If A Company Fails To Record A Sales On Account

 

If a company fails to record a Credit Sales or Sales On Account, then due to non recording of credit sales on Income Statement or Trading Account, Gross Income or Gross Profit will be decreased and as a result, net Income or net Profit will also be understated.

 

The journal entry to record credit sales or sales on account is shown below:

 

                             Accounts Receivable a/c  XXX

 

                                                                        Sales a/c  XXX

 

                                             (Credit Sales Recorded for the Period)

If complete journal entry is not recorded, then it also affects Accounts Receivable or Sundry Debtors on balance Sheet. As accounts receivable is increasing with every credit sales made, so accounts receivable Value is understated and hence as a result, total assets will also be understated.