{"id":238728,"date":"2025-05-12T20:41:59","date_gmt":"2025-05-12T20:41:59","guid":{"rendered":"https:\/\/peraltafinancing.com\/accounting\/journal-entry-for-sales-how-to-make-cash-and-credit-entries\/"},"modified":"2025-05-12T20:41:59","modified_gmt":"2025-05-12T20:41:59","slug":"journal-entry-for-sales-how-to-make-cash-and-credit-entries","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=238728","title":{"rendered":"Journal Entry for Sales | How to Make Cash and Credit Entries"},"content":{"rendered":"


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Ten out of 10 businesses sell products or services. And when you make a sale, you need to record the transaction in your accounting books. How comfortable are you with making a journal entry for sales?<\/p>\n

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How you record the transaction depends on whether your customer pays with cash or uses credit. Read on to learn how to make a cash sales journal entry and credit sales journal entry.\u00a0<\/p>\n

Skip Ahead<\/h3>\n

What is a journal entry for sales?\u00a0<\/h2>\n

A sales journal entry records a cash or credit sale to a customer.<\/strong> It does more than record the total money a business receives from the transaction. Sales journal entries should also reflect changes to accounts such as Cost of Goods Sold<\/a>, Inventory, and Sales Tax Payable accounts.\u00a0<\/p>\n

To create a sales journal entry, you must debit and credit<\/a> the appropriate accounts. Your end debit balance should equal your end credit balance.\u00a0<\/p>\n

As a refresher, debits and credits affect accounts in different ways. Assets and expenses are increased by debits and decreased by credits. Liabilities, equity, and revenue are increased by credits and decreased by debits.\u00a0<\/p>\n

\"Debits<\/figure>\n

So, how does a sales journal entry work? Which accounts do you debit, and which ones do you credit?\u00a0How do you create a journal entry to reflect your inventory reduction?<\/p>\n

How to make a sales accounting entry: Cash sales<\/h2>\n

When you sell something to a customer who pays in cash, debit your Cash account and credit your Revenue account.<\/strong> This reflects the increase in cash and business revenue.<\/p>\n

\n\n\n\n\n\n\n\n
Date<\/strong><\/th>\nAccount<\/strong><\/th>\nDebit<\/strong><\/th>\nCredit<\/strong><\/th>\n<\/tr>\n<\/thead>\n
X\/XX\/XXXX<\/td>\nCash<\/td>\nX<\/td>\n<\/tr>\n
Revenue<\/td>\n\nX<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

Realistically, the transaction total won\u2019t all be revenue for your business. It will also involve sales tax, which is a liability.\u00a0\u00a0<\/p>\n

You must credit your Sales Tax Payable account to reflect the increase in sales tax liability:<\/p>\n

\n\n\n\n\n\n\n\n\n\n
Date<\/strong><\/th>\nAccount<\/strong><\/th>\nDebit<\/strong><\/th>\nCredit<\/strong><\/th>\n<\/tr>\n<\/thead>\n
X\/XX\/XXXX<\/td>\nCash<\/td>\nX<\/td>\n<\/tr>\n
Sales Tax Payable<\/td>\n\nX<\/td>\n<\/tr>\n
Revenue<\/td>\n\nX<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

Your debit and credit columns should equal one another.\u00a0<\/p>\n

Cash sales example without sales tax<\/h3>\n

Let\u2019s say your customer spends $100 at your business. You must debit your Cash account $100 and credit your Revenue account $100.<\/p>\n

\n\n\n\n\n\n\n\n
Date<\/strong><\/th>\nAccount<\/strong><\/th>\nDebit<\/strong><\/th>\nCredit<\/strong><\/th>\n<\/tr>\n<\/thead>\n
X\/XX\/XXXX<\/td>\nCash<\/td>\n100<\/td>\n<\/tr>\n
Revenue<\/td>\n\n100<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

Cash sales example with sales tax<\/h3>\n

Now, let\u2019s say your customer\u2019s $100 purchase is subject to 5% sales tax. Your customer must pay you $5 ($100 X 0.05) in sales tax. This makes the total amount the customer gives you $105.\u00a0<\/p>\n

\n\n\n\n\n\n\n\n\n\n
Date<\/strong><\/th>\nAccount<\/strong><\/th>\nDebit<\/strong><\/th>\nCredit<\/strong><\/th>\n<\/tr>\n<\/thead>\n
X\/XX\/XXXX<\/td>\nCash<\/td>\n105<\/td>\n<\/tr>\n
Sales Tax Payable<\/td>\n\n5<\/td>\n<\/tr>\n
Revenue<\/td>\n\n100<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

How to make a sales accounting entry: Credit sales<\/h2>\n

When you offer credit to customers<\/a>, you must increase your Accounts Receivable account instead of your Cash account. <\/strong>This reflects that the customer received something without paying for it immediately.<\/p>\n

Your Accounts Receivable account is the total amount a customer owes you. Later, when the customer does pay, you can reverse the entry and decrease your Accounts Receivable account and increase your Cash account.\u00a0<\/p>\n

You\u2019ll also need to increase your Revenue account to show that your business is bringing in the amount the customer owes.\u00a0<\/p>\n

\n\n\n\n\n\n\n\n
Date<\/strong><\/th>\nAccount<\/strong><\/th>\nDebit<\/strong><\/th>\nCredit<\/strong><\/th>\n<\/tr>\n<\/thead>\n
X\/XX\/XXXX<\/td>\nAccounts Receivable<\/td>\nX<\/td>\n<\/tr>\n
Revenue<\/td>\n\nX<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

Like in a cash sales journal entry, you likely also will deal with sales tax.\u00a0\u00a0<\/p>\n

Your Accounts Receivable total should equal the sum of your Sales Tax Payable and Revenue accounts.<\/p>\n

\n\n\n\n\n\n\n\n\n\n
Date<\/strong><\/th>\nAccount<\/strong><\/th>\nDebit<\/strong><\/th>\nCredit<\/strong><\/th>\n<\/tr>\n<\/thead>\n
X\/XX\/XXXX<\/td>\nAccounts Receivable<\/td>\nX<\/td>\n<\/tr>\n
Sales Tax Payable<\/td>\n\nX<\/td>\n<\/tr>\n
Revenue<\/td>\n\nX<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/figure>\n

Remember that your debit and credit columns must equal one another.\u00a0<\/p>\n

When your customer pays their bill, you\u2019ll need to create another journal entry. The following accounts are affected when the customer pays:<\/p>\n