Sales Journal

True Tamplin

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

Sales Journal: Definition

A sales journal is used to record the merchandise sold on account. Any entry relating to the sale of merchandise for cash is recorded in the cash receipts journal.

Sales Journal: Explanation

Just like the purchases journal, only credit sales are recorded when preparing a sales journal. Cash sales are recorded in the cash book.

It should be noted that sales of goods are recorded in the sales journal. However, sales of assets such as land, building, and furniture are not recorded in the sales journal because they are sold infrequently.

On the other hand, assets sold in cash are recorded in the cash book and the sales of assets on credit are recorded in the proper journal.

Format of Sales Journal

The sales journal has five columns to record the necessary information relating to credit sales. Its format is given below.
Sales Journal Format

An overview of the columns in the sales journal is given as follows:

  • Date column: Records the date of sales made on account
  • Account debited column: Records the title of customers (account title) to whom merchandise are sold on account
  • Invoice number column: Records the invoice number relating to credit sales
  • Posting reference column: Records the account numbers at the time of posting entries from the sales journal to the ledger accounts
  • Amount column: Records the amount of merchandise sold

Posting Entries From Sales Journal to Ledgers

Entries from the sales journal are posted to the accounts receivable subsidiary ledger and general ledger. The posting procedure is explained below.

At the end of each month (or at fixed intervals), the amount column of the sales journal is added and the total is posted as a debit to accounts receivable and a credit to the sales account in the general ledger.

In turn, the individual entries in the sales journal are posted to the respective accounts in the accounts receivable subsidiary ledger.

Example

The sales journal, sometimes called the credit sales journal, is used to record all sales made on account. The sales journal for the Fortune Store is shown below. All the sales on account for June are shown in this journal; cash sales are recorded in the cash receipts journal.

Sales invoices are the primary inputs into the sales journal. In this example, we will assume that all sales are made on terms of 2/10, n/30 and that the gross method is used to record sales discounts. In this way, each account receivable is shown at its full amount.

Since the sales journal is used exclusively to record credit sales, the last column (i.e., the amount column) represents both a debit to accounts receivable and a credit to sales.

The example below also shows how postings are made from the sales journal to both the subsidiary and general ledger accounts. Each individual sale is posted to its appropriate subsidiary account. After the posting, the account number or a check is placed in the post reference (Post Ref.) column.

The Post Ref. column in the subsidiary ledger and controlling accounts is labeled SJ-1 to represent page 1 of the sales journal. Postings to the subsidiary ledger should be made daily to ensure that management has up-to-date knowledge about how much each customer owes.

This knowledge can be used to ensure that individual customers have not exceeded their credit limits.

At the end of the month, the amount column in the journal is totaled. This total is then posted as a debit in the accounts receivable control account and as a credit to the general ledger sales account.

In the illustration shown in the example below, the total of the amount column is $11,152.50. The numbers under this amount are the account numbers for accounts receivable (1,110) and sales (4,011). Finally, at the end of the month, the accounts receivable trial balance is prepared.
Sales Journal Posting Entries to General Ledger and Subsidiary Accounts

Example

Transactions relating to the sale of merchandise on account completed by Crescent Company during the month of March 2016 are shown below:

Mar. 01: Sold merchandise on account to Z & Co. $1,120, invoice No. 110
Mar. 08: Sold merchandise on account to John & Sons $3,140, invoice No. 111
Mar. 20: Sold merchandise on account to John & Sons $6,400, invoice No. 112
Mar. 28: Sold merchandise on account to Sam Corporation $2,300, invoice No. 113

Required:

  1. Record the above transactions in the sales journal
  2. Post the sales journal entries to (a) the accounts receivable subsidiary ledger, and (b) general ledger
  3. Prepare a schedule of accounts receivables

Solution

1. Sales journal
Sales Journal
2(a). Accounts receivable subsidiary ledger
Accounts Receivable Subsidiary Ledger Z & Co.
Accounts Receivable Subsidiary Ledger John & Sons
Accounts Receivable Subsidiary Ledger Sam Corporation
2(b). General ledger
General Ledger Sales
General Ledger Accounts Receivable
3. Schedule of accounts receivable
Schedule of Accounts Receivable

Advantages

Using a sales journal significantly decreases the amount of work needed to record transactions in a manual system. Only one line is needed to record each transaction. It also is not necessary to write an explanation of the transaction because only credit sales are recorded.

Finally, the amount of time needed to post entries is reduced. Although each transaction must be posted to the subsidiary accounts receivable ledger, only the totals for the month have to be posted to the general ledger accounts.

If a general journal is used to record credit sales, each transaction must be posted to both the subsidiary and the general ledger accounts. Even for a firm with only several hundred sales a month, using a sales journal can save considerable time.

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