Accounting for sale which is the part of my book " the system of accounting Vol III is now on slide share.

1. THE SYSTEM OF ACCOUNTING
Volume III
WRITTEN BY:
SYED AQEEL RAZA
MASTER OF COMMERCE & POLITICS

2. Sales 1
ACCOUNTING FOR SALE
The sale in accounting means the commodities or services
of economical value are purchased by someone and
someone must receive the commodities or services in
good condition underpayment in cash or in credit.
Although the sale is confirmed after receiving the cash
when in business some parties pay cash against goods and
some parties take goods and pay later but in accounting
the profit is confirmed when a sale occurs and the goods
delivered and the matter of payment is between the seller
and the purchaser. If the purchaser does not pay the debt,
the seller will do credit party’s payable account and
considers it expense under debiting bad debt expense
account.
The commodities which were sold may be returned in case
of any defect under mutual understanding. The return of
goods does contra effect on sale.
No business is made without a sale.
<THE SYSTEM OF ACCOUNTING < VOLUME III< SYED AQEEL RAZA<aqeelraza@live.com>

3. Sales 2
THE TYPES OF SALE
All sales transactions require exchanging value in shape of cash.
The cash which receives on the spot on account of selling goods
comes under cash transaction and that cash which was not
received in the time of handing over goods comes under credit
sales and they record under double entry system create following
two type of sales as to cash sales and credit sales.
Cash sales may offer a discount for quick sales but credit sales
may have discount but increase in price and many legal conditions
under the agreement.
CASH SALES:
Cash (debit)
Sales (Credit)
(To record sales as cash)
Cash increases in liquid asset accounts of the entity and sales increases in
the income.
CREDIT SALES:
Accounts Receivable/Party name (Debit)
Sales (Credit)
The accounts receivable/party name account increases in liquid asset
accounts and sales increases in the income.
Cash sale and credit sale are both the technique of sale.
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4. Sales 3
THE PROCEDURE OF SALE:
On receiving a purchase order, the seller issue sales
invoice to purchaser and deliver it to the place of
purchaser along with the delivery order. In case of any
defect in goods, the purchaser informs to the seller about
the defect under debit memorandum and seller credit the
account of purchaser issuing him credit memorandum.
The cash sale does not require many formalities like credit
sale in which the matter of giving and take is occurred on
the spot and in case of warranty or guarantee of the
product the condition of sale applies either credit or on
cash payment.
The credit sales are recorded under sales journal and
transferred to in subsidiary ledger parties’ account under
control account in general ledger account as accounts
receivable;
Accounts receivable (debit)
Sales (Credit)
The minimum procedure and maximum sale must be the aim of the seller.
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5. Sales 4
SALE RETURN:
The sale return in case of a defect in goods from purchaser
reduces the amount in balance of Purchaser account in
seller’s ledger. The sales return and allowance journal are
for recording sales return and allowances and at the end
of the month sales returns and allowances are transferred
to the subsidiary ledger of parties under reference sales
journal and the total amount of sales return and
allowances is transferred to control account of accounts
receivable;
Sales return & allowances (debit)
Accounts receivable (credit)
The sale return may apply on credit sale and on cash sale
as;
Sales return (debit)
Accounts receivable (credit)
Sales return (debit)
Cash (credit)
The sale return is contra revenue account and reduces the
sale in the income statement.
Return in the sale is under question for the seller.
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6. Sales 5
SALES DISCOUNT:
In order to increase sale or to sell old stock or for early
payment, the sales discount or reduction in the price of a
product is given to the Purchaser. The Sales discount is a
contra revenue account and reduces the sale in the
income statement.
The sales discount is used in place of sales which reduce
the amount of balancein account receivableof party when
the sales discount is given, the journal entry is recorded as;
Sales Discount (debit)
Accounts receivable (credit)
The discount in sales shows the stability of the product.
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7. Sales 6
BAD DEBT EXPENSES
The cause of bad debt expense is of credit sale wherein
the seller sells products to all parties wherein some pay
the debt in time and some pay after time and some do not
pay the debt because of many reasons thus the category
of customer is made as to fine customers, good customers,
the best customers and bad customers.
Then we can say the bad debt is the debt which
recoverable chance is equal to not receive and in case of
receiving the bad debt, the entry of bad debt and reversal
entry are made as;
Bad debt Expense (debt)
Accounts receivable (credit)
Account receivable(debit)
Bad debt (credit)
The bad debt is an expense which reduces gross income in
the income statement.
The result of sale war is bad debt expense.
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