written by khatabook | November 16, 2022

All You Need To Know About Sales Journal Entry | Pros and Cons

×

Table of Content


The sales journal entry is a way to track a product's or service's value over time. The financial value of a product or service can fluctuate, so this type of tracking allows you to see how much money you make by selling it.

When you create a sales journal entry, you need to know the name of your product or service, the date it was sold, and its price. 

To track how much money you've made from selling products/services, add up all your sales and divide them by 12 to determine how much money you have per month.

Did you Know? The journal entry is recorded in the Accounts Receivable account when the sale is made on credit. The journal entry is recorded in the Cash account when the sale is made for cash.

Also read: Know Everything About Historical Costs in Accounting

What is a Sales Journal Entry? 

Let's start with knowing what a sales journal entry is. Sales Journal Entries are made in a company's sales journal. A sales journal is a ledger that records all of a company's sales transactions. These entries can be made manually or electronically. 

Sales Journal Entries usually include the date of the deal, the customer's name, the products or services sold, the quantity of each product or service sold, and the sale amount. Sales journal entries can also include other information, such as the salesperson's name, the method of payment, and any discounts given. 

Sales Journal Entries are important because they record a company's sales transactions. This information can be used to generate reports, such as sales reports, that can help a company track its sales.

Importance Of Recording Sales Information

Accurate sales information is critical to making sound inventory, pricing, and marketing decisions in any business. Good data allows you to track trends over time, understand what products are selling well and which are not, and make informed decisions about where to allocate your resources. 

Without accurate sales information, you are essentially flying blind. You might make decisions that put your business at a competitive disadvantage or miss opportunities to capitalize on market trends. In the worst case, you could make decisions that lead to financial losses. 

Accurate sales information is the key to making smart, data-driven decisions to help your business grow. If you are not currently recording sales information, now is the time to start!

Sales information is important because it allows you to track your progress, identify gaps in your sales strategy, and ensure you get the most out of your marketing efforts. It also helps you plan for future growth by helping you predict how much money you'll be able to make in a given period.

Example of Sales Credit Journal Entry

Sales Credit Journal entry revolves around journal entry recorded through the company in sales journal when the organisation makes any sales for inventory to a third party on credit. 

For example, Company A Ltd has sold goods to its client on 1st August, 2019 on credit that was worth  82,22,885. It means company A must make the payment on or before August 15, 2019

Dates

 

1/8/2019

Particulars

 

Accounts Receivable A/c.                        Dr.

 

To Sales A/c

 

(Being Goods worth 82,22,885 sold by Company A Ltd. to its client on 1st August 2019 on credit)

Dr ₹

 

82,22,885

Cr ₹


 

82,22,885

Date

Particulars

Dr

Cr

15/8/2019

Cash A/c.                                                 Dr.

 

To Accounts Receivable A/c

 

(Being payment realized in cash for Goods worth 82,22,885 sold by Company A Ltd. to its client on 1st August 2019)

82,22,885

 

82,22,885

Also read: Materiality Concept in Accounting as per GAAP and FASB

What To Include In a Sales Journal Entry?

The correct information should be included in each sales journal entry.

A sales journal entry records the company's transactions and activities, including all financial activities. It is also considered to be an important record as it provides a piece of detailed information regarding the company's performance.

Including all relevant information in every sales journal entry helps you keep track of your sales which will help you efficiently run your business.

You can add the following details about each transaction:

1. Date of transaction

2. Customer name

3. Product name

4. Quantity sold (if applicable)

5. Price per unit (if applicable)

Sales Journal Entries include key information about sales transactions. This information includes the date of the sale, the customer's name, the product or service sold, the sales price, and any relevant taxes or discounts. This information is important for tracking sales and for preparing financial statements. 

Sales Journal Entry: Pros

The pros of a Sales Journal Entry are that it allows you to keep track of your sales and expenses. You can see how much money is coming into the company, so you know where and where not to spend it. Using Sales Journal Entry will help you make informed decisions about whether or not the business is doing well enough to continue as a going concern. If your sales are up, but no one is buying, then it may be time to consider changing your product line or even restructuring how you're doing things.

Sales Journal Entry: Cons

The Sales Journal Entries are a great way to track your sales and expenses. There are some cons to using sales journal entries, though. It might take some time to get used to the process, and it's not always easy to do right. Keeping the journal entries for sales credit for each business transaction becomes complex and time-consuming when there are many transactions within the business. It also increases the risk of the individual involved in making a mistake.

If the person documenting the transaction makes a mistake, the wrong deal is reflected in the company's books of accounts.

How can Sales Journal Entries Help Your Business? 

Sales Journal Entries are a crucial tool for tracking and managing your sales. They can help you keep track of your sales data, monitor your sales trends, and make better decisions for your business.

Sales journal entries are used to track a variety of different data points, including -

  • Sales volume
  • Sales revenue
  • Sales expenses
  • Sales commissions

This data can be precious in helping you to understand your sales process and make improvements where necessary. Sales Journal Entries monitor your sales trends over time. This information can help make future sales projections and strategies.

Sales journal entries can be a powerful tool for managing your sales and growing your business. We strongly encourage you to start if you're not already using them.

Also read: Grab Knowledge on Cloud Accounting Software for Understanding

Conclusion

Sales Journal Entries are a valuable tool for businesses of all sizes. By recording sales transactions in a sales journal, companies can track their sales data in a more organized and efficient way. This data can then be used for better pricing, inventory, and marketing decisions. Additionally, sales journal entries can help businesses monitor their progress and performance over time. Overall, sales journal entries can be a helpful way to manage and understand your business's sales data. Sales Journal Entries are a great way to keep track of your sales. If you're not already using a sales journal to record your sales transactions, we encourage you to try it.

Follow Khatabook for the latest updates, new blogs, and articles related to micro, small and medium businesses (MSMEs), business tips, income tax, GST, salary, and accounts.

FAQs

Q: What is the Sales Commission?

Ans:

A sales commission is the compensation amount paid to a person based on the amount of sales generated.

Q: What is Sale expense?

Ans:

Sale Expenses are the costs associated with distributing, marketing and selling a product or service.

Q: What are the types of Sales Journals?

Ans:

There are general 4 (four) types of sales journals, and their explanations are as follows:

  • Cash. 
  • Credit. 
  • Sales discount journal. 
  • Return journal and sales discounts.

Q: What is the Importance of Sales Journal Entries?

Ans:

The sales journal entry is an important part of the business. It helps you keep track of your sales, and more importantly, it helps you figure out why your sales are not going as well as you want them to. Sales journal entries help you understand what's happening with your sales. It can make all the difference if you know what's going wrong with your sales.

Q: What are Sales Journal Entries?

Ans:

A Sales Journal Entry is a way to track your sales and sales volume. You'll fill out this form and add it to your sales journal as soon as you make a sale, so you can track how much profit you made, how many customers you sold to, and how much money you spent on each order.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
×

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.