What Is Sales In Accounting

Sales is the price of goods sold or services rendered to customers For Cash or For Credit or On Account.

You Can Also Study, ”What Is Purchases In Accounting”

As it is a Direct Revenue or Income for the business, so it is a direct source of Revenue and necessary to generate for the Survival And Stability of the Business.

Sales Journal Entry

For Example, Mr. A Sold 3 Computers to Mr. B for Cash Rs. 50000, then it is a Cash Sales Transaction and following Entry is passed in the Cash Book of business as shown below:

                                                                  Cash a/c    50000

                                                                                Sales a/c     50000

(Computer Sold for Cash)

If goods are sold on Credit Basis then the above Entry can recorded in Sales Day Book as:

                                                                Mr. B     50000

                                                                           Sales a/c    50000

(Computer Sold on Credit Basis)

Sales Day Book is prepared to record Credit Sales in this book while Cash Sales are recorded only in Cash Book. All the Sales Journal Entries are posted to Sales T Account Or Ledger and where the Final Amount of Sales is transferred to Income Statement / Profit And Loss Account at the end of the Accounting Period.

Sales Returns And Sales Allowances are Contra Revenue Accounts which are deducted from Total / Gross amount for the period.

Types of Sales

(i) Cash Sales

(ii) Credit Sales Or Sales On Account

Is Sales Debit Or Credit?

Sales has no Balance at the end of Accounting Period as it the profitable activities of the owners of the business and so it included in the calculation of Net Income / Net Profit that is finally added to Equity on Balance Sheet. We Credit Sales Account, when it increases and Debit it when it decreases.

Sales becomes Sales Returns when goods returned by the customer due to unsatisfactory conditions or defectives goods or not according to the requirements of order specified by the buyer.

So, we can say that Sales is the price of goods sold or services rendered by the business to customers whether it is Cash Basis or Credit Basis of Accounting. Also it is a Direct Source of Revenue for the business.