SEARCH, INDEX, UPDATES, CONTENTS, UNDERSTANDING, GLOSSARY OF TERMS, TOTAL ACCOUNT
A personal ledger account shows how much you owe to a supplier or how much a customer owes to you. Example customer accounts might show -
Mr A
| 1st (Month) | Opening balance | £500.00 | ||
| 4th (Month) | Sales Invoice | £1,100.25 | £1,600.25 | |
| 7th (Month) | Sales Credit Note | £235.00 | £1,365.25 | |
| 8th (Month) | Sales Invoice | £600.50 | £1,965.75 | |
| 16th (Month) | Cash received | £487.50 | £1,478.25 | |
| 16th (Month) | Discount allowed | £12.50 | £1,465.75 | |
| 31st (Month) | Closing balance | £1,465.75 |
Mr B
| 1st (Month) | Opening balance | £725.00 | ||
| 6th (Month) | Sales Invoice | £946.85 | £1,671.85 | |
| 12th (Month) | Sales Invoice | £100.00 | £1,771.85 | |
| 21st (Month) | Cash received | £825.00 | £946.85 | |
| 31st (Month) | Closing balance | £946.85 |
If these were the only customer accounts, you Total Account would show -
| Opening balances | £1,225.00 | ||
| Sales Invoices | £2,747.60 | £3,972.60 | |
| Sales Credit Notes | £235.00 | £3,737.60 | |
| Cash received | £1,312.50 | £2,425.10 | |
| Discount allowed | £12.50 | £2,412.60 | |
| Closing balances | £2,412.60 |
Your end of year accounts would show debtors of £2,412.60, and your personal ledger would show that this sum comprised the debts from Mr A of £1,465.75 and from Mr B of £946.85.
There is little point in knowing that you are owed £2,412.60 unless you know how much each individual customer owes you, but your end of year (published) accounts do not need to detail the amounts owed by each individual customer.
In this example it would be easy to find any discrepancy, but in a real set of records with hundreds or thousands of transactions an error can occur. We would describe that as a Total Account difference. Suppose that the Sales Credit Note had not been entered on Mr A's account - it would show an incorrect balance of £1,700.75. The total of the individual balances would be £2,647.60, compared to the Total Account of £2,412.60, a difference of £235.
Reminder - disclaimer applies. Please feedback your comments. This page was last modified 16 April 2002.