![]() ![]() Account Debit Credit Accounts Payable $$$ Purchase Return/Discount $$$ The journal entry is debiting accounts payable and credit purchase accounts. If there are purchase returns and purchase discounts, the company has to reduce the purchase account. The transaction will increase the inventory balance as the purchase account is under the inventory account. Account Debit Credit Purchase $$$ Accounts Payable / Cash $$$ The journal entry is debiting the purchase account and credit accounts payable/cash. When the company purchases the inventory, they have to record it into the purchase account which is the inventory sub-account. These are the month-end closing journal entry. The cost of goods sold will be calculated and recorded in the income statement. The purchase account will be reversed to zero alongside with previous month’s balance. It is the balance that will be present on the balance sheet. The cost of goods sold will not be recorded as well, we only calculate it at the month-end.Īt the month-end, company will perform an inventory physical count and record it into the financial statement. The inventory increase will not update, we only use the temporary account (purchase). So during the month, we do not know about the inventory balance and cost of goods sold at all. Cost of goods sold is only recorded at the month-end as the total amount. ![]() When inventory is sold, they only record sales revenue and accounts receivable. Moreover, the periodic system will not record any cost of goods sold during the month. Some companies put it under the inventory sub-account, however, we can put it in any account as it is just a temporary account. It is the temporary account that will be reversed to zero on the reporting date. The periodic inventory system will record the purchase inventory into the purchase account. There are two systems that we can use to manage the inventory, periodic and perpetual. It is the main source of income for the company. Inventory is the assets that a company will sell to generate revenue for the business. For the manufacturer, it refers to the raw material, work in progress, and finished products as well. It is the resource that is available for sale for the trading company. Inventory is the main key asset that remains on the company balance sheet. It will update the final balance at the month-end only. Cost of goods sold is debited for the price the company paid for the inventory and the inventory account is credited for the same price.Periodic inventory is the inventory control system that does not keep track of the inventory balance and cost of goods during the month. So a typical sales journal entry debits the accounts receivable account for the sale price and credits revenue account for the sales price. Second, the inventory has to be removed from the inventory account and the cost of the inventory needs to be recorded. This entry records the amount of money the customer owes the company as well as the revenue from the sale. First, the accounts receivable account must increase by the amount of the sale and the revenue account must increase by the same amount. When a piece of merchandise or inventory is sold on credit, two business transactions need to be record. Since a sales journal entry consists of selling inventory on credit, four main accounts are affected by the business transaction: the accounts receivable and revenue accounts as well as the inventory and cost of goods sold accounts. All of the cash sales of inventory are recorded in the cash receipts journal and all non-inventory sales are recorded in the general journal. ![]() A sales journal entry is a journal entry in the sales journal to record a credit sale of inventory. ![]()
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