Set-offs

Set-offs

Some firms may find that they have customers who are also suppliers. In this case, there will be an account for this firm or person both in the sales ledger (as a customer) and in the purchases ledger (as a supplier). It could appear to be common sense that rather than both parties send a cheque to each other, the amounts owing (both to and by the firm) should be partly offset against each other. If you owe someone £5 who also owes you £10, then it would be sensible for you to offset the debt and accept £5 in full settlement of both debts. This can also be achieved with firms and are known as set-offs.

As a general rule, set-offs will appear in both control accounts and on the following sides:

• In the sales ledger control account - on the credit side
• In the purchases ledger control account - on the debit side