How to Handle Cash Sale Journal Entries

What you need to know about recording cash sales

Female accountant keying in numbers
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When a small business makes a financial transaction, the bookkeepers need to make a journal entry in their accounting journal to record that transaction. Often, the transaction is recorded in the general journal or a special journal for the most active accounts. The most common special journals are the Sales Journal, the Purchases Journal, the Cash Receipts Journal, and the Cash Disbursements Journal.

How to Handle Cash Sale Journal Entries

It is an example of how to handle a double-entry bookkeeping journal entry when selling a product or service for cash. Here is the scenario:

You are the bookkeeper for XYZ Clothing Store. A customer has just shopped in your store and purchased the following items:

  • three pairs of socks for a total of $12.00
  • two men's shirts for a total of $55.00

It makes the total sale $67.00. The sales tax in your state is 6% for a total of $4.02 in sales tax. The sales total is $71.02. The customer plans to buy these items for cash. Here is the bookkeeping entry you would make on your computer accounting software, to record the journal transaction.

First, you would enter a debit to cash to your checking account. Next, you would enter a credit to the Sales and Sales Tax Collected accounts. The entries on the debit side and credit side should always balance.

Cash Disbursements Journal

The cash disbursements journal is a book businesses use to record all purchases made in cash. Examples are accounts payable, materials payable, and operating expenses among other cash purchases. Columns are set up for each transaction as follows: date, check number, explanation, cash credit, other credit, account debited, accounts payable debit, other debit. A deposit to the petty cash fund is posted to the cash disbursements journal, usually on a monthly basis.

The Importance of Accounting Journal Entries

An accounting journal is a necessary detailed record of the financial transactions of the business. The transactions are listed in chronological order, by amount, by accounts that are affected, and in what direction those accounts are affected. Depending on the size and complexity of the business, a reference number can be assigned to each transaction, and a note may be attached explaining the transaction.

The accounting journal is the place where the details lie. The general ledger is where you look at the big picture. A sample accounting journal page has columns for the date, the account, the amount of the debit, and the amount of the credit.