Definition of Sales Journal

Businesses utilize accounting methodology to keep accurate financial records of all transactions. Common transactions are organized in a separate section from the main 2-column general ledger transaction system for organization and to reduce the number of individual entries needed. These common transaction logs are called special journals. A sales journal is a routine special journal used by companies to record sales transactions purchased on credit. Cash sales are usually recorded in a separate journal called a cash receipts journal.

Required Information

The only required information in a sales journal is the sales date, the amount of the sale, and the customer who is responsible for paying for the purchase made on credit. Additional items can include invoice numbers and a spot to note if the amount was posted to the general ledger. Standard practice is to keep the sales journal simple.

Structure

The structure of a sales journal is not the typical debit/credit format used in the general ledger. The format looks more like a spreadsheet with column headings for each category of information like the date and amount debited running horizontally at the top. Information is then input into each row under the appropriate column heading.

Entries into Customer Accounts

After information is posted to the sales journal, the information should be used to update the individual customer's account. When a company uses a computerized accounting system, the update to a customer's accounts is done automatically.

General Ledger Updates

From the sales journal entries, totals should be posted to the general ledger as a credit to the sales income account and a debit to the accounts receivable account. The total amount updated on the sales income account will be placed under the right-hand side of the T account and the total amount on the accounts receivable account will be placed under the left hand side of the T account in the general ledger.

Sales Returns or Price Adjustments

When a customer returns a good purchased on credit, or the merchant makes a post-sale decrease on the price, the sales journal is not updated. Only credit sales are entered on a sales journal. The entry for a sales return or adjustment is made in the general journal with a debit to the sales returns and allowances account and a credit to the accounts receivable account. An update would also be made the customer's individual account.

References

• Special Journals: Sales Journal
• Sales Journal Definition