Selling goods and services: journal entry worksheet
Name: Date:
Convention: United States (US textbooks)
Record each transaction as a journal entry: write each account in the Debit or the Credit column with its amount.
Cash sale of merchandise (periodic inventory)
A store sells merchandise for $240.00. The customer pays immediately in cash.
Assumptions: The store uses the periodic inventory system: the cost of the goods sold is not recorded at the time of each sale. No sales tax applies to this sale.
Accounts to choose from: Service Revenue · Sales Tax Payable · Accounts Receivable · Inventory · Cost of Goods Sold · Cash · Sales Revenue
Account Debit Credit Sale on account with a trade discount
A wholesaler sells merchandise on account to a retailer at a list price of $2,500.00, less a 10% trade discount. Terms n/30.
Assumptions: The wholesaler uses the periodic inventory system: the cost of the goods sold is not recorded at the time of each sale. The retailer buys for resale, so no sales tax is charged.
Accounts to choose from: Sales Returns and Allowances · Cash · Accounts Receivable · Sales Revenue · Inventory · Sales Discounts · Cost of Goods Sold
Account Debit Credit Cash sale with cost of goods sold (perpetual inventory)
A store sells merchandise for $850.00, paid immediately in cash. The merchandise cost the store $510.00.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. No sales tax applies to this sale.
Accounts to choose from: Sales Returns and Allowances · Service Revenue · Sales Revenue · Cost of Goods Sold · Cash · Inventory · Accounts Receivable
Account Debit Credit Sale on account with cost of goods sold
A wholesaler sells merchandise on account for $4,200.00, terms n/30, to a retailer that will resell it. The merchandise cost the wholesaler $2,600.00.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. The retailer buys for resale, so no sales tax is charged.
Accounts to choose from: Cash · Sales Discounts · Cost of Goods Sold · Accounts Receivable · Inventory · Accounts Payable · Sales Revenue · Sales Tax Payable
Account Debit Credit Customer returns merchandise bought on account (periodic inventory)
Last week a store sold merchandise on account for $4,000.00. Today the customer returns part of the merchandise, with a sales price of $600.00, because it does not match the order, and the store issues a credit memo. The customer has not paid yet.
Assumptions: The store uses the periodic inventory system, so the return of the goods to stock is not recorded in Inventory. Returns are recorded in Sales Returns and Allowances, not by debiting Sales Revenue. No sales tax applies.
Accounts to choose from: Sales Discounts · Cost of Goods Sold · Inventory · Cash · Accounts Receivable · Sales Returns and Allowances · Sales Revenue
Account Debit Credit Customer returns goods for a cash refund, restocked (perpetual inventory)
Yesterday a store sold merchandise for $450.00, paid in cash; the merchandise had cost the store $270.00. Today the customer returns all of it undamaged and receives a full cash refund. The merchandise goes back into inventory.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. Returns are recorded in Sales Returns and Allowances, not by debiting Sales Revenue. No sales tax applies to this sale.
Accounts to choose from: Accounts Receivable · Sales Discounts · Cost of Goods Sold · Sales Returns and Allowances · Sales Revenue · Inventory · Cash
Account Debit Credit Collecting a customer’s invoice in full, in cash
Last month a store sold merchandise on account for $360.00 plus 6% sales tax. Today the customer comes to the store and pays the full amount owed in cash.
Assumptions: Sales tax 6%. The sale and its sales tax were recorded last month. No discount is given.
Accounts to choose from: Cash · Service Revenue · Accounts Receivable · Sales Revenue · Sales Discounts · Sales Tax Payable · Accounts Payable
Account Debit Credit Customer pays within the discount period
Eight days ago a wholesaler sold merchandise on account for $5,000.00, terms 2/10, n/30. Today the customer pays the invoice in cash and takes the discount.
Assumptions: The wholesaler records sales and receivables at the full invoice amount (gross method). No sales tax applies to this sale.
Accounts to choose from: Interest Expense · Accounts Payable · Sales Returns and Allowances · Cash · Accounts Receivable · Sales Revenue · Sales Discounts
Account Debit Credit Selling merchandise on account with sales tax
A store sells merchandise on account for $3,000.00 plus 6% sales tax. The merchandise cost the store $1,800.00.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. Sales tax 6%.
Accounts to choose from: Sales Tax Payable · Cash · Service Revenue · Accounts Payable · Sales Revenue · Cost of Goods Sold · Inventory · Accounts Receivable
Account Debit Credit Cash sales with sales tax included in the total
At the end of the day a store’s cash register shows total receipts of $1,590.00, including 6% sales tax that was not rung up separately. The merchandise sold cost the store $900.00.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. Sales tax 6%. All the merchandise sold is taxed at the same rate.
Accounts to choose from: Inventory · Accounts Payable · Cash · Sales Tax Payable · Cost of Goods Sold · Accounts Receivable · Service Revenue · Sales Revenue
Account Debit Credit Invoicing a client for services rendered
A design studio has finished a project for a client and sends its invoice for $1,800.00, payable in 30 days.
Assumptions: Design services are not subject to sales tax here.
Accounts to choose from: Accounts Payable · Accounts Receivable · Cash · Unearned Revenue · Service Revenue · Sales Revenue
Account Debit Credit Service paid for on completion
An IT support firm repairs a client’s office network. When the job is done the client pays the fee of $640.00 immediately in cash.
Assumptions: IT support services are not subject to sales tax here.
Accounts to choose from: Service Revenue · Accounts Receivable · Cash · Accounts Payable · Sales Revenue · Unearned Revenue
Account Debit Credit Receiving a customer deposit before the service
A catering company will cater a customer’s event next month. Today the customer pays a deposit of $1,200.00 in cash, as an advance on the price.
Assumptions: Catering services are not subject to sales tax here.
Accounts to choose from: Accounts Receivable · Service Revenue · Accounts Payable · Cash · Sales Revenue · Unearned Revenue
Account Debit Credit Delivering a service the customer paid in advance
Last month a customer paid a catering company $950.00 in cash in advance for an event, and the company credited Unearned Revenue. The deposit covers the whole price. Today the company caters the event.
Assumptions: Catering services are not subject to sales tax here.
Accounts to choose from: Accounts Receivable · Service Revenue · Accounts Payable · Cash · Sales Revenue · Unearned Revenue
Account Debit Credit Sale paid partly in cash, partly on account
A store sells merchandise for $6,000.00. The customer pays $2,000.00 in cash and owes the rest on account, due in 30 days. The merchandise cost the store $3,800.00.
Assumptions: Perpetual inventory: each sale also records its cost of goods sold. No sales tax applies to this sale.
Accounts to choose from: Accounts Payable · Cash · Notes Receivable · Cost of Goods Sold · Sales Discounts · Accounts Receivable · Inventory · Sales Revenue
Account Debit Credit Writing off a bad debt: direct write-off method
A customer who owes $2,500.00 on account for goods bought earlier this year has gone bankrupt, and the account is uncollectible. Record the write-off.
Assumptions: The company uses the direct write-off method: it has no Allowance for Doubtful Accounts. No sales tax applies.
Accounts to choose from: Accounts Receivable · Notes Receivable · Allowance for Doubtful Accounts · Bad Debt Expense · Cash · Sales Revenue · Accounts Payable
Account Debit Credit Writing off an account under the allowance method
The company uses the allowance method. A customer’s account of $4,000.00 is now determined to be uncollectible and is written off.
Assumptions: The Allowance for Doubtful Accounts has a credit balance larger than this account. No sales tax applies.
Accounts to choose from: Notes Receivable · Accounts Receivable · Sales Revenue · Allowance for Doubtful Accounts · Accounts Payable · Cash · Bad Debt Expense
Account Debit Credit Estimating bad debts as a percentage of sales
Credit sales for the year were $480,000.00. The company estimates that 2% of credit sales will prove uncollectible. Before adjustment, the Allowance for Doubtful Accounts has a credit balance of $900.00. Record the year-end entry for bad debts.
Assumptions: The company uses the allowance method with the percentage-of-sales approach.
Accounts to choose from: Cash · Accounts Receivable · Allowance for Doubtful Accounts · Sales Revenue · Bad Debt Expense · Notes Receivable
Account Debit Credit Recovering an account previously written off
Earlier this year the company wrote off a customer’s account of $1,800.00 against the Allowance for Doubtful Accounts. Today the customer unexpectedly pays the full $1,800.00 by bank transfer.
Assumptions: The company uses the allowance method. No sales tax applies.
Accounts to choose from: Sales Revenue · Accounts Payable · Cash · Allowance for Doubtful Accounts · Bad Debt Expense · Accounts Receivable
Account Debit Credit Receiving rent for a van rented out
A trading company rents out a delivery van it does not need this month to a private individual. It receives this month’s rent of $850.00 by bank transfer.
Assumptions: Renting out vehicles is not the company’s main business. The rent is for the current month. No sales tax applies.
Accounts to choose from: Rent Revenue · Accounts Receivable · Unearned Revenue · Cash · Interest Revenue · Rent Expense
Account Debit Credit
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