Recording Sale Transactions (Cambridge (CIE) IGCSE Accounting)

A cash sale is when a customer pays upfront for goods or services

The business issues the customer with a receipt

• A copy of the sales receipt is used as the business document

The book of prime entry is the cash book

• Cash sales do not get recorded in the sales journal

Debit the cash or bank account in the nominal ledger

• This is because the business is receiving cash

• The asset is increasing

Credit the sales account in the nominal ledger

Note that no entries are made in the trade receivables accounts

• This is because the goods were paid for straight away

• Therefore the customer does not owe the business any money

A credit sale is when a customer pays later for goods or services

The business will issue the customer with an invoice

• A copy of the sales invoice is used as the business document

The book of prime entry is the sales journal

Debit the trade receivable account in the sales ledger

• This is because the business is owed money by the credit customer

• The asset is increasing

Credit the sales account in the nominal ledger

Note that no entries are made in the cash or bank accounts

• No cash has been exchanged yet

A credit customer could pay by:

• Cash payment

• Cheque

• Bank transfer

• Telephone transfer

Cheques and transfers are recorded in the bank account

Bank statements, cheques, and receipts are used as business documents

The book of prime entry is the cash book

Debit the cash or bank account in the nominal ledger

• This is because the business is receiving money

• The asset is increasing

Credit the trade receivable account in the sales ledger

• This is because the customer owes the business less money

• The asset is decreasing

A business might offer a cash discount for early repayment of an invoice

• This is not a trade discount

The business is allowing a discount to a credit customer

The sales invoice is used as the business document

• The terms of the cash discount will be detailed

The book of prime entry is the cash book

Credit the trade receivable account in the sales ledger

• This is because the business is owed less money from a credit customer

• The asset is decreasing

Debit the discount allowed account in the nominal ledger

You will normally have to record the transaction for the receipt of payment at the same time

• Make sure that the sum of the debit entries equals the sum of the credit entries

A sale return is when a customer returns some goods

This could be because:

• The goods were damaged

• The goods were not what the customer wanted

The business will issue the customer with a credit note

• A copy of the credit note issued is used as the business document

The book of prime entry is the sales returns journal

Credit the trade receivable account in the sales ledger

• This is because the business is owed less money from a credit customer

• The asset is decreasing

Debit the sales returns account in the nominal ledger

If the credit customer has already paid all of their invoices in full

• Then the trade receivable account will have a credit balance

• This means the business owes the customer money

• This will be balanced when the business gives a cash refund