What is a Sales Journal?

Definition and meaning

The Sales Journal is an accounting journal used in the accounting system that is dedicated to keeping track of the sales items that debtors have purchased on account. In other words, this journal is used every time a business makes a sale on the account. A customer comes in to purchase something, they buy it and promise to pay the seller later, which is what on account means. Since a business made a sale that was on account and no cash was involved, the transaction goes into the Sales Journal. This means that this journal is also considered a prime entry book. 

Format

The Sales Journal format can slightly vary from company to company. Below you can see what this journal would look like in most companies. The bookkeeper would need to record transaction details such as the date, customer’s name, invoice number for future reference, and post reference, which refers to account numbers in the AR subsidiary ledger to which entries from the Sales prime book are posted regularly. Every sale on account would result in a debit to Accounts receivable and a credit to Sales as well as Sales tax, if applicable. The cost of goods sold is also recorded as a debit, and a balancing credit entry is made to Inventory. 

Example

On August 14^th, Home Supplies company sold merchandise on account to Richard Wallace worth $895 plus sales tax of $49. The sales invoice number is 205.In this example, we have Adrian who found something that cost $895. Businesses are required to collect sales tax at the time of purchase when they sell something. Thus, Adrian would actually be paying $944. The business would be collecting $895 from the sale and $49 for tax, which does not technically belong to the business and cannot really be called a part of the sale. Let’s record this example transaction in the Sales Journal. First, we would record the date, the account name, and the sale invoice number. Just like everything, we always have to have the debits and credits equal. Thus, the amount Home Supplies has collected in total will be our debit. The amount that it actually sold in merchandise is the credit and if sales tax applies, it will go into the sales tax credit column. 

SALES JOURNAL