Business exist for one purpose, and one purpose only: to make a profit.
Most companies doe this by selling goods or services.
For this reason, it's absolutely critical to understand what the journal entries look like when a firm makes a sale.
Before you start, it's a great idea to ask yourself three questions about the transaction:
Once you have these three questions answered, you have all of the information you need to create the journal entries for a basic sale. Let's take a look at all of the possibilities:
Question 1: Did the buyer pay with cash or credit?
Question 2: Did the seller provide a good or service?
Question 3: Did the seller collect sales tax?
You've been provided with the following information:
The buyer and seller agreed on a price of $290.
The buyer was pleased with his purchased products which had a COGS of $9.
This offering's sales tax is $12.
The seller happily accepted payment in credit at time of sale.