Consider this (ridiculously simple) trial balance:

Bank account - Dr £100
Sales ledger - Dr £300
Purchase ledger - Cr £150
Retained profit - Cr £250

That post is suggesting you do the opening balance journal along these lines:

1200 - opening balance on bank (Dr) £100
9998 - opening balance on sales ledger (Dr) £300
9998 - opening balance on purchase ledger (Cr) £150
3200 - opening balance on retained profit (Cr) £250

The journal comes out as nil - the debits add up to the same amount as the credits, but you'll be left with a debit balance of £150 on 9998.

You now post the individual invoices that make up the sales ledger and purchase ledger balances, but you use the nominal code 9998.

When you post the sales invoices, they will debit 1100 (the sales ledger code) and credit 9998 - and when you post the purchase invoices, they will credit 2100 (purchase ledger) and debit 9998. Therefore, 9998 now looks like this:

Opening balance on sales ledger - Dr £300
Opening balance on purchase ledger - Cr £150
Sales invoices that make up the opening balance - Cr £300
Purchase invoices that make up the opening balance - Dr £150.

That all adds up to zero - and the trial balance now looks like this:

Bank account - Dr £100
Sales ledger - Dr £300
Purchase ledger - Cr £150
Retained profit - Cr £250

And that's the simple TB that I started this post with. :)

"1. When you say ' purchases ledger' 2100 and ' sales ledger' 1100 you probably mean purchases ledger control account 2100 and sales ledger control account 1100. Am I right ?"

Yes, I was referring to the control accounts.

"Since purchases ledger account and sales ledger account refer to individual accounts and not to nominal accounts I got a bit confused here."

It's more correct to say they can refer to individual accounts - the reality is that it's just semantics. While it's practical and sensible to try to formulate a consistent terminology, you'll find that in practice this doesn't happen. (Especially if you progress from Sage to other software, which in time you probably will).

"You said: 'You now post the sales invoices...' Your opening balance on receivables 1100 is already made of invoices. If you post them again you duplicate them. Why you should duplicate invoices ? Can you explain in few more words what do you mean here ?"

In doing things the way I described above, you are not duplicating them. It's all about knowing what's happening with the debits and credits. To understand why not, start by considering what happens when you post a sales invoice on Sage:

(For the sake of simplicity, I'm assuming no VAT is involved - the same as in my example above, though I didn't mention it).

You have a sales invoice to the value of £175. When you post this as an invoice on Sage under normal circumstances, the software will debit the sales ledger control account (1100) with £175, and credit the sales nominal code used (let's assume 4000). So if nothing else at all has been posted, your trial balance will show that debit and credit balance.

You have another sales invoice, this time to the value of £125. When you post this as an invoice on Sage, it will similarly debit the sales ledger control account, and credit the sales nominal code. This time, the amount is obviously £125 - and the total debits to the sales ledger control account are now £300, and the credit to the sales nominal is also £300.

Look back at what I said in my post above. Here, when posting the opening balance journal, I said to post the sales ledger balance (by which, yes, I meant the sales ledger control account) as a debit to 9998. That means no sales invoices have been entered, just the total balance that should appear on the nominal account - and because it's to 9998, that balance has not yet gone anywhere near the sales ledger control account; the debit balance at the moment is on 9998 instead of 1100.

Now think about those two invoices above. If you post them (as per my previous) with the nominal account as 9998 instead of 4000, consider what's happening: They will cancel out the debit balance in 9998 (posting them as sales invoices will credit that account), and the debit balance will appear in 1100 (posting them as sales invoices will debit that account).

There is no duplication - you are only posting the invoices once.

The best way to understand it is to actually try it - I know you were asking about options to try Sage in  another thread, so I hope you've managed (or are soon able to manage) to sort that.

rafapak wrote:

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thanks for reply Look back at what I said in my post above. Here, when posting the opening balance journal, I said to post the sales ledger balance (by which, yes, I meant the sales ledger control account) as a debit to 9998. That means no sales invoices have been entered, just the total balance that should appear on the nominal account - and because it's to 9998, that balance has not yet gone anywhere near the sales ledger control account; the debit balance at the moment is on 9998 instead of 1100. 1. Do you post sales ledger control account balance as a debit to 9998 when you already know what values are on sales invoices mentioned in your post (invoice for 125 pounds and invoice for 175 pounds ) or is it balance from previous period that was calculated before invoices in brackets were even raised ? I ask because it is hard for me to find chronological order in all those postings.

-- Edited by rafapak on Saturday 1st of April 2017 12:43:04 AM

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Cheshire wrote:

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Remember that when using this method all you are doing is setting up the opening balances, ie the closing balances from a prior period. So when Vince mentions supplier invoices (#), when you create those that are still outstanding (ie not paid!) then you cannot create these as normal to the sales account, as they were already counted as sales in the prior period. Note any new invoices would be in the new period and therefore NOT part of this exercise until you have entered all of your closing TB to get your opening position, only then do you start on new invoices and code these to sales in the usual way.

The 9998 suspense account is just a bucket account that the system uses to hold all the opposite entries of the ones you are keying until by working through it you bring it to nil, as the trial balance will have been balanced.

(#) The invoices and credit notes raised in the opening TB exercise are just to get the balances into the correct supplier and customer accounts. A customer may owe £5000 over 10 invoices. So you can enter it as one invoice lump sum £5000, but in reality most folk would probably do it so the supplier account itself shows the ten invoices totalling the £5000, as this makes it easier for sending checking back to supplier statements etc. It might be easier to not think of it as creating invoices, but creating the individual supplier balances (which then match your creditors control)

I have a useful very old sage guide somewhere, if I can find it I will scan it and drop it on here.

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