Sales Journal Entries Report

This report provides a comprehensive guide to understanding and utilizing sales journal entries in accounting. It details the process of recording sales transactions, including debit and credit entries for cash and credit sales, cost of goods sold, revenue, inventory, and sales tax. The report emphasizes the importance of sales journal entries in maintaining detailed transaction records, chronological order for decision-making, and the creation of general ledgers and trial balances. It also discusses the limitations of manual entry, highlighting the benefits of using accounting software for automation and efficiency. The report includes a step-by-step example of creating a sales journal entry and addresses the objectives and limitations associated with this crucial accounting practice.

Topic: Writing a sales journal entry
Keyword: Sales Journal
Journal entries help to keep a record of all the transactions of an organization and classify
them into the relevant heads to assist in reporting. The process of writing a sales journal
entry involves recording the sales transaction of the organization. The logging of the
transactions, into the debt and the credit balance, helps in the preparation of the financial
reports of the organization.
Bookkeeping and Accounting are some of the important functions to maintain the records of
the financial data of an organization. Journal forms the basic way of recording the
transactions which can be used to calculate the profitability of the organization.
Sales journal is one of the specialized journals in accounts and forms the book of prime
entry. All the transactions related to the sales of the organization are recorded in the sales
journal. This book of prime entry is different from the receipts journal in which only the
cash sales are recorded. Whereas the sales journal records all credit sales of the organization.
In order to write a sales journal entry, the following steps are required:
 Cash Account Debit- As there is an increase in the level of cash, the cash account or
the accounts receivable account is debited.
 Cost of Goods Sold Debit – As there is an expense incurred by the company for the
cost of the products sold to the customers, this account is debited.
 Revenue Credit- As the revenue is earned for the organization, this account is
credited.
 Inventory Credit- As the stock of the inventory reduces due to the sale of the products
to the final customers, this account is credited by the organization.
 Sales Tax Credit- As the tax liability on the sale of the products is required to be paid
to the government, this account is credited.
In the situation when the company makes a credit sale instead of a cash sale, the Cash
Account is replaced by the Accounts Receivable Account.
Importance of Sales Journal Entry
The sale journal entry is one of the most common forms of journal entry recorded by every
organization as they sell their products and services to the customers. Whether it is a small

venture or a large multinational organization, these entries form a part of the accounts and
financial reports. The value of credit and cash sales may vary depending on the type of
company or industry, but the treatment of the transactions are the same. The bookkeeper of
the organizations has the responsibility to record the transactions in the proper accounting
journals.
The sales journal entry is one of the important journal entries due to the following reasons:
 Detailed Record of the transactions- The sales journal entry helps in the detailed
record of the sales transactions of the company. The entries are made on the date on
which such transactions take place. This also helps in future reference on the data
when planning for the future periods are made or the performance of the previous
period is evaluated. The detailed information on the sale helps the company
understand the nature of revenue generation. The sale journal entries are also
accompanied by a narration, which provides detail about the customers and the type
of sale. These records are important to maintaining by all organizations so that the
impact of such transactions can be clearly evaluated.
 Arrangement in the chronological order- The sale journal entries are important as
these are arranged in the chronological order, of their occurrence. This arrangement
helps the company to take important decisions about future sale targets or the
promotional activities to be conducted to meet the current period targets. The
chronological arrangement of the sale journal entries helps to identify the seasonal
effect of the demand and on the profitability of the company. These are important
journal entries as the entire revenue generation of the company is dependent on such
activities.
The sales day book maintained by the companies for all the sales transactions helps in
maintaining the data in chronological order.
 Helps in forming general ledger and trial balance- The sales journal entry helps in the
construction of the general ledger and the trial balance for the organization. These
financial accounts are required for the preparation of the financial statements like the
profit and loss account, and Balance Sheet. These entries form the important
component of the revenue or cash balance in the income statement and the balance
sheet. As the sales represented through sales journal entry increases, the asset side of
the balance sheet also increases. When the customers of the company pay the

proceeded of the sale in cash, it helps to increase the cash side of the Balance Sheet.
Thus it has a consequent effect on the retained earning represented in the liability side
of the balance sheet.
 Maintaining data for decisions- The information recorded through sales journal
entries are important data on which many vital decisions of the company is dependent.
These are the basic data based on which many reports are created for planning and
evaluation. Maintaining such data in its original form in served through accounts. The
records in the sales journal provide information like the number of sales to the
important customers of the organization. The managers and the directors can identify
the loyal customer and can form strategies to retain them for longer periods.
How to manage sale journal entries?
Whenever an organization makes financial transactions, a journal entry is passed by the book-
keeper of the accounting software used by the company to record such transactions. These
transactions are either included in the special journal or the general journal, depending upon
the type of account affected by the transaction. One of the widely used special journals is the
sales journal. Other special journals are cash receipts and purchase journals. When the sales
are made in cash, the transaction has a direct impact on the cash receipt journal and when the
sales are made in credit, the transaction has a direct impact on the accounts receivable. Thus
these journal entries are recorded based on the double entry system of financial accounting.
All the sale journal entries are recorded in the debt and the credit format which are arranged
according to the date of occurrence. The information from the sales is then transferred into
the general ledger, which is used for the preparation of the trial balance.
All the sale journal entries of an organization are recorded in a specified format which has
the following important columns:
 Account to be debited- One of the columns in the sale journal entry format include
the accounts which need to be debited to record the transactions. This column will
thus include the name of the customers whose accounts are maintained by the
company in accounts receivable.
 Date- The format for recording the sale journal entries, include one column for a
date. It will include the date on which the sale invoice is generated for the sale.

 Sale Invoice Number- In one of the columns for recording sale journal entries, the
sale invoice number is recorded.
 Accounts Receivable- the format for recording the sale journal entries include a
column for accounts receivable. The amount receivable from the customer is
mentioned in this column. The accounts receivable account is debited in the general
ledger and the sales account is credited.
 Inventory and the cost of goods sold- The format for sales journal entries include a
column for inventory and cost of goods sold. It includes the amount related to the cost
of production of the product sold by the company. This account is debited in the
general ledger and inventory account is credited.
 Post reference number- The format for recording the sale journal entries include a
column for post reference number. The transactions related with the sales are included
in the respective accounts on a daily basis by the book-keeper. Thus this column helps
in entering the account number of the individual accounts, for future reference of the
entries.
Method of posting the sale journal entries into ledgers
The sale journal entries are required to be posted in the ledgers for preparation of the trial
balance and the financial statements. These are a number of sales journal entries during any
period for a growing organization. These are recorded in the general ledger to know the total
amount. The method of posting the entries to the respective accounts from the sales journal.
Accounts Receivable Ledger Posting- the accountants and the book-keepers are required to
record the individual entries in the accounts receivable at the end of the day. Either this task
is performed manually or through the use of accounting software where the individual
accounts of accounts receivab9le are immediately recorded.
General Ledger Posting- The next step involves, the posting of the respective entries in the
general ledger account. This process is generally done at the end of a month if done
manually. Through the use of accounting software, these processes are conducted
simultaneously when the transactions are recorded. Some of the sub-stage in this process
involves the following:

 The final amount of the sales and the accounts receivable column are included in the
account of accounts receivable and sales.
 The inventory and the cost of goods sold are debited to the cost of goods sold.
Objectives of Sales Journal Entries
The sale journal entries by the companies have some of the important objectives which are
as follows:
 Maintain two aspects of the financial transactions- The sale journal entries have the
important objective to maintain the two aspects of the financial transactions of the
organization. Each of the entry of the financial transaction has a debit and the credit
side which should be recorded perfectly for the balancing of the financial statements.
 Method of systematic recording- The sale journal entries are meant to establish a
system of systematic recording in the book of primary entry. The golden rules of
accounts are followed while recording these transactions and posting them into the
respective accounts.
 Legal evidence of the transactions- The transactions related with sales are important
as they are the important source of revenue for any organization. The management
may manipulate such amounts to present a rosy picture to the stakeholders. But as
these transactions are recorded in the books of primary entry and then subsequently
recorded in the respective ledgers, there is little scope for any manipulations. Such
accounts provide the legal evidence of the transactions related to the sales along with
the date and narration.
 Assist in the updating of the ledger books- The ledger books of the companies can be
updated with the help of proper recording of the sales journal entries. The ledger
books are required to be marinated and updated at all times to ensure that they provide
the necessary information about the financial position of an organization. Such entries
help in updating both the debt and the credit side of the accounts.
 Important information to the internal users of the accounts- The internal users of the
accounts of a company include the managers, directors, employees who need to take
necessary decisions for the fulfillment of the objectives. The recording of the sales
journal entries in the primary books helps to provide all the necessary and true
information to the internal users. Such information is also used to compare the
performance of the company over a certain period of time and with other companies
in the same sector.

 Maintenance of the Double entry system of book-keeping- The recording of sale
journal entries help in maintaining the double entry system of the accounts. The
transactions affect the two accounts, one is on the debit side and other is on the credit
side by the equal amount.
Example of Sale Journal Entries
A company experiences a sale on credit, which is of the amount $ 10,000 with a sale tax of
the amount 5%. The cost price of the goods sold is $ 6500. The following steps are taken to
make the journal entry.
Accounts Receivable Account which is of $10500
Cost of Goods Sold Account which is of $6500
Revenue Account which is of $10000
Inventory Account which is of $ 6500
Sales Tax Account which is of $500
Thus there are basically three important events which is included while recording the sale
journal entries.
 The first one is the recording of the sale transactions
 The second one is the recording of the changes in the inventory due to the products
sold to the customers.
 The third one relates to the sales tax which needs to be paid to the government.
Limitations related to the sale journal entries
The sale journal entries are one of the important journal entries recorded in the financial
statements of an organization. However, there are some limitations which should be studied
in detail.
The volume of transactions- The sale journal entries are recorded for each of the sale
transactions made by the company. Is there a number of sales related transactions, it becomes
cumbersome to record with one manually and pass the entries in the relevant accounts. For

large multinational companies, each day many have hundreds of sales transactions which
need to be recorded in the primary books of the accounts.
Take time – The method of recording each of the sale journal entries is time-consuming as
updating is required in each of the accounts. It's a time-consuming process and specific
person and accountants are required to maintain such books of primary information.
Less internal control system- The books of accounts like the day books and subsidiary books
have higher control over the recording mechanism. In the journal entry system, the
transactions are simply recorded in the chronological order.
Use of Accounting Software for recording Journal entries
As the recording of the journal entries is a time consuming and cumbersome process
especially for large organizations whose operations expand in more than one countries,
various accounting software are used for recording the transactions. This accounting software
directly records the entries in the respective accounts and also creates a ledger at any point in
time. Thus a lot of time energy is saved by the companies and better records are maintained
for reference.
There are various journal entry automation systems which directly convers transactions into
the journal entries into the respective accounts. They are relevant in the modern finance
functions of the company as it helps to maintain updated records. These automation system
facilitate the required data for decision making within the organizations. The use of such
accounting software has been increasing in the globalised business environment. The
managers and the decision makers heavily rely on such software to maintain the financial
records of the company.