If A Company Fails To Record A Cash Sales
The journal entry to record is shown below:
Cash a/c XXX
Sales a/c XXX
(Goods sold for Cash)
As cash account is increasing i.e., we debit cash account when it is increasing according to the Rules of Debit And Credit. While cash sales is also increasing as we credit it when it is increasing.
Since cash is increasing but it is not recorded in balance sheet, so it understates the total cash and ultimately total assets on assets side of balance sheet are also understated. Similarly, as cash sales is also not recorded, so it decreased the total sales on Income Statement which leads to less Net Income or Net Profit.
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