When the customer eventually pays, the second stage of double entry is as follows:
CASH ACCOUNT
Debit £200DEBTORS ACCOUNT
Credit £200
Therefore, the two entries in the debtors account will eventually (hopefully!) cancel eachother out. Since, in the first stage 9the actual sale), there was a debit of £200 and in the second stage (when payment is made), there is a credit of £200.
The overall effect is to just leave the CASH ACCOUNT and the SALES ACCOUNT in the same position as if the sale had been a cash one.
The method of double accounting for credit sales enables a business to see quite quickly, how much is owed to them in total and how much is outstanding for a particular customer (as, in practice, each customer would be set up with their own debtors account in the “books” of a company)
