Sales Journal

Publication Date :

14 Oct, 2019

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Table Of Contents

Sales Journal Definition

A sales Journal is a type of journal used to record credit sale transactions of the company and is used for maintenance and tracking the account receivable and inventory account. It is the Principal book of Credit Sale Transactions, and the information recorded in it depends on the nature and requirement of each business.

Format of Sales Journal comprises six columns:- Date, Account debited, Invoice No., Accounts Receivable- Dr. Sales- Cr. And the cost of goods sold- Dr. Inventory- Cr.

Sales Journal Definition

Sales Journal Entry Format

Given below is the format of the sales journal entry.

Date	Account Debited	Invoice No	PR	Accounts Receivable - Dr Sales - Cr.	Cost of Goods Sold - Dr. Inventory - Cr.

Date: This Column is used to mention the date on which the entity sold the goods. The recording date and Invoice date should be the same.
Account Debited: In this column, the Customer's Name is to be recorded who is purchasing the goods on credit only from an entity.
Invoice No: Sale invoice No. to be mentioned in this column.
PR: PR stands for Post Reference Entries and is recorded daily to the relevant account (Customer Account). Under this column, enter certain no. and the same no. to be allotted to the Customer Account for tracking.
Account Receivable and Sales: In this column, the amount to be mentioned will be received from the customer. Account receivables to be debited and sales credited by the same amount.
Cost of goods sold and inventory: In this column, the cost price of goods sold is mentioned, the cost of goods sold to be debited, and the inventory (Stock) Account to be credited by the same amount.

Example of Sales Journal Entry

M/s XYZ Company sold the below goods on 01st April 2020.

To M/s Albert Ltd. For $ 2,00,000.00 on credit, the cost of goods sold was $ 1,50,000.00 through invoice No. 140.
To M/s Michel Ltd. For $ 3,00,000.00 on credit, the cost of goods sold was $ 2,25,000.00 through invoice No. 141.
To L&T Ltd. For $ 5,00,000.00 on credit, the cost of goods sold was $ 3,75,000.00 through invoice No. 142.
To M/s Global Limited for $ 50,000.00 on credit, and the cost of goods sold was $ 37,500.00 through invoice No. 143.

Create a credit sales journal entry for M/s XYZ Company.

Solutions:

Summary:

Entity debited the M/s Albert Ltd for $ 2,00,000.00 as account receivables, credited the credit sales by the same amount, debited the cost of goods sold by $ 1,50,000.00, and credited the inventory Account.
Entity debited the M/s Michel Ltd. for $ 3,00,000.00 as account receivables and credited the credit sales by the same amount and also debited the cost of goods sold by $ 2,25,000.00 and credited the inventory Account.
Entity debited the L&T Ltd. for $ 5,00,000.00 as account receivables, credited the credit sales by the same amount, and debited the cost of goods sold by $ 3,75,000.00 and credited the inventory Account.
Entity debited the M/s Global Limited for $ 50,00.00 as account receivables and credited the credit sales by the same amount and also debited the cost of goods sold by $ 37'500.00 and credited the inventory Account.

Advantage

When recording the credit sale transaction in the sales journal, each such transaction is analyzed in the debit and credit aspects.
All credit sale transactions entered are supported with invoices.
The amount, nature of transactions, customer name, inventory cost, etc., are mentioned in one line.
There is no such requirement to mention a long explanation for every transaction.
It allows an entity to save time and avoid repetition in the journaling.
All credit sales entries are grouped in one journal.
It is the base for the finalization of the trial balance.

Disadvantage

An entity should pass correct entries in the sales journal for accuracy of trial balance; if the entity passes any wrong credit sales entry in it, this will be mismatched between the sales account and account receivable account.
It increases the burden of accounting work on an entity because an entity can also identify the credit sale transaction from the Account receivable account.
Trial Balance, Accounts receivable account, and inventory account will not be tallied if there is a difference or mismatch in this journal.
An entity needs to pass the entries in this journal very carefully.
It increases the workforce cost of the entity.

Limitation

Closing Balance of Account Receivable Account and Credit Sale Account should be matched in this journal; otherwise, there will not be beneficial.
The entity should have a separate human resource for doing credit sales entries in this journal.
Trial Balance can't be matched if the Sales Journal is mismatched.
The entity can pass the sales credit transactions through journals also.
It increases the accounting burden on the entity.

Important Points

The entity should pass the sales credit entries correctly to save further time on errors.
The entity should use the format specified as accounting policies and guidance notes.
The entity should hire separate employees to enter credit sales transactions.
It is used for maintenance and tracking of the account receivable account and inventory accounts.
The entity should check and reconcile the balances of the Sales Journal on a periodical basis.

Conclusion

An entity should maintain Sales Journal in the prescribed format by generally accepted accounting principles for an accounting of credit sale transactions so that Debtors' records and credit sales records can be managed.

Its usage is overall beneficial for an entity because it helps for credit sales amount losses; if the company does not maintain a sales journal and forgets to pass any credit sale entry, it will be a loss.