Incomplete Records

Finding Revenue Using the Trade Receivables Account

Why Use a Trade Receivables Account?

When a business has credit sales, the bank account only shows cash received from customers — not total sales. To find total revenue, reconstruct the trade receivables control account.

The Control Account Layout

Trade Receivables Account
Dr                                    Cr
Bal b/d (opening receivables)  x    Bank (cash received from customers) x
Credit sales (missing figure)  x    Bal c/d (closing receivables)       x
                              ──                                         ──
                               x                                          x

Shortcut formula:

Credit sales = Bank receipts + Closing receivables − Opening receivables

If there are also cash sales, add these to credit sales to get total revenue.

Note on Other Entries

Any transaction that would normally appear in a sales ledger control account can appear here:

• Returns inwards → credit entry (reduces revenue)

Worked Example — Mikel Nibali (year ended 31 August 2014)

Bank account shows: receipts from trade receivables = £121 365 Additional info: opening receivables £11 250; closing receivables £10 650

W1 — Trade Receivables (credit sales):

Trade Receivables
Dr                                Cr
Bal b/d        11 250   Bank    121 365
Credit sales  120 765   Bal c/d  10 650
              ───────            ───────
              132 015            132 015

Formula: 121 365 + 10 650 − 11 250 = 120 765

All sales were on credit, so total revenue = £120 765.

Exam tip: If the question mentions both cash sales and credit sales, reconstruct the bank account (or cash account) to find cash receipts from customers, then add cash sales separately.