7 3 Analyze and Journalize Transactions Using Special Journals Principles of Accounting, Volume 1: Financial Accounting

Consumers spent 16 percent more on lodging during the Memorial Day weekend than they did during the holiday in 2019, according to an analysis by Bank of America. Accurate sales information is critical to making sound inventory, pricing, and marketing decisions in any business. Good data allows you to track trends over time, understand what products are selling well and which are not, and make informed decisions about where to allocate your resources.

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. To create the sales journal entry, debit your Accounts Receivable account for $240 and credit your Revenue account for $240. Now, there is software that automatically enters the day, time, and even the name of the goods sold.

Cash Flow Statement

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. But most economists are optimistic that spending will stay on an upward trajectory. Tuesday’s retail sales report also does not capture spending on travel and hotels, though credit and debit card data shows that those sectors rebounded significantly in May.

One of the most important reasons to keep a Sales Journal is so you can look back and see how you’ve grown since day one. Which, by the way, is an excellent way to start building confidence in sales if you are new. Your Accounts Receivable total should equal the sum of your Sales Tax Payable and Revenue accounts.

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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. The use of a reference code in any of the special journals is very important. Remember, after a sale is recorded in the sales journal, it is posted to the accounts receivable subsidiary ledger, and the use of a reference code helps link the transactions between the journals and ledgers.

Sales Journal: Explanation

You’ll also need to increase your Revenue account to show that your business is bringing in the amount the customer owes. When you offer credit to customers, they receive something without paying for it immediately. Double Entry Bookkeeping is here to provide you with free online information to help you learn and understand bookkeeping and introductory accounting. My Accounting Course  is a world-class educational resource developed by experts to simplify accounting, finance, & investment analysis topics, so students and professionals can learn and propel their careers.

The importance of keeping a Sales Journal is very valuable to the success of any person working in sales. Make sure that every experience is being timed accurately so that you can get an accurate reading of how long it took to get the sale. If you’re ever in need of motivation, read your “Motivated” section, and it’ll give you the inspiration to get back on track. If you’re feeling lazy, go to your “Lazy” section of your journal and read what you did to get out of that mood.

Your credit sales journal entry should debit your Accounts Receivable account, which is the amount the customer has charged to their credit. And, you will credit your Sales Tax Payable and Revenue accounts. Such as sales discounts, sales returns, and discounts can reduce revenue because they can add to the postage of selling goods and other expenses. Because inventory is constantly getting an update, the seller adds the cost of the items returns to the inventory account. In addition, the seller must credit the cost of the goods that the customer returns to the goods sold account because this account is a debit when the initial sale is recorded.

Sales journal entries can also include other information, such as the salesperson’s name, the method of payment, and any discounts given. Let’s say your customer purchases a table for $500 with cash. There’s a 5% sales tax rate, meaning you receive $25 in sales tax ($500 X 0.05). A sales journal entry is the same as a revenue journal entry. These two are basically the same columns but the name just changes depending on whether the client made a purchase on credit or by paying cash. If the payment is made in cash, the column becomes the sales column, but when it is paid on credit, the column becomes account receivables.

Bookkeeping

The warehouses are updated constantly, so there is no delay and the company does not run out of product when clients are asking for it. So, if a client wants to return the product the invoice number can be matched with the invoice number in the sales journal. The six main parts of a sales journal are Data, account Debited, Invoice number, post Reference, Accounts Receivables, and cost of goods sold. It should be noted that sales of goods are recorded in the sales journal. However, sales of assets such as land, building, and furniture are not recorded in the sales journal because they are sold infrequently.