JOURNAL ENTRY FOR DIFFERENT TYPES OF SALE (CASH,CREDIT AND REAL BUSINESS SALE TRANSACTION INCLUDING DUTIES)

Hi friends here we are going to learn journal entry for sale.

Usually in accounting software there is no need to pass journal entry like below:-

SL.NO	PARTICULAR	DEBIT	CREDIT
1	Sundry debtor A/c      Dr          To Sales  A/c	XXXX	XXXX

(* Dr=Debit)

Because in software there is separate entry field for sale, the required details will be updated in sales and Sundry debtor ledger accounts.

Sales are divided into cash sales and credit sales and further sub categorized into manufacturing sales and trading sales.

But i am giving brief explanation for the first entry

here:-                                                                                            

Before passing the entry you should know three golden accounting principle

Basic entry

Journal entry in case of cash sales for Rs. 1000/-

SL.NO	PARTICULAR	DEBIT	CREDIT
1	Cash A/c      Dr          To Sales  A/c	1000	1000

(Narration:- Being goods sold in cash)

The rules for passing Journal Entry

Debit

Here we are getting cash into business by selling goods.

As per Real account rule(cash) "debit what comes into business"(Current asset)

Credit

When we are selling goods, they are going out of business.

So, as per real account rule(sales) “credit what goes out of business"(Revenue Account)

Journal entry in case Credit sales of Rs.2000

SL.NO	PARTICULAR	DEBIT	CREDIT
1	Sundry debtor A/c      Dr                To Sales A/c	2000	2000

 (Narration:- Being goods sold to debtors against bill no:01)

The rules for passing Journal entry

Debit                           

Here we are selling goods on credit and the party who buys goods will become debtors. Debtor is receiving goods.

So, as per personal account rule(sundry debtor) "debit the receiver account"(Current asset)

Credit

When we are selling goods, they are going out of business.

So, as per real account rule(sales) “credit what goes out of business"(Revenue Account)

Journal entry in case of MANUFACTURING/SERVICE companies with inclusive taxes

Goods sold to XYZ LTD for Rs. 1000/-

SL.NO	PARTICULAR	DEBIT	CREDIT
1	XYZ Ltd A/c      Dr          To Sales A/c          To Duties and taxes A/c	1000	860    140

(Narration:- Being goods sold to sundry debtors against bill no:08)

The rules for passing Journal Entry

Debit

Here we are selling goods on credit and the XYZ LTD who buys goods will become debtors. Debtor is receiving goods.

So, as per personal account rule(sundry debtors) "debit the receiver account"(Current asset)

Credit

When we are selling goods, they are going out of business.

So, as per real account rule(sales) “credit what goes out of business"(Revenue Account)

Credit

Here Duties and taxes payable will be treated as representative person. When duties are payable will be treated as liability.

As per personal account rule (Duties and taxes) "credit the giver account"(Current liability)

(I.e. taxes collected from debtor are not an income it is a liability and it must be paid to concern tax authorities)

Ex: - EXCISE DUTY, VAT & SERVICE TAX.

Journal entry in case of Export sales with excise rebate
Goods sold to z pvt ltd for Rs. 1200/-

SL.NO	PARTICULAR	DEBIT	CREDIT
1	Z pvt ltd A/c         Dr Excise rebate A/c  Dr                   To Sales  A/c                   To Duties & taxes A/c	1000  200	1000  200

      

(Narration:- Being goods sold to Z pvt ltd and excise rebate entered against bill no:02)

The rules for passing Journal Entry

Debit

Here we are selling goods on credit and the party who buys goods will become debtors. Debtor is receiving goods.

So, as per personal account rule(sundry debtors) "debit the receiver account"(Current asset)

Debit

Excise rebate (refund) is amount receivable from excise department will be treated as representative person or It may be treated as current asset.

So, as per personal account rule(excise rebate) "debit the receiver account"(Current asset)

Credit

When we are selling goods, they are going out of business.

So, as per real account rule(sales) “credit what goes out of business"(Revenue Account)

Credit

Here Duties and taxes payable will be treated as representative person. When duties are payable will be treated as liability.

As per personal account rule (Duties and taxes) "credit the giver account"(Current liability)

(I.e. taxes collected from debtor are not an income it is a liability and it must be paid to concern tax authorities)

Ex: - EXCISE DUTY, VAT & SERVICE TAX.

In case of exports there is rebate of duties. So, it is considered as current asset.

Layman view: - The duties on sales in case of exports are exempted and sometimes refunded. In the above case First the company will pay Duties and the same will be refunded within Six months.

The Journal entry for receipt of duties refunded:-

SL.NO	PARTICULAR	DEBIT	CREDIT
1	Bank A/c      Dr          To Excise Duty rebate  A/c	200	200

      

  (Narration:- Being Excise duty refund received against bill no:02)

The rules for passing Journal entry

Debit

Here we are getting cash into business.

As per personal account rule (Bank) "debit the receiver account"(Current asset)

Credit

Excise rebate is paid by excise department so, they are giving us cash.

As per personal account rule (Excise Rebate) "Credit the giver account"(Current asset)

Before passing entries you need to cross check the sale entry with invoice in following areas:-

   1)  Quantity 2) Rate per Kg 3) Excise Duty (Direct or Input as such) 4) VAT/CST.

   5)  Date of sale invoice

Friends if you any queries please comment below.