Quick Summary
- Also called Sales Day Book or Sales Journal
- Records only credit sales of goods (not cash sales)
- Part of the books of original entry (subsidiary books)
- Source document is the sales invoice or receipt
- Individual entries are posted to customers’ accounts, totals to sales account
Detailed Explanation
What is a Sales Book?
The sales book is a special accounting book where businesses record all goods sold on credit. When you sell something and allow the customer to pay later, that transaction goes into the sales book. It is one of the subsidiary books, which means it is a book of original entry where transactions are first recorded before being transferred to the ledger.
Think of it like a notebook where a shop owner writes down all the customers who bought goods but have not paid yet. For example, if you run a provision store in Benin City and you sell ₦15,000 worth of rice to Mr. Eze who promises to pay next week, you write this sale in your sales book immediately.
Why is the Sales Book Important?
The sales book helps businesses keep organized records of who owes them money and how much. Without it, a business owner could easily forget which customers have paid and which have not. It also makes it easy to see the total value of credit sales for any period.
For WAEC and NECO exams, understanding the sales book is crucial because questions often ask you to prepare it from given transactions, post entries to the ledger, or explain the difference between sales book and cash sales.
What Goes into the Sales Book?
Items Recorded in Sales Book:
- All sales of trading goods on credit
- Sales supported by sales invoices or receipts
- Sales where payment will be received later
- Trade discount deducted before recording (net amount goes in)
Items NOT Recorded in Sales Book:
- Cash sales (go in cash book)
- Sales of assets like furniture, vehicles, or machinery (go in journal proper)
- Sales of investments (go in journal proper)
- Returns inwards/sales returns (go in returns inward book)
- Services provided on credit (may go in journal depending on business type)
Format of the Sales Book
The sales book typically has five columns:
| Date | Particulars (Customer Name & Details) | Invoice No. | L.F. (Ledger Folio) | Amount (₦) |
|---|---|---|---|---|
| 2024 Jan 5 | Chidi Okonkwo – 20 bags of rice | 001 | SL 12 | 45,000 |
| 2024 Jan 7 | Amina Bello – 50 cartons of noodles | 002 | SL 25 | 80,000 |
| 2024 Jan 12 | Tunde Adeyemi – 100 bottles of vegetable oil | 003 | SL 8 | 60,000 |
| Total Credit Sales for January | 185,000 | |||
How to Post from Sales Book to Ledger
After recording transactions in the sales book, you need to post them to the ledger. This is a two-step process:
Step 1: Individual Postings
Each credit sale is posted to the debit side of the individual customer’s account in the Sales Ledger (also called Debtors Ledger). This shows that the customer owes you money.
Example: From the table above, Chidi Okonkwo’s account would show:
Debit: Jan 5 – Sales ₦45,000
Step 2: Total Posting
At the end of the period (usually monthly), the total of all credit sales is posted to the credit side of the Sales Account in the General Ledger. This shows the total revenue from credit sales.
Example: Credit: Jan 31 – Sundry Debtors ₦185,000
Real-Life Nigerian Example
Imagine you own a phone accessories shop in Ikeja, Lagos. On Monday, three customers buy items on credit:
- Fatima buys phone cases worth ₦12,000 and will pay on Friday
- Emeka buys chargers worth ₦8,500 and will pay next week
- Blessing buys headphones worth ₦25,000 and will pay in two weeks
You record all three transactions in your sales book on Monday with their names, what they bought, and the amounts. You give each one a sales invoice as proof. At the end of the month, you add up all credit sales (let’s say ₦450,000 total) and post this to your Sales Account. You also post each customer’s purchase to their individual account so you know who owes what.
Comparison: Sales Book vs Cash Book (Sales Section)
| Aspect | Sales Book | Cash Book (Sales) |
|---|---|---|
| Type of Sale | Credit sales only | Cash sales only |
| Payment Timing | Payment later (customer owes money) | Payment immediate |
| Purpose | Track who owes money | Record cash received |
| Posting | Individual debtors debited, Sales account credited | Cash debited, Sales credited |
| Source Document | Sales invoice | Sales receipt or cash register tape |
| Effect on Assets | Increases debtors (receivables) | Increases cash/bank |
Trade Discount vs Cash Discount in Sales Book
This is an important distinction for WAEC exams:
Trade Discount: A reduction given to customers at the time of sale (usually for bulk purchases or regular customers). Trade discount is deducted BEFORE recording in the sales book. Only the net amount goes in.
Example: You sell goods worth ₦100,000 with 10% trade discount to a wholesaler.
Calculation: ₦100,000 – ₦10,000 = ₦90,000
Amount recorded in sales book: ₦90,000
Cash Discount: A reduction given if the customer pays early (e.g., “2% discount if paid within 7 days”). Cash discount is NOT deducted in the sales book. The full amount after trade discount is recorded. Cash discount is only recorded later when payment is actually made early.
Example: Same sale of ₦90,000 (after trade discount) with 2% cash discount for early payment.
Amount recorded in sales book: ₦90,000 (full amount)
If customer pays within 7 days: ₦90,000 – ₦1,800 = ₦88,200 received
Common Exam Mistakes (WAEC Examiner Insights)
Students frequently make these errors:
- Recording cash sales in sales book: Only credit sales belong here. Cash sales go in the cash book
- Including sales of assets: If a business sells old furniture or vehicles, this is NOT a trading transaction and should go in the journal proper
- Wrong posting direction: Students credit the customer’s account instead of debiting it. Remember: customer owes you = they are your debtor = debit their account
- Not deducting trade discount: Trade discount must be taken off before recording the amount
- Deducting cash discount in sales book: Cash discount is only recorded when payment is made, not at time of sale
- Poor calculation skills: Simple arithmetic errors in totaling columns
- Not explaining clearly: WAEC examiners report students “merely mention” that sales book records credit sales without explaining the posting procedure
Practice Questions
Multiple Choice Questions
1. Which of the following is recorded in the sales book?
a) Cash sales of goods
b) Credit sales of goods ✓
c) Sales of fixed assets
d) Purchase of goods on credit
2. The source document for entries in the sales book is:
a) Receipt voucher
b) Payment voucher
c) Sales invoice ✓
d) Credit note
3. Individual entries in the sales book are posted to the:
a) Credit side of customers’ accounts
b) Debit side of customers’ accounts ✓
c) Credit side of sales account
d) Debit side of purchases account
4. At the end of the month, the total of the sales book is posted to:
a) Debit side of sales account
b) Credit side of sales account ✓
c) Debit side of cash book
d) Credit side of purchases account
5. Trade discount on credit sales is:
a) Not recorded anywhere
b) Recorded in a separate discount column
c) Deducted before recording in sales book ✓
d) Added to the sales price
Essay Questions
1. The following credit sales were made by Adamu Enterprises in March 2024:
- March 3: Sold to Bisi Traders, 40 bags of cement at ₦3,500 per bag, Invoice No. 101
- March 10: Sold to Kunle Motors, 25 gallons of engine oil at ₦8,000 per gallon, Invoice No. 102
- March 18: Sold to Grace Stores, assorted goods worth ₦95,000, Invoice No. 103
- March 25: Sold to Ibrahim & Sons, 100 cartons of nails at ₦1,200 per carton, Invoice No. 104
Required: Prepare the Sales Book for March 2024. (10 marks)
Examiner’s tip: Calculate each sale correctly (2 marks for calculations), use proper format with all columns (3 marks), show total at bottom (1 mark), present neatly (1 mark), label correctly as “Sales Book” (1 mark).
2. Explain FOUR differences between sales book and cash book as used in accounting. (8 marks)
Examiner’s tip: Give four distinct differences (2 marks each). Do not just define each book. Show clear contrasts such as: type of sales recorded, timing of payment, posting procedure, effect on accounts.
3. State FIVE items that should NOT be recorded in the sales book. (5 marks)
Examiner’s tip: List five distinct items (1 mark each). Examples: cash sales, sales of assets, sales returns, purchases, cash discount allowed.
4. A trader sold goods worth ₦150,000 to a customer, less 20% trade discount and 5% cash discount. What amount should be recorded in the sales book? Show your workings. (5 marks)
Examiner’s tip: Calculate trade discount first (₦30,000), deduct it (₦120,000), explain that cash discount is NOT deducted in sales book (2 marks for explanation), final answer ₦120,000 (1 mark for working, 2 marks for correct answer).
Memory Aids
CREDIT Acronym for Sales Book:
- Credit sales only (not cash)
- Recorded chronologically by date
- Each customer gets debited in their account
- Document needed: sales invoice
- Items sold: trading goods only
- Total goes to credit of sales account
Easy Way to Remember Posting:
“Customer bought on credit = Customer owes me = Customer is my Debtor = DEBIT customer’s account”
Trade vs Cash Discount:
“Trade discount: Take it off NOW (in sales book)
Cash discount: Wait till they PAY (in cash book)”
Related Topics
- Purchase Book – Records credit purchases of goods (opposite of sales book)
- Returns Inward Book – Records goods returned by customers who bought on credit
- Cash Book – Records all cash and bank transactions including cash sales
- Sales Ledger (Debtors Ledger) – Contains individual accounts of customers who buy on credit
- Books of Original Entry – The family of subsidiary books including sales book