Journal entry to record the sale of merchandise on account



[Q1] The entity sold merchandise at the sale price of $50,000 on account.
The cost of merchandise sold was $30,000.
Prepare a journal entry to record this transaction.

[Journal Entry]
When merchandise is sold, two journal entries are recorded.
(1) Journal entry to record sales revenue
(2) Journal entry to record the cost of sales

This is the journal entry to record sales revenue.

  Debit Credit
Accounts receivable 50,000  
     Sales revenue   50,000

[Notes]
Debit: Increase in accounts receivable
Because the merchandise is sold on account, accounts receivable balance increases.
Credit: Increase in sales revenue

[Journal Entry]
This is the journal entry to record the cost of sales.

  Debit Credit
Cost of sales 30,000  
     Merchandise   30,000

[Notes]
Debit: Increase in cost of sales
Credit: Decrease in merchandise
When merchandise is sold, the quantity of merchandise owned by an entity decreases.

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