New to setting up your Business Venture and don’t have Accounts Background? No Worries, we’ve got you here! In this post, you will learn to be a pro at setting up Sales Ledger and Purchase Ledger.
Being new to the business world, the first requirement before stepping in is to gather the right kind of information to find yourself a path to walk towards success. We all know how important it is to be organized in order to be under the control of current work patterns. While you plan to build on the current status, you must realize the need to keep a track of your sales and purchase.
While you are too occupied planning to establish your brand name, gain satisfied customers and develop business relationships to grow and flourish, don’t get distracted from the need of being organized and maintaining your account records. Here comes the need of sale and purchase ledger.
Allow yourself to monitor how well you are doing and record the activities of your company. The question arises here is “What is a sales ledger?” or “What is a purchase ledger?”
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Let’s start this from the basics as a beginner.
What Is A Sales Ledger?
Generally, the word ledger is defined as a record book. In business, it is taken as an account book that keeps the record of accounts. Now, most of you readers know how simple it is to define sales ledger in business. Let’s make it so, a sales ledger is an account book that records of:
- Business sales with each customer.
- The amount you have received for selling your products and services.
- What does the customer still owe you?
- Trade debtors
- What to add in annual accounts?
What Is A Purchase Ledger?
Now that you know what ledger is and what its role and importance is in business. Let’s see what is a purchase ledger? It is known as a subledger that keeps the track of creditors and monitors them. It is used to maintain:
- Purchase records
- Individual accounts of business suppliers
- Bookkeeping of orders, invoices, and expenses
The Need Of Maintaining Business Records:
Let’s keep going to learn further with the hope that by now you are very clear about sales and purchase ledger. To convince a new businessman mentally about the need of maintaining these records is equally important. It’s a must to own a system in your business that can monitor the processes of sales and purchases.
Financial information should be accessible by a business-friendly system like bookkeeping that keeps the smooth processing of purchases and sales made in a year. Without this, it is near to impossible to maintain such records. The absence of records means you are going nowhere and business has no direction to move towards.
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Construct Your Sales And Purchase Ledger:
As a new businessman, it is natural to think that maintaining records is a very basic task to do. It might appear a simple task to keep track of all the transactions and bring them to HMRC’s knowledge. Will it be covered in a spreadsheet as well?
You need to be very vigilant and need the exact details of what you are doing? Recording play by play exact details of selling and buying along with the debtors and creditors. How and when they should be handled is not only a hard task but it is very time consuming as well.
Here are some ways to do it right with the details of their pros and cons as well.
- Getting a grab of bookkeeping for smooth processing can make it less time consuming and appear to be doable at first. However, unknowingly you are missing out on several opportunities. For example, there are some allowable expenses that can be claimed against income tax, you are missing out on the detailed information on what is tax deductible and at what time is it possible.
- If you have an idea of legislation which is only possible if you come with a business background, then manual spreadsheets are a fine way as well. You may have an accountant to guide you with the required details. Moreover, you will still need an accountant professional and accounting software to be tech savvy and to know exactly what you are doing.
- Choosing between spreadsheet and software is challenging too. You might get confused with thoughts as the business is new, the manual spreadsheets can handle the details because of the less business activity. Deciding between saving money and using manual methods of records or investing money to establish accounting software totally depends on the type of business you own. Also, at what stage of business activity are you?
- Once your business takes off and starts to have happening business activity, you will need an upgraded level to handle your sales and purchase ledger. An upgraded form of automation and software will be a requirement for smooth processing.
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To sum up the discussion we can say that the information provided above is a general idea to help you reach your goals. There is no fixed template to answer these queries as every business and its requirements vary according to the kind of business and its circumstances, and the stage of your business at the time of making sales and purchase ledger.