Cash Sale of Inventory

A business can make a cash sale of inventory or services to a customer. The goods or services are supplied to the customer and payment is immediate using either cash or cheque. There is no credit given to the customer for the goods or services.

Suppose for example, the business makes a cash sale for the amount of 300, then the journal entries will be as follows.

Journal Entry for a Cash Sale of Inventory

The accounting records will show the following bookkeeping entries for the cash sale of inventory or services:

Journal Entry for a Cash Sale
Account Debit Credit
Cash 300
Sales revenue 300
Total 300 300

Cash Sale Bookkeeping Entries Explained

Cash is received from the customer for the cash sale.

A sale of inventory or services is made increasing sales revenue.

The Accounting Equation

The Accounting Equation, Assets = Liabilities + Owners Equity means that the total assets of the business are always equal to the total liabilities plus the equity of the business. This is true at any time and applies to each transaction. For this transaction the Accounting equation is shown in the following table.

Cash Sale of Inventory Accounting Equation
Assets = Liabilities + Owners Equity
Cash = None + Retained earnings
300 = 0 + 300

In this case one asset (cash) increases representing money received from the customer, this increase is balanced by the increase in owners equity. The credit to the income statement for the sale increases the net income which increases the retained earnings and therefore the owners equity in the business.

Popular Examples

Another example for you to discover.

Cash Sale of Inventory November 6th, 2016Team

You May Also Like

Related pages

formula for inventory turnspv growing annuityperpetuity discount ratecollection of accounts receivable journal entryvariable overhead variancehorizontal and vertical analysis of a financial statementwhat is operating cycle in accountingcost of goods sold formula manufacturingcalculating double declining balancemargin and markup formulasjournal entry for bills payabledistinguish between revenue expenditure and capital expenditurenbv accountingexcel formula to calculate discount percentagedefinition of post closing trial balanceaccounting closing entriesfactoring process flowimplicit rate calculatorallowance for sales returns journal entryincome statement vertical analysisaccounting debitsstraight line amortization methodsoftware amortisationperpetual inventory method definitionhow to accrue payrollpreferred equity redemption cumulative stockhow to calculate future value of an annuityhow to calculate irr in excelamortization spreadsheet xlsprovision for obsolescencebalance formula calculatorallowance to reduce inventory to marketmultistep income statementfob sellerexamples of profitability ratiosdisposal of fixed assets definitioncontribution margin income statementexample of cogshow to calculate write offsinvoice received journal entryobselete stockhow to establish a petty cash fundexample of an accrued expensestandard costing variancesdefine debit note and credit notedouble decline balance depreciationjournal entry of goodwillledger columnsvertical analysis income statement exampleoperating cycle in accountingtrade discount accounting entryhow to calculate depreciation straight line methodformula of total variable costhow to calculate profit margin in accountingaccounting cycle tutorialwhat is a cashier chequedepreciation reducing balance method exampleperiodic inventory systemshow to calculate debtors turnover ratioperiodic compoundinggross margin and contribution marginincreasing annuity formulaworking out gross profit marginpresent value of annuity formuladefine fob destinationaccounting spreadsheet for small businessdiscount factor annuity tablecredit turnover ratio formulacash denomination sheetinterest coverage ratio formula examplecash cover ratioincome statement bad debt expensegearing ratio meaningconvertible bond accountingwork in progress accounting entries