Cash Sales Journal Entry and Credit Sales Journal Entry – Accounts
Meaning of Sales
Sales simply means to transfer something, whether goods or services , by receiving for it , either at the time when the goods are transferred or at a later date. Sales Journal Entry is the accounting entry made in the books of accounts, to record either of these two situations.
Like we mentioned, Sales could be : –
- In cash – this means that the payment has been received from the buyer at the time when the goods are transferred
- In credit – this means that the payment has been received from the buyer at the time , which is other than the time when the goods are transferred.
Further, the Sales could be of an Asset, or trading goods. The Sales journal entries can therefore be divided in the following four categories : –
- Sales of trading goods on cash
- Sales of trading goods on credit
- Sales of an Asset for cash
- Sales of an asset on credit
Each of these four are discussed as under : –
Sales Journal Entry – Cash Sales of goods
Question 1:
What would be the Journal Entry for Sale of goods amounting to Rs. 10,000 in Cash ?
Explanation : –
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 .
Further , receipt of money for Sales of goods in Cash , results in increase of Cash, which is an Asset. When an asset is increased, the asset account is debited according to the Rules of Debit and Credit. So Cash A/c would be debited, as a increase in an Asset account is debited.
Hence the entry would be : –
Cash A/c Dr. 10,000
To Sales A/c 10,000
Sale Journal Entry – Credit Sales of goods
Question 2:
What would be the Journal Entry for Sale of goods amounting to Rs. 10,000 to ABC Co. on credit ?
Explanation:
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 .
Further , on Sales of goods on Credit to ABC Co., the company has a receivable from ABC Co. or in other words the asset of the company is increased. When an asset is increased, the asset account is debited , as according to the Rules of Debit and Credit, an increase in asset account is debited.
Hence the correct entry is:
ABC Co. A/c Dr. 10,000
To Sales A/c 10,000
Sale Journal Entry – Asset Sold in Cash
Question 3:
What would be the Journal Entry for Sale of Furniture amounting to Rs. 10,000 in Cash ?
Explanation:
Since Sale of Furniture results in an decrease in the value of furniture, Furniture A/c would be credited, because according to the Rules of Debit and Credit, an decrease in an asset A/c is credited .
Further , on Sales of Furniture in Cash , there is an in increase of Cash, which is an Asset. When an asset is increase, the asset account is debited according to the Rules of Debit and Credit. . So Cash A/c would debited.
Hence the correct entry is:
Cash A/c Dr. 10,000
To Furniture A/c 10,000
Sale Journal Entry – Credit Sale of Asset
Question 4:
What would be the Journal Entry for Sale of Furniture amounting to Rs. 10,000 to Nived ?
Explanation:
Sale of Furniture results in decrease in the value of Furniture, which is an asset. Furniture A/c would be credited, because according to the Rules of Debit and Credit, decrease in an asset A/c is credited .
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. When an asset is increased, the asset account is debited , as according to the Rules of Debit and Credit, an increase in asset account is debited.
Hence the correct entry is:
Nived A/c Dr. 10,000
To Furniture A/c 10,000
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.