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Example of a Bookkeeping Entry When Selling on Credit

How to Handle Accounts Receivable Journal Entries

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This is an example of how to handle a double-entry bookkeeping journal entry when selling a product or service on credit. This example is relevant to small businesses who offer credit to their customers. Here is the scenario:

You are the bookkeeper for XYZ Clothing Store. A customer has just shopped in your store on 9/16/2010 and purchased the following items:

  • 3 pairs of socks for a total of $12.00
  • 2 men's shirts for a total of $55.00
  • This makes the total sale $67.00. The sales tax in your state is 6% for a total of $4.02 in sales tax. The sales total is $71.02. The customer has an account with your store and plans to buy this merchandise on credit. Here is the bookkeeping entry you would make, hopefully using your computer accounting software, to record the journal transaction.

    You would enter this information in two places. First, you would enter the data into your Sales Journal. Second, you would enter the data in the customer's account. The entry into the customer's account should look something like this:

  • 9/16/2010 Clothing-Sales Receipt # $71.02
  • The entry into your sales journal would use three figures -- the subtotal of sales, total sales, and sales tax. Here is how the entry would look:

    Sales Journal Entry - Credit Receipts for 9/16/2010

    DebitCredit
    Accounts Receivable$71.02
    Sales$67.00
    Sales Tax Collected$4.02

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