Process in a Sales Ledger System
The primary action involved in updating the sales ledger is modifying the amount outstanding on the customer’s account. How the amount is modified depends on what data is being input.
When processing starts, the balance on an account is called the brought forward balance. When processing has finished, the balance on the account is called the carried forward balance. These terms are often abbreviated to b/f and c/f.
What a computer does is to add or subtract whatever you tell it to from the b/f balance, and end with a c/f balance.
This method of updating customer accounts is called the balance forward method.
Most systems also offer users the open item method of processing the data, which is much neater. Under this method, the user identifies specific invoices, and credits individual payments against specific invoices. Late payments of individual invoices can be identified and chased up. The customer’s outstanding balance is the sum of the unpaid open items. The open item method follows best accounting practice, but it is more time consuming than the balance forward method.
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