Recall that the accounts receivable subsidiary ledger is a record of each customer’s account. The sales journal is used to record sales on account (meaning sales on credit or credit sale). Selling on credit always requires a debit to Accounts Receivable and a credit to Sales. Because every credit sales transaction is recorded in the same way, recording all of those transactions in one place simplifies the accounting process. Note there is a single column for both the debit to Accounts Receivable and the credit to Sales, although we need to post to both Accounts Receivable and Sales at the end of each month. There is also a single column for the debit to Cost of Goods Sold and the credit to Merchandise Inventory, though again, we need to post to both of those.

Sales Journal Entry Format

Each individual sale is posted to its appropriate subsidiary account. All the sales on account for June are shown in this journal; cash sales are recorded in the cash receipts journal. A sales journal is used to record the merchandise sold on account. Any entry relating to the sale of merchandise for cash is recorded in the cash receipts journal. An entity should maintain Sales Journal in the prescribed format by generally accepted accounting principles https://www.facebook.com/BooksTimeInc for an accounting of credit sale transactions so that Debtors’ records and credit sales records can be managed. The posting reference would be to indicate that we had entered the amount in the accounts payable subsidiary ledger (Figure 7.29).

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These companies would keep multiple sales journals to track the sales of each product. The sales, their dates, and prices are all listed in chronological order. Sometimes, a specific identification number would also be added to track the product.

Sales Discount or Allowance Entry

• The general journal is also necessary for adjusting entries (such as to recognize depreciation, prepaid rent, and supplies that we have consumed) and closing entries.
• This total is then posted as a debit in the accounts receivable control account and as a credit to the general ledger sales account.
• It also is not necessary to write an explanation of the transaction because only credit sales are recorded.
• Since all sales recorded in the sales journal are paid on credit, there is no need for a cash column.
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This helps to create an audit trail, or a way to go back and find the original documents supporting a transaction. At the end of the period, the TOTALS only sales journal would be recorded in posted directly into the accounts listed with no journal entry necessary. Each client is given a certain number and the same number, post reference is different from the account debited, as this does not contain the amount of money for a particular order from the client. Now, there is software that automatically enters the day, time, and even the name of the goods sold.

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. Figure 7.20 shows how the accounts and amounts are posted. 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 gross vs net 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.

• In the above example, 400 is posted to the ledger account of customer BCD, 150 to customer KLM, and 350 to customer PQR.
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• That is why the general journal is divided up into smaller journals like the sales journal, cash receipts journal, and purchases journal.
• 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.
• For locations with sales taxes, you also need to record the sales tax that your customer paid so you know how much to pay the government later.

Its usage is overall beneficial for an entity because it helps for credit sales amount losses; if the company does not maintain a sales journal and forgets to pass any credit sale entry, it will be a loss. You can see how these journal entries (using the perpetual inventory method) would be recorded in the general ledger as by clicking fooz ball town to save space. The sale type columns will depend on the nature of business. 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. The multi-column journal should always have an ‘other’ column to record amounts which do not fit into any of the main categories.

Understanding the meaning of each debit and credit can be tricky when you’re dealing with returns. Textbook content produced by OpenStax is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike License . This book uses the Creative Commons Attribution-NonCommercial-ShareAlike License and you must attribute OpenStax. This book may not be used in the training of large language models or otherwise be ingested into large language models or generative AI offerings without OpenStax’s permission.