Recording Sale Transactions (Cambridge (CIE) IGCSE Accounting): Revision Note

Cash sales

What is a cash sale?

• A cash sale is when a customer pays upfront for goods or services

• The business issues the customer with a receipt

  • A copy of the sales receipt is used as the business document

• The book of prime entry is the cash book

  • Cash sales do not get recorded in the sales journal

How do I record a cash sale in the ledger accounts?

• Debit the cash or bank account in the nominal ledger

  • This is because the business is receiving cash

  • The asset is increasing

• Credit the sales account in the nominal ledger

  • This is because the profit is increasing

  • The capital is increasing

Credit sales

What is a credit sale?

• A credit sale is when a customer pays later for goods or services

• The business will issue the customer with an invoice

  • A copy of the sales invoice is used as the business document

• The book of prime entry is the sales journal

How do I record a credit sale in the ledger accounts?

• Debit the trade receivable's account in the sales ledger

  • This is because the business is owed money by the credit customer

  • The asset is increasing

• Credit the sales account in the nominal ledger

  • This is because the profit is increasing

  • The capital is increasing

Payments from credit customers

How could a credit customer pay an invoice?

• A credit customer could pay by:

  • Cash payment

  • Cheque

  • Bank transfer

  • Telephone transfer

• Cheques and transfers are recorded in the bank account

• Bank statements, cheques, and receipts are used as business documents

• The book of prime entry is the cash book

How do I record a payment from a credit customer in the ledger accounts?

• Debit the cash or bank account in the nominal ledger

  • This is because the business is receiving money

  • The asset is increasing

• Credit the trade receivable's account in the sales ledger

  • This is because the customer owes the business less money

  • The asset is decreasing

Discount allowed

What is discount allowed?

• A business might offer a cash discount for early repayment of an invoice

  • This is not a trade discount

• The business is allowing a discount to a credit customer

• The book of prime entry is the cash book

How do I record discount allowed in the ledger accounts?

• Credit the trade receivable's account in the sales ledger

  • This is because the business is owed less money from a credit customer

  • The asset is decreasing

• Debit the discount allowed account in the nominal ledger

  • This is because the profit is decreasing

  • The capital is decreasing

• You will normally have to record the transaction for the receipt of payment at the same time

  • Make sure that the sum of the debit entries equals the sum of the credit entries

Sales returns

What is a sale return?

• A sale return is when a customer returns some goods

• This could be because:

  • The goods were damaged

  • The goods were not what the customer wanted

• The business will issue the customer with a credit note

  • A copy of the credit note issued is used as the business document

• The book of prime entry is the sales returns journal

How do I record a sale return in the ledger accounts?

• Credit the trade receivable's account in the sales ledger

  • This is because the business is owed less money from a credit customer

  • The asset is decreasing

• Debit the sales returns account in the nominal ledger

  • This is because the profit is decreasing

  • The capital is decreasing

• If the credit customer has already paid all of their invoices in full

  • Then the trade receivable account will have a credit balance

  • This means the business owes the customer money

  • This will be balanced when the business gives a cash refund