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A Comprehensive Guide

   

Added on  2019-09-23

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A Comprehensive Guide_1

Topic: Writing a sales journal entryKeyword: Sales JournalJournal 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 journalentry 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 EntryThe 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
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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 inmaintaining the data in chronological order. Helps in forming general ledger and trial balance- The sales journal entry helps in theconstruction 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
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