Journal entry for sale of merchandise

Businesses sell merchandise for cash as well as on account. The journal entries for both type of transactions are discussed below:

When merchandise are sold for cash:

When merchandise are sold for cash, the accounts involved in the transaction are cash account and sales account. Cash account is debited and sales account is credited. See the following example:

Example:
On January 01, 2016, Sam & Co. sells merchandise for $10,000 cash to John Traders. The Sam & Co. would record this cash sale in its general journal by making the following entry:

journal-entry-for-sale-of-merchandise-img1

When merchandise are sold on account:

When merchandise are sold on account, the two accounts involved in the transaction are accounts receivable account and sales account. Accounts receivable account is debited and sales account is credited. See the following example:

Example:
On January 01, 2016, Sam & Co. sells merchandise for $10,000 on account to John Traders. The Sam & Co. would record this credit sale in its general journal by making the following entry:

journal-entry-for-sale-of-merchandise-img2

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