Journal Entry For Cash Sale of Inventory With Example

Cash Sale of Inventory / Stock With Example

Here we are concerned with the Accounting Journal Entry For Cash Sale of Inventory with the help of a example. Previously, we studied about Inventory, Perpetual Inventory and Periodic Inventory Systems.

In case of Cash sale of Inventory, the payment is received from customers and goods or products are decreased from our store. So, two types of Accounts are involved. One is Cash and the second one is Sales. So,

Cash a/c  XXX

                              Sales a/c  XXX

Both Cash and Sales are increased. When Cash is increased it is debited while when Sales is increased, it is credited.

Suppose, a retailer shop has 500 pieces of clothes in stock. 300 pieces of clothes (each costs Rs. 1000) are sold at the rate of 1100 for cash, then following Accounting Journal Entry is passed in the Journal of Retailer:

Cash 1,100,000 (1000 X 1100)

                              Sales 1,100,000

(300 Pieces of Clothes Sold For Cash at the Rate of 1100)

As we know, in this case 200 Pieces of clothes are left in the shop, so, according to The Matching Concept which is one of the Principles of Generally Accepted Accounting Principles (GAAP), and it says that revenues must be matched with all those expenses incurred in earning that revenue, so pass the following Accounting Journal Entry in the Journal of Company:

Cost of Sales a/c (Cost of Goods Sold) 200,000 (200 X 1000)
 

                                     Closing Inventory a/c  200,000
 

(200 Clothes Worth 200,000 Remained Unsold At the End of Accounting Period)

 

In Perpetual Inventory System, the value of inventory is updated daily while in periodic system, it is adjusted at the end of Accounting Period.

So, it is all about Accounting Journal Entry For Cash Sale of Inventory.