Recording Sale Transactions (Edexcel IGCSE Accounting)

Cash Sales

Spec point — IGCSE_ACCOUNTING:S2.132

What is a cash sale?

• A cash sale is when a customer pays upfront for goods or services

• The business issues the customer with a receipt

  • A copy of the sales receipt is used as the source document

• The book of original entry is the cash book

  • Cash sales do not get recorded in the sales day book

How do I record a cash sale in the ledger accounts?

• Debit the cash or bank account in the nominal ledger

  • This is because the business is receiving cash
  • The asset is increasing

• Credit the sales account in the nominal ledger

• Note that no entries are made in the trade receivables accounts

  • This is because the goods were paid for straight away
  • Therefore the customer does not owe the business any money

Worked Example A business sells $500 worth of goods to Alex who pays in cash upfront on 1 January 2024. Record this transaction in the ledger accounts for the business.

Answer

Cash Account

Date	Details	$**	Date	Details	$
Final answer: 2024 Final answer: Jan 1	Final answer: Sales	Final answer: 500

Sales Account

Date	Details	$	Date	Details	**$
			Final answer: 2024 Final answer: Jan 1	Final answer: Cash	Final answer: 500

Credit Sales

Spec point — IGCSE_ACCOUNTING:S2.132

What is a credit sale?

• A credit sale is when a customer pays later for goods or services

• The business will issue the customer with an invoice

  • A copy of the sales invoice is used as the source document

• The book of original entry is the sales day book

How do I record a credit sale in the ledger accounts?

• Debit the trade receivable account in the receivables ledger

  • This is because the business is owed money by the credit customer
  • The asset is increasing

• Credit the sales account in the nominal ledger

• Note that no entries are made in the cash or bank accounts

  • No cash has been exchanged yet

Worked Example A business sells $500 worth of goods to Alex on credit on 1 January 2024. Record this transaction in the ledger accounts for the business.

Answer

Alex Account

Date	Details	$**	Date	Details	$
Final answer: 2024 Final answer: Jan 1	Final answer: Sales	Final answer: 500

Sales Account

Date	Details	$	Date	Details	**$
			Final answer: 2024 Final answer: Jan 1	Final answer: Alex	Final answer: 500

Payments from Credit Customers

Spec point — IGCSE_ACCOUNTING:S2.132

How could a credit customer pay an invoice?

• A credit customer could pay by:

  • Cash payment
  • Cheque
  • Bank transfer
  • Telephone transfer

• Cheques and transfers are recorded in the bank account

• Bank statements, cheques, remittance advice and receipts are used as source documents

• The book of original entry is the cash book

How do I record a payment from a credit customer in the ledger accounts?

• Debit the cash or bank account in the nominal ledger

  • This is because the business is receiving money
  • The asset is increasing

• Credit the trade receivable account in the receivables ledger

  • This is because the customer owes the business less money
  • The asset is decreasing

Worked Example On 4 January 2024, a business receives a cheque from Alex for $100 for an invoice. Record this transaction in the ledger accounts for the business.

Answer

Bank Account

Date	Details	$**	Date	Details	$
Final answer: 2024 Final answer: Jan 4	Final answer: Alex	Final answer: 100

Alex Account

Date	Details	$	Date	Details	**$
			Final answer: 2024 Final answer: Jan 4	Final answer: Bank	Final answer: 100

Discount Allowed

Spec point — IGCSE_ACCOUNTING:S2.132

What is discount allowed?

• A business might offer a cash discount for early repayment of an invoice

  • This is not a trade discount

• The business is allowing a discount to a credit customer

• The sales invoice is used as the source document

  • The terms of the cash discount will be detailed

• The book of original original is the cash book

How do I record discount allowed in the ledger accounts?

• Credit the trade receivable account in the receivables ledger

  • This is because the business is owed less money from a credit customer
  • The asset is decreasing

• Debit the discount allowed account in the nominal ledger

• You will normally have to record the transaction for the receipt of payment at the same time

  • Make sure that the sum of the debit entries equals the sum of the credit entries

Exam Hint Questions will normally:

• Tell you the percentage for the discount allowed
• Tell you that a customer paid an amount in full settlement of their debt

Worked Example A business allows Alex a 10% cash discount when they repay their $400 invoice early on 4 January 2024 via bank transfer. Record this transaction in the ledger accounts for the business.

Answer

The discount is 10% of $400, which is $40.

The amount Alex pays is $400 - $40, which is £360.

Discount Allowed Account

Date	Details	$**	Date	Details	$
Final answer: 2024 Final answer: Jan 4	Final answer: Alex	Final answer: 40

Bank Account

Date	Details	$	Date	Details	$
Final answer: 2024 Final answer: Jan 4	Final answer: Alex	Final answer: 360

Alex Account

Date	Details	$	Date	Details	**$
			Final answer: 2024 Final answer: Jan 4	Final answer: Discount Allowed	Final answer: 40
			Final answer: Jan 4	Final answer: Bank	Final answer: 360

Sales Returns

Spec point — IGCSE_ACCOUNTING:S2.132

What is a sale return?

• A sale return is when a customer returns some goods

  • It is referred to as a return inwards

• This could be because:

  • The goods were damaged
  • The goods were not what the customer wanted

• The business will issue the customer with a credit note

  • A copy of the credit note issued is used as the source document

• The book of original entry is the sales returns day book

How do I record a sale return in the ledger accounts?

• Credit the trade receivable account in the receivables ledger

  • This is because the business is owed less money from a credit customer
  • The asset is decreasing

• Debit the returns inwards (sales returns) account in the nominal ledger

• If the credit customer has already paid all of their invoices in full

  • Then the trade receivable account will have a credit balance
  • This means the business owes the customer money
  • This will be balanced when the business gives a cash refund

Worked Example Alex returns $100 worth of goods to a business on 4 January 2024. Alex had not yet paid the invoice for the goods. Record this transaction in the ledger accounts for the business.

Answer

Returns Inwards Account

Date	Details	$**	Date	Details	$
Final answer: 2024 Final answer: Jan 4	Final answer: Alex	Final answer: 100

Alex Account

Date	Details	$	Date	Details	**$
			Final answer: 2024 Final answer: Jan 4	Final answer: Returns inwards	Final answer: 100