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Aadil
AadilCurious
In: 1. Financial Accounting > Journal Entries

What is the journal entry for cash sales?

What is the journal entry for cash sales?
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    1. Simerpreet Curious CMA Inter qualified
      2021-08-07T13:33:57+00:00Added an answer on August 7, 2021 at 1:33 pm
      This answer was edited.

      The journal entry for Cash Sales is-

      Particulars Amount Amount
      Cash A/c                                                      Dr $$$
           To Sales A/c $$$

      Sales Account is a Revenue Account and Cash Account is an Asset Account for the business.

      So, According to the modern approach for Sales account:

      • When there is an increase in the Revenue, it is ‘Credited’.
      • When there is a decrease in the Revenue, it is ‘Debited’.

       

      According to the Modern approach for Cash  account:

      • When there is an increase in the Asset, it is ‘Debited’.
      • When there is a decrease in the Asset, it is ‘Credited’.

       

      So, the journal entry here is about cash sales and since there is an increase in Revenue on account of goods being sold, the sales account will be credited as per the modern rule and due to the increase in cash on account of sales, cash account will be debited.

      For Example, Polard sold goods for cash worth Rs 2,000 for his business.

      I will try to explain it with the help of steps.

      Step 1: To identify the account heads.

      In this transaction, two accounts are involved, i.e. Cash A/c and Sales A/c.

      Step 2: To Classify the account heads.

      According to the modern approach: Sales A/c is a Revenue account and Cash A/c is an Asset account.

      Step 3: Application of Rules for Debit and Credit:

      According to the modern approach: As Sales increases, because goods have been sold, ‘Sales A/c’ will be credited. (Rule – increase in Revenue is credited).

      Cash account is an Asset account. As cash has been received on account of goods sold, there is an increase in assets and hence Cash account will be debited (Rule – increase in Asset is debited).

      So from the above explanation, the Journal Entry will be-

      Particulars Amount Amount
      Cash A/c                                                      Dr 2,000
           To Sales A/c 2,000

       

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