Inventory Sale Journal Entry

When a company sells inventory, the transaction involves two key journal entries:

1. Revenue from the sale of inventory: Recognizing the income from the sale and recording cash or accounts receivable.
2. Cost of goods sold (COGS): Removing the cost of sold inventory from the inventory account and recording an expense (COGS).

Here’s how the journal entries work.

Example Journal Entries for Inventory Sale:

Let’s assume:

• A company sells goods for $10,000 on credit (i.e., accounts receivable).
• The cost of goods sold is $6,000.

1. Journal Entry for Revenue from the Sale of Inventory:

Date	Account Title	Debit ($)	Credit ($)
09/06/2024	Accounts Receivable A/c Debit	10,000
09/06/2024	To Sales Revenue A/c		10,000

Explanation:

• Accounts Receivable will debited of $10,000, indicating the company expects to receive an amount in the future.
• Sales Revenue will credited of $10,000, recognizing the income earned from the sale.

2. Journal Entry for Cost of Goods Sold (COGS):

Date	Account Title	Debit ($)	Credit ($)
09/06/2024	Cost of Goods Sold (COGS) A/c Debit	6,000
09/06/2024	To Inventory A/c		6,000

Explanation:

• Cost of Goods Sold (COGS) will debited of $6,000, recording the expense associated with the sale.
• Inventory will credited of $6,000, reducing the inventory balance to reflecting the items sold.

Combined Journal Entry for Inventory Sale:

In many cases, both entries may be recorded together, like this:

Date	Account Title	Debit ($)	Credit ($)
09/06/2024	Accounts Receivable A/c Debit	10,000
09/06/2024	To Sales Revenue A/c		10,000
09/06/2024	Cost of Goods Sold (COGS) A/c Debit	6,000
09/06/2024	To Inventory A/c		6,000

Explanation:

• The first two lines record the revenue from the sale.
• The last two lines record the cost of goods sold and reduction in inventory.

These entries ensure that revenue and expenses related to the sale are correctly recorded, reflecting the impact on the company’s financial statements.