Journal Entry for Credit Sales and Cash Sales

On January 1, 2018, Company A sold computers and laptops to John on credit. On January 30, 2018, John made the full payment of $10,000 for the computers and laptops. Thus, to record sales made by an organisation a sales (journal) book is maintained which helps in keeping track of total sales made during the year. Remember that your debit and credit columns must equal one another.

Although each transaction must be posted to the subsidiary Accounts Receivable ledger, only the totals for the month have to be posted to the General Ledger accounts. A sales journal entry records a cash or credit sale to a customer. It does more than record the total money a business receives from the transaction.

Double-Entry Accounting

Record the journal entries for the following sales transactions of a retailer. The chart in Figure 2.65 represents the journal entry requirements 7 157 outstanding checks based on various merchandising sales transactions. A customer purchases 55 units of the 4-in-1 desktop printers on October 1 on credit.

• These entries generally involve a credit to one or more accounts and a debit to one or more accounts.
• Cash increases (debit) for the amount paid to CBS, less the discount.
• On the income statement, increases are reported in sales revenues, cost of goods sold, and (possibly) expenses.
• A credit sales transaction is recorded as a typical sales transaction in the books of accounts, but instead of recording cash, an account receivable against the customer is booked.
• Cash sales are sales made on credit and where the payment of money is received in advance.

For instance, cash is an asset account, while cost of goods sold is an expense account. Finally, if your state or local governments impose a sales tax, then your entry will show an increase in your sales tax liability. Further , on   Sale of Furniture  on Credit to Nived., the company incurs a liability towards Nived, or in other words the asset of the company is increased.

What Is a Ledger-to-Ledger Transaction?

Creating a credit sales journal entry usually involves a debit to the account receivable and a debit to the sales account. Second, the inventory has to be removed from the inventory account and the cost of the inventory needs to be recorded. So a typical sales journal entry debits the accounts receivable account for the sale price and credits revenue account for the sales price.

Furniture A/c would be credited, because according to the Rules of Debit and Credit, decrease in an asset   A/c is credited . Since Sale of goods is an income, so, Sales A/c would be credited, because according to the Rules of Debit and Credit, an income A/c is credited . Your Accounts Receivable total should equal the sum of your Sales Tax Payable and Revenue accounts. Harold Averkamp (CPA, MBA) has worked as a university accounting instructor, accountant, and consultant for more than 25 years. He is the sole author of all the materials on AccountingCoach.com. If the sale is made with the terms FOB Shipping Point, the ownership of the goods is transferred at the seller’s dock.

4 Sales of Merchandise- Perpetual System

COGS increases (debit) and Merchandise Inventory-Packages decreases (credit) for the cost of the packages, $6,200 ($620 × 10). Here are a few different types of journal entries you may make for a sale or a return depending on how your customer paid. You also have to make a record of your inventory moving and the sales tax. If your customer purchased using a credit card, then you use accounts receivable instead of cash.

Terms of the sale are 10 ÷ 15, n ÷ 40, with an invoice date of October 1. On October 6, the customer returned 10 of the printers to CBS for a full refund. CBS returns the printers to their inventory at the original cost. On September 1, CBS sold 250 landline telephones to a customer who paid with cash.

Sales Discount or Allowance Entry

Goods are denoted as ‘Purchases A/c’ when goods are purchased and ‘Sales A/c’ when they are sold. When you sell a good to a customer, you’re getting rid of inventory. And, you’re increasing your Cost of Goods Sold (COGS) Expense account. Your COGS represents how much it costs you to produce the item. You’ll also need to increase your Revenue account to show that your business is bringing in the amount the customer owes.

When companies offer credit to customers, the customers receive goods or services from the company without paying for them immediately. As a result, it increases the amount owed to the company by customers. An increase in credit sales shows that more customers are taking advantage of the credit sales that are offered by a company. Companies are careful when extending credit to customers since a failure to pay the amount owed adds to the company’s bad debt. Bad debt refers to all amounts owed to the company by its clients which are considered irrecoverable. A sale for your company means a customer bought your product or service.

On October 10, the customer discovers that 5 printers from the October 1 purchase are slightly damaged, but decides to keep them, and CBS issues an allowance of $60 per printer. FOB Destination means the ownership of the goods is transferred at the buyer’s dock. This means the seller is responsible for transporting the goods to the customer’s dock, and will factor in the cost of shipping when it sets its price for the goods. This knowledge can be used to ensure that individual customers have not exceeded their credit limits.