Understanding Sales Journal and Its Types for Smooth Control

Managing financial transactions in a retail business is no easy feat. Imagine a store that handles dozens of sales each day, with credit transactions piling up alongside cash payments. Kung walang maayos na records like a sales journal, madali lang mawala sa sistema ang mga utang at inventory tracking.

This is where a daybook becomes indispensable. It’s not just a tool for recording numbers, it’s the backbone of tracking credit sales and making sure your business’ financials runs smoothly.

Kahit maliit na tindahan o lumalaking negosyo ang hawak mo, learning how to use a balance sheet can make financial management simpler and more efficient. This article will explain the role of a sales journal and why it’s a vital part of any retail business worth their salt.

What is a Sales Journal?

A sales journal is a specialized ledger used to record detailed sales transactions. Its primary function is to reduce the volume of entries in the general ledger, keeping it more manageable. When a transaction is recorded, the accounts receivable account is debited, and the sales account is credited.

It is a type of special journal used to record detailed sales transactions, focusing specifically on credit sales only tracks credit sales, meaning cash sales are excluded and instead recorded in the cash receipts journal. However, in reality, many may still use the sales daybook to record cash sales.

If you want to view and check the balances recorded in the general ledger, you can trace them through the journal. You can use the invoice number listed to access a copy of the invoice.

To simplify invoice management in your company, you can use an e-invoicing system integrated with a sales recording application to automatically track invoices.

As transactions grow more numerous and complex, companies require a reliable recording system. This recording system is known as the accounting system, which evolves over time to form a cycle called the accounting cycle.

Also read: Closing Entries in Accounting: Definitions, Types, and Examples

When Sales Journal is Used

At the close of each reporting period, the total debits and credits from the sales journal are transferred to the general ledger. To investigate these posted balances in the general ledger, one can refer back to the sales journal and use the listed invoice number to locate a copy of the invoice. Additionally, an adjusting journal entry may be made to ensure that income and expenses are recognized in the correct period.

The use of sales journals is primarily associated with manual accounting systems. In computerized accounting systems, subsidiary journals are often unnecessary due to automated processes.

Advantages of Sales Journal

A sales journal simplifies transaction recording by consolidating credit sales into one place. Here are several advantages of this particular journal entry:

• Efficient Transaction Analysis: Each credit sale is analyzed in terms of debits and credits, ensuring accurate records.
• Invoice Support: All credit sales are backed by invoices, providing a reliable audit trail.
• Simplified Recording: Details like transaction amount, type, customer name, and inventory cost are recorded in one line, avoiding lengthy explanations.
• Time-Saving: Eliminates the need for repetitive entries, making the process faster and more efficient.
• Centralized Record: Groups all credit sales transactions in a single journal entry for easier reference.
• Trial Balance Foundation: Acts as a base for preparing the trial balance to make sure the financial reporting is balanced.

Disadvantages of Sales Journal

While a journal entry of sales helps organize credit sales, manual entries can lead to mistakes that affect financial accuracy. Here are the disadvantages businesses should consider.

• Risk of Errors: Incorrect entries in the income records can lead to mismatches between the sales account and accounts receivable, which will affect the trial balance’s accuracy.
• Increased Workload: The credit sales transactions could also be identified directly from the accounts receivable, making the journal an additional task.
• Reconciliation Issues: Discrepancies in the sales journal can cause mismatches in the trial balance, accounts receivable, and inventory accounts.
• Requires Precision: Entries in the record book must be recorded with great care to avoid errors.
• Higher Workforce Costs: Maintaining the sales journal adds to the accounting workload, potentially increasing labor expenses.

Types of Sales Journal

There are four (4) common types of sales journals, which consist of:

1. Cash Sales Journal

Cash sales, including those made via physical cash or credit cards, are recorded in this journal. Credit card transactions are processed by clearing agencies or banks (e.g., BDO, BPI), which transfer the funds to the seller’s account after deducting a processing fee (typically 2-3%). These fees are recorded as credit card expenses in the journal.

2. Credit Sales Journal

This journal tracks all credit sales transactions, where accounts receivable is debited, and sales are credited. Businesses often use this to monitor outstanding payments from customers. Credit sales also highlight the risk of unpaid receivables, which are managed by issuing promissory notes or credit terms.

3. Sales Discount Journal

Discounts are common for encouraging customers to pay early. Terms like “2/10, n/30” mean a 2% discount is applied if payment is made within 10 days, while the full amount is due within 30 days. These discounts are recorded in the sales discount journal, reducing the total accounts receivable.

4. Sales Returns and Allowances Journal

This journal is used for tracking goods returned by customers or allowances given for defective items. As such, businesses issue credit memos for such transactions, reducing the accounts receivable balance and adjusting inventory and cost of goods sold.

These practices are generally consistent across countries, as they adhere to standard accounting principles (such as GAAP or IFRS). However, local tax regulations (e.g., VAT in the Philippines) might influence specific details, such as how sales taxes are recorded in these journals.

To simplify invoice management, many businesses rely on accounting software Philippines to automate tracking and reporting processes, with HashMicro being one of the most reliable ones. To check out for yourself about this system’s features, click the free demo banner below!

Sales Journal Entry Format

Below is the format for recording a sales journal entry:

Explanation:

1. Date: This column records the date of the sale, which should match the invoice date.
2. Account Debited: This column lists the name of the customer purchasing goods on credit.
3. Invoice No: The sales invoice number is recorded here for reference.
4. PR (Post Reference): This column is used for tracking, where a specific number is assigned to the customer account for daily postings.
5. Accounts Receivable and Sales: The amount due from the customer is recorded here, with accounts receivable debited and sales credited for the same amount.
6. Cost of Goods Sold and Inventory: This column records the cost price of the sold goods, where the cost of goods sold is debited, and inventory is credited for the same value.

How to Record Sales Journal

Recording a sales journal involves following a systematic process to ensure accuracy in documenting credit sales. Here’s a simple step-by-step guide:

1. Identify the Transaction

Determine if the sale was made on credit. Only credit sales (not cash sales) are recorded in the sales journal.

2. Gather Necessary Information

Collect details such as:

• Date of the transaction
• Customer’s Name
• Invoice Number
• Amount of Sale (credit sale value)
• Cost of Goods Sold (COGS) (if using a perpetual inventory system)

3. Record the Transaction in the Sales Journal

Create a journal entry for the transaction. Use the following accounts:

• Accounts Receivable (Debit): Record the amount the customer owes.
• Sales (Credit): Record the revenue earned from the sale.
• Cost of Goods Sold (Debit): Record the cost incurred for the sold goods.
• Inventory (Credit): Deduct the sold goods from inventory.

4. Post to the General Ledger

At the end of the reporting period, total the sales journal columns (e.g., Accounts Receivable, Sales) and transfer the amounts to the general ledger.

5. Verify and Adjust Entries

Double-check for errors or missing information. If there are discounts, returns, or allowances, make adjustments using appropriate journal entries (e.g., sales returns journal).

Sales Journal Example

Let’s set up an example for a sales journal in the Philippines. ABC Manufacturing is a furniture production company in the Philippines. On January 15, 2025, they recorded the following credit sales transactions in their sales journal:

1. To Juana’s Trading: Sold ₱120,000 worth of office chairs on credit. The cost of goods sold was ₱90,000. Invoice No. 001.
2. To Mateo Supplies: Delivered conference tables worth ₱200,000 on credit. The cost of goods sold was ₱150,000. Invoice No. 002.
3. To Clara Retail: Supplied wooden desks worth ₱300,000 on credit. The cost of goods sold was ₱240,000. Invoice No. 003.
4. To Global Hardware: Shipped cabinets worth ₱75,000 on credit. The cost of goods sold was ₱60,000. Invoice No. 004.

Sales Journal Entry:

Notes:

1. VAT Payable: Output VAT is calculated at 12% of the sales amount (e.g., ₱120,000 x 12% = ₱14,400 for Juana’s Trading).
2. Discount: A 2% discount is applied if the customer pays within 10 days of the invoice date. For example, Juana’s Trading receives a ₱2,400 discount (2% of ₱120,000).
3. Accounts Receivable: This reflects the total amount billed to the customer, including VAT, minus any applicable discount.
4. Inventory and COGS: Inventory is credited, and the cost of goods sold is debited based on the actual cost of the items sold.

Effortless Sales Journal Tracking with HashMicro Accounting Software

As your business grows, managing credit sales and maintaining accurate sales journals can become increasingly complex. High transaction volumes require an efficient solution to keep financial data organized and reliable.

This is where HashMicro Accounting Software can make a difference. Designed to simplify complex financial processes, it helps businesses maintain seamless records, track receivables, and generate accurate reports with minimal effort.

Whether you’re a small business or an established company, having an automated system ensures every transaction is accounted for. With unlimited users, BIR accreditation, and customizable features, it’s tailored to meet the unique needs of every company.

Let’s look at the features of HashMicro’s Accounting Software:

• Invoicing, Billing, Credit Note and Debit Note Management: Essential for recording credit sales and tracking adjustments like returns or allowances.
• Chart of Accounts Hierarchy: Important for correctly categorizing sales and associated accounts (e.g., accounts receivable, sales revenue).
• Customer Aging Report & Statement: Helps monitor outstanding receivables and overdue payments linked to sales recorded in the journal.
• Online Payment/e-Invoice: Facilitates tracking of receivables and linking invoices directly to payments for faster reconciliation.
• Comprehensive Financial Reporting: Useful for summarizing sales journal entries into reports like the trial balance, income statement, and balance sheet.
• Deposit, Prepayment and Journal Entry Reversal Tracking: Supports accurate adjustments for prepayments or corrections to sales journal entries.
• Debt Collection Management: Ensures follow-up on receivables recorded in the sales journal.

Conclusion

A sales ledger is essential for recording credit sales and maintaining accurate financial data. It organizes transactions, tracks receivables, and reduces errors, kaya mas madali ang paggawa ng financial reports. Businesses can rely on this tool to streamline their records and support effective decision-making.

HashMicro’s Accounting Software is your partner in simplifying financial processes and automating sales tracking. It offers customizable features, BIR accreditation, and unlimited users para mas swak sa pangangailangan ng negosyo mo.

Take control of your finances with HashMicro, a reliable and comprehensive accounting solution. Its seamless integration, real-time tracking, and automated reporting ensure accuracy and efficiency.

So, if this software interests you, why don’t you try the free demo now?

FAQ on Sales Journal Book

• What is the difference between a sales journal and a cash receipts journal?

  A sales journal records all credit sales transactions, while a cash receipts journal records all cash inflows, including cash sales and payments received from customers.

• How are sales returns and allowances recorded in accounting?

  Sales returns and allowances are recorded in a contra-revenue account, which reduces the total sales revenue. When a product is returned, the sales returns and allowances account is debited, and accounts receivable is credited.

• How do sales discounts impact sales book entries?

  Sales discounts are reductions in the amount due from customers who pay early, as per the credit terms. These discounts are recorded in a contra-revenue account called “Sales Discounts,” which reduces the total sales revenue reported.

• What is the purpose of posting references in an income balance?

  Posting references in a sales book are used to indicate that an entry has been posted to the appropriate ledger account. This helps in tracking and cross-referencing entries between the journal and the ledger.

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