that the total from the Sales Day Book is posted to the Sales Ledger Control Account in the General Ledger, while the individual invoices are recorded in the individual customer accounts in the Sales Ledger.

This is a common misconception. The books of prime entry (or day books) are memorandum records. They are the first place transactions are written down, but they are not part of the double entry ledger system itself. The double entry (debit and credit) takes place when the totals and individual items are posted from these books into the ledger accounts.

No. The system is designed for efficiency. You only post the period's total from the Sales Day Book to the General Ledger. This single posting is a debit to the Sales Ledger Control Account and a credit to the Sales Account. The individual invoices are posted to the individual customer accounts in the subsidiary Sales Ledger, not the General Ledger.

No, it is not. The trial balance is a crucial internal working document prepared before the financial statements. Its purpose is to check that the total debits in the general ledger equal the total credits. The main financial statements, which are prepared for external users, are the Statement of Profit or Loss, the Statement of Financial Position, and the Statement of Cash Flows.