Journal Entry for Sale of Merchandise

True Tamplin

Written by True Tamplin, BSc, CEPF®
Updated on October 13, 2021

Businesses sell merchandise for cash as well as on account. The journal entries for both types of transactions are discussed below.

When Merchandise Are Sold for Cash

When merchandise are sold for cash, the accounts involved in the transaction are the cash account and sales account. The cash account is debited and the sales account is credited.

See the following example:

Example

On 1 January 2016, Sam & Co. sells merchandise for $10,000 cash to John Traders. Sam & Co. would record this cash sale in its general journal by making the following entry:
Cash Sale Journal Entry

When Merchandise Are Sold on Account

When merchandise are sold on account, the two accounts involved in the transaction are the accounts receivable account and sales account. The accounts receivable account is debited and the sales account is credited.

See the following example:

Example

On 1 January 2016, Sam & Co. sells merchandise for $10,000 on account to John Traders. Sam & Co. would record this credit sale in its general journal by making the following entry:
Credit Sale Journal Entry

True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.

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