How to Record a Journal Entry for a Sale on an Account

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A company uses a journal entry to record transactions made during the course of operating the business. Information in a company’s journal is transferred to a general ledger, which is used to prepare financial statements such as a balance sheet and income statement. A double-entry system is used to record information in a journal, which means a debit and credit is used to illustrate a transaction. The two sides of the transaction must be equal, meaning debits must equal credits for the journal entry to balance.

  • Retrieve the invoice that corresponds with the sale. The invoice contains important information about the sale such as the date, sale amount and the business or person to whom the sale was made. In addition, having a sales invoice provides a paper trail that supports the journal entry. This makes it easier to trace an error in the journal recording process.

  • Record the date of the sale in the journal. The date is important because it helps the company track sales revenue for a given month. Also, the date has significance if the company offers discounts for paying within a 30-day timeframe. For instance, a person or business may receive a discount for a sale that occurred on Sept. 5 as long as the company receives payment for the sale by Oct. 5.

  • Write accounts receivable in the journal. The accounts receivable account indicates that the company has provided goods or services on account, but has not received cash for the goods or services. The amount of the sale should be recorded in the debit column. For instance, if a company made a $100 sale on account, a $100 debit must appear under accounts receivable. Debiting accounts receivable increases the amount of cash a company can expect to collect in the future.

  • Write sales or revenue in the journal in the line under accounts receivable. Credit the sales or revenue account for the appropriate amount reflected in the sales invoice. If a company makes a $100 sale on account, the sales or revenue account must have a $100 credit. A credit to the sales or revenue account exists as an increase in sales.

  • Write the name of the person or business that owes the money to the company. For instance, if the company sold parts to AZ plumbing, the account in the journal entry should say AZ plumbing. This makes it easy to determine who owes the company money and reconciling the account becomes easier once a cash payment is received.

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