What is a Sales Journal? Example, Journal Entries, and Explained

For example, a $100 sale with $10 additional sales tax collected would be recorded as a debit to Accounts Receivable for $110, a credit to Sales for $100 and a credit to Sales Tax Payable for $10. Why use a general journal if we have all the special journals? The reason is that some transactions do not fit in any specialjournal. However, most firms enter those transactionsin the general journal, along with other transactions that do notfit the description of the specific types of transactions containedin the four special journals. The general journal is also necessaryfor adjusting entries (such as to recognize depreciation, prepaidrent, https://x.com/BooksTimeInc and supplies that we have consumed) and closing entries.

Example of the Sales Journal Entry

For example, if we overpaid our electric bill,we could get a refund check in the mail. We would use the cashreceipts journal because we are receiving cash, but the creditwould be to our Utility Expense account. If you look at the examplein Figure 7.23, you see that there is no column for UtilityExpense, so how would it be recorded?

The Cash Disbursements Journal

Let us return to the sales journal, shown in Figure 7.17 that includes information about Baker Co. as wellas other companies with whom the company does business. At the end of the month, we would post the totals from the sales journal to the general ledger (Figure 7.19). Let us return to the sales journal, shown in Figure 7.17 that includes information about Baker Co. as well as other companies with whom the company does business.

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• There are two sides to every accounting book; it is the same for a sales journal.
• In the cash receipts journal, the credit can be to Accounts Receivable when a customer pays on an account, or Sales, in the case of a cash sale, or to some other account when cash is received for other reasons.
• Good internal control dictates the best rule isthat all cash received by a business should be deposited, and allcash paid out for monies owed by the business should be made bycheck.
• When the customer pays, a debit is created for your cash account.
• If the amount of all theindividual accounts receivable accounts did not add up to the totalin the Accounts Receivable general ledger/control account, it wouldindicate that we made a mistake.
• The sale of the LED light would bring 100 Dollars to the company.

And the accounts receivable subsidiary ledger for Baker Co. would also show the payment had been posted (Figure 7.22). The best way to record entries is by using flexible accounting software. Many accounting software options allow entries to be created both manually and automatically. Some even allow you to instantly make an accounting entry from a sales invoice. Automation is a way to make your business function smoothly.

Keeping an accurate record of your business’s sales is a must. https://www.bookstime.com/articles/capital-stock By creating sales journal entries, you’re keeping track of your company’s financial data. It helps create an understanding of both active sales and future sales.

Now thatmost businesses use digital technology, the step of posting tojournals is performed by the accounting software. The transactionsthemselves end up on transaction files rather than in paperjournals, but companies still print or make available on the screensomething that closely resembles the journals. If a company had manytransactions, that meant many journal entries to be recorded in thegeneral journal. We wouldenter these four types of transactions into their own journals,respectively, rather than in the general journal.

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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 information in the sales journal was taken from a copy of the sales invoice, which is the source document representing the sale. The sales invoice number is entered so the bookkeeper could look up the sales invoice and assist the customer. One benefit of using special journals is that one person can work with this journal while someone else works with a different special journal.

Q: What is the best way to record entries?

• The sales invoice number is mentioned in the third column as shown in figure 1.
• At the end of the month, the total of $2,775would be posted to the Accounts Receivable control account in thegeneral ledger.
• One benefit ofusing special journals is that one person can work with thisjournal while someone else works with a different specialjournal.
• When a piece of merchandise or inventory is sold on credit, two business transactions need to be record.
• 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.
• If you sell a product to a customer who pays in cash, you’ll have to create several entries.
• And the accounts receivable subsidiary ledger for Baker Co.would also show the payment had been posted (Figure7.22).

In the next section, we’ll talk more about what each debit and credit means for the sale entry. This is done to avoid the chances of fraud to avoid any unnecessary losses. This is all now done by software, where a person types the invoice number into the account and the software tracks down the sale. If you’re looking for more info like this, check out our resource hub! Shaun Conrad is a Certified Public Accountant and CPA exam expert with a passion for teaching. After almost a decade of experience in public accounting, he created MyAccountingCourse.com to help people learn accounting & finance, pass the CPA exam, and start their career.

Sales journal definition

In the preceding example, if Baker Co. paid the $1,450 owed, there would be a debit to Cash for $1,450 and a credit to Accounts Receivable. A notation would be made in the reference column to indicate the payment had been posted to Baker Co.’s accounts receivable subsidiary ledger. After Baker Co.’s payment, the cash receipts journal would appear as in Figure 7.21. In the cash receipts journal, the credit can be to AccountsReceivable when a customer pays on an account, or Sales, in thecase of a cash sale, or to some other account when cash is sales journal receivedfor other reasons.