The idea behind this is related to getting rid of on-hand inventory. When you sell it, you reduce the liabilities you have with inventory. However, it also increases the total cost of goods sold for your business. Double Entry Bookkeeping is here to provide you with free online information to help you learn and understand bookkeeping and introductory accounting.

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• If you look at the example in Figure 7.23, you see that there is no column for Utility Expense, so how would it be recorded?
• The sales journal, sometimes called the credit sales journal, is used to record all sales made on account.
• Sometimes, a specific identification number would also be added to track the product.
• First, the accounts receivable account must increase by the amount of the sale and the revenue account must increase by the same amount.
• Any time a sale is made, it needs to be recorded in your books of accounts.
• When goods are involved in a sale, other entries in accounts must be made in addition to those listed above.
• Both cash and credit sales of non-inventory or merchandise are recorded in the general journal.

■ The No. 2 sale in July was a 46th-floor penthouse at the Waldorf Astoria that sold for $8.5 million. The unit with three bedrooms and three baths measures 3,980 square feet. In his listing, Marsh said the front of the home is nestled down an entry path, creating added privacy for the homeowner and guests. The great room blends into the open kitchen and dining area, with sliding glass doors opening to the terrace on two sides for indoor-outdoor living.

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Because of this, a different method of recording sales has to be used. Receivable accounts are any accounts that record how much a customer owes to your business. Creating journal entries for each of your sales is an essential bookkeeping skill. You’ll need to use multiple accounts to show that you received money, your revenue increased, and your inventory value decreased because of the sale. In recording a journal entry for sales, you’ll need to pass entry for sales—that is, move the information to all of the different accounts where it needs to be recorded.

Recording Journal Entries for Services

• Cash sales of inventory are recorded in the cash receipts journal.
• If we paid this month’s phone bill of $135 with check #4011, we would enter it as shown in Figure 7.26 in the cash disbursements journal.
• The timing of the state’s sales tax holiday that runs through Aug. 8 is no coincidence.
• Sales journal entries should also reflect changes to accounts such as Cost of Goods Sold, Inventory, and Sales Tax Payable accounts.

At the end of each accounting period (usually monthly), the sales journal double entry is used to update the general ledger accounts. As the business is using an accounts receivable control account in the general ledger, the postings are part what is a sales journal of the double entry bookkeeping system. A sales journal is a subsidiary ledger used to store detailed sales transactions. Its main purpose is to remove a source of high-volume transactions from the general ledger, thereby streamlining it.

And the accounts receivable subsidiary ledger for Baker Co. would also show the payment had been posted (Figure 7.22). The information in the sales journal was taken from a copy of the sales invoice, which is the source document representing the sale. The sales invoice number is entered so the bookkeeper could look up the sales invoice and assist the customer. One benefit of using special journals is that one person can work with this journal while someone else works with a different special journal. Little Electrodes, Inc. is a retailer that sells electronics and computer parts. On January 1, Little Electrode, Inc. sells a computer monitor to a customer for $1,000.

Carla Redmond with Queensridge Realty was the listing agent, and Gavin Ernstone of Simply Vegas was the buyer’s agent. Melissa Tomastik with UMRO Realty Corp. was the listing agent and buyer’s agent representing Jeffery and Roxanne Fegert. Frank Napoli with Berkshire Hathaway Home Services was the listing agent, and Brian Nugent with IS Luxury was the buyer’s agent representing the Bickett Ponte Vedra Beach Limited Partnership.

• Realistically, the transaction total won’t all be revenue for your business.
• The seller usually makes a credit memo or credit memorandum for the buyer who makes the return.
• The unit with three bedrooms and three baths measures 3,980 square feet.
• This knowledge can be used to ensure that individual customers have not exceeded their credit limits.
• The posting reference would be to indicate that we had entered the amount in the accounts payable subsidiary ledger (Figure 7.29).

Fact Checked

• A notation would be made in the reference column to indicate the payment had been posted to Baker Co.’s accounts receivable subsidiary ledger.
• Usually, the seller records the sales discount in a separate account.
• As the business is using an accounts receivable control account in the general ledger, the postings are part of the double entry bookkeeping system.
• Therefore, you can browse the journals to view the balances recorded in the general ledger.
• If your sales returns and allowances account is high compared to your revenue account, you may be offering too many discounts or have a product quality issue.
• The processing load that the clearing agency or credit card issuing bank pays is about 2-3% of the sales transaction figure.

As the business maintains control accounts in the general ledger, the accounts receivable ledger itself is not part of the double entry bookkeeping, it is simply a record of the amounts owed to each customer. On a regular (usually daily) basis, the line items in the sales journal are used to update each customer account in the accounts receivable ledger. In the above example, 400 is posted to the ledger account of customer BCD, 150 to customer KLM, and 350 to customer PQR. When posting to the accounts receivable ledger, a reference to the relevant page of the journal would be included. Just like the purchases journal, only credit sales are recorded when preparing a sales journal.

Post reference entries