Recording a cash sale in your accounting system involves debiting cash (since you’re receiving cash) and crediting sales revenue (to recognize the revenue earned). Here are some detailed examples:
Example 1: Simple Cash Sale
Scenario: Your business makes a cash sale of $1,500 on August 1, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-01-2024 | Cash | 1,500 | |
| 08-01-2024 | To Sales Revenue | 1,500 |
Explanation:
- Cash will debited because the business is receiving cash from the sale.
- Sales Revenue will credited to recognize the income from the sale.
Example 2: Cash Sale with Sales Tax
Scenario: Your business sells goods for $2,000 plus a 5% sales tax on August 5, 2024.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-05-2024 | Cash | 2,100 | |
| 08-05-2024 | To Sales Revenue | 2,000 | |
| 08-05-2024 | To Sales Tax Payable | 100 |
Explanation:
- Cash will debited for the total amount received, including sales tax.
- Sales Revenue will credited for the actual sale amount.
- Sales Tax Payable will credited to record the liability for the sales tax collected.
Example 3: Cash Sale of Inventory
Scenario: On August 10, 2024, you sell inventory for $3,000 cash. The cost of the inventory sold was $1,800.
Journal Entry:
- Recording the Sale:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-10-2024 | Cash | 3,000 | |
| 08-10-2024 | To Sales Revenue | 3,000 |
- Recording the Cost of Goods Sold (COGS):
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-10-2024 | Cost of Goods Sold | 1,800 | |
| 08-10-2024 | To Inventory | 1,800 |
Explanation:
- Cash will debited for the total cash received.
- Sales Revenue will credited to recognize the sale.
- Cost of Goods Sold (COGS) will debited to reflect the cost of the inventory sold.
- Inventory will credited to reduce the inventory balance.
Example 4: Cash Sale with Discount
Scenario: On August 15, 2024, your business offers a customer a 2% discount on a $2,000 sale, so they pay $1,960 in cash.
Journal Entry:
| Date | Account Title | Debit ($) | Credit ($) |
|---|---|---|---|
| 08-15-2024 | Cash | 1,960 | |
| 08-15-2024 | Sales Discounts | 40 | |
| 08-15-2024 | To Sales Revenue | 2,000 |
Explanation:
- Cash will debited for the amount received after the discount.
- Sales Discounts will debited to record the discount given to the customer.
- Sales Revenue will credited for the total amount before the discount.
These entries reflect common scenarios for cash sales, ensuring accurate financial reporting and keeping your accounting records in order.