In addition, the seller must credit the cost of the goods that the customer returns to the goods sold account because this account is a debit when the initial sale is recorded. Altogether, the three individual accounts owe the company $2,775, which is the amount shown in the Accounts Receivable control account. It is called a control total because it helps keep accurate records, and the total in the accounts receivable must equal the balance in Accounts Receivable in the general ledger. If the amount of all the individual accounts receivable accounts did not add up to the total in the Accounts Receivable general ledger/control account, it would indicate that we made a mistake. The total cost of sales and total sales will go on the income statement.

• The sales journal is a transaction journal that tracks credit sales of stock, inventory that is sold for credit and not cash.
• 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.
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• Some businesses simply have one column to record the sales amount whereas others need additional columns for sales tax, delivery fees charged to customers etc.

This helps to create an audit trail, or a way to go back and find the original documents supporting a transaction. For a cash sale, debit the Cash account to increase assets and credit the Sales Revenue account to reflect earned income. In instances where goods are returned or allowances are made, the Sales Returns and Allowances account, a contra-revenue account, is used to adjust the sales revenue. Each sale invoice is recorded as a line item in the sales journal as shown in the example below. In this example some information has been omitted to simplify the example. In practice, each line item would include the information listed above.

What is the Sales Journal Entry?

Instead, you collect sales tax at the time of purchase, and you make payments to the government quarterly or monthly, depending on your state and local rules. Let’s review what you need to know about making a sales journal entry. The sales journal is essential for a business because of the ongoing buying and selling. The recording of cash flows also needs to be used by various existing business people. At the end of the month, we would post the totals from the sales journal to the general ledger (Figure 7.19). Using the reference information, if anyone had a question about this entry, he or she would go to the sales journal, page 26, transactions #45321 and #45324.

• The credit entry increases the Sales Revenue, indicating the earning of income.
• In this example, we will assume that all sales are made on terms of 2/10, n/30 and that the gross method is used to record sales discounts.
• A notation would be made in the reference column to indicate the payment had been posted to Baker Co.’s accounts receivable subsidiary ledger.
• He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries.
• The sales journal is simply a chronological list of the sales invoices and is used to save time, avoid cluttering the general ledger with too much detail, and to allow for segregation of duties.

The sales journal differs from the general journal, as the general journal provides a record in chronological order of financial transactions. The sales journal is significant because it is used to transfer revenue transactions from the general ledger, track reduction of inventory, and record sales tax liability. The sales journal, which is recorded in chronological order, simplifies access to sales data, as it includes specific information related to each sale. The inability to maintain an accurate sales journal may result in an inaccurate general ledger and inaccurate financial statements.

Table of Content

The sales journal is a type of sub-journal that you keep separated so that the general journal doesn’t get so cluttered. If we had to log every single transaction in the general journal, things would get out sales journal example of hand pretty quickly. Along with the sales journal, there are cash receipts, cash payments, and a purchases journal. A sales journal must include the transactions of sales purchased and/or sold on credit.