Recording Sale Transactions | Accounting for GCSE/IGCSE - Year 11 PDF Download

Cash Sales

What is a cash sale?

A cash sale refers to a transaction where a customer pays upfront for goods or services.

• The business provides the customer with a receipt, which serves as the official documentation for the transaction.
• A copy of the sales receipt is retained for record-keeping purposes.
• Cash sales are recorded in the cash book, which serves as the primary record for cash transactions.
• These transactions do not feature in the sales journal.

How do I record a cash sale in the ledger accounts?

• Debit the cash or bank account in the nominal ledger:
  • This reflects the increase in assets as the business receives cash.
• Credit the sales account in the nominal ledger:
  • This entry signifies the revenue generated from the sale of goods or services.
  • No entries are made in the trade receivables accounts since the customer pays immediately, eliminating any outstanding debt owed to the business.

Credit Sales

What is a credit sale?

A credit sale involves a customer deferring payment for goods or services until a later date.

• The business issues an invoice to the customer, serving as the official record of the transaction.
• A copy of the sales invoice is retained for documentation purposes.
• Credit sales are recorded in the sales journal, which serves as the primary record for such transactions.

How do I record a credit sale in the ledger accounts?

• Debit the trade receivable account in the sales ledger:
  • This reflects an increase in assets as the business is owed money by the credit customer.
• Credit the sales account in the nominal ledger:
  • This entry represents the revenue generated from the sale of goods or services.
  • No entries are made in the cash or bank accounts as no cash exchange occurs at the time of the sale.

Payments from Credit Customers

How could a credit customer pay an invoice?

• Credit customers can settle their invoices through various methods such as cash payments, cheques, bank transfers, or telephone transfers.
• Transactions involving cheques and transfers are documented in the bank account ledger, with supporting evidence including bank statements, cheques, and receipts.

How do I record a payment from a credit customer in the ledger accounts?

• Debit the cash or bank account in the nominal ledger:
  • This entry reflects the increase in assets as the business receives money from the credit customer.
• Credit the trade receivable account in the sales ledger:
  • This action reduces the amount owed by the customer to the business.
  • It indicates a decrease in assets as the business is owed less money by the customer.

Discount Allowed

What is discount allowed?

• Discount allowed refers to a reduction in the amount owed by a credit customer, typically offered by a business as an incentive for early repayment of an invoice.
• This discount is distinct from a trade discount and is specifically provided to credit customers.
• The sales invoice serves as the official document for recording the discount allowed.
• Details regarding the terms of the cash discount are outlined on the sales invoice.
• The cash book is the primary record-keeping book for documenting discount allowed transactions.

How do I record discount allowed in the ledger accounts?

• Credit the trade receivable account in the sales ledger:
  • This action signifies that the business is owed less money by the credit customer.
  • It indicates a decrease in assets as the business is owed less money.
• Debit the discount allowed account in the nominal ledger:
  • This entry records the amount of discount allowed by the business.
  • Normally, this transaction is recorded simultaneously with the receipt of payment.
  • Ensuring that the sum of debit entries equals the sum of credit entries maintains balance in the ledger accounts.

Sales Returns

What is a sale return?

• A sales return occurs when a customer returns goods to the business for reasons such as damage or dissatisfaction.
• The business issues a credit note to the customer, which serves as the official record of the return transaction.
• A copy of the credit note is retained for documentation purposes.
• Sales returns are recorded in the sales returns journal, which is the primary record for such transactions.

How do I record a sale return in the ledger accounts?

• Credit the trade receivable account in the sales ledger:
  • This action signifies that the business is owed less money by the credit customer.
  • It indicates a decrease in assets as the business is owed less money.
• Debit the sales returns account in the nominal ledger:
  • This entry records the amount of goods returned by the customer.
  • If the credit customer has already paid all invoices in full, the trade receivable account may carry a credit balance, indicating that the business owes the customer money.
  • This balance will be offset when the business provides a cash refund, thus balancing the account.