What are sales journals in accounting?
Another widespread accounting tool is called a sales journal. The company needs this journal to track all credit sales made. After a transaction is made, all the details and results should be filled out in this journal. However, if we mention cash sales separately, they’re entered in a different journal. It’s called a cash receipts journal, and it’s used to track every sale made for cash.
How are the sales journal and sales invoices connected?
First, sales journals are needed when a company sells goods or merchandise. On the seller’s side, an invoice is prepared. This document is then sent to the customer together with the goods they buy. It’s worth mentioning that a copy should be prepared as well. After that, the original document is sent to the buyer. The copy is kept by the seller to make all the entries in the sales journal.
Understanding what sales invoice is
Here, we present you with an example of how a sales invoice looks. It may vary from one company to another, but the general information is presented there anyway.
This document is essential when you’re trying to figure out what sales journals are. Keep in mind that there is no difference between a sales invoice and a purchase invoice. They’re the same documents bearing two different names. The only difference is the following:
- The first document is prepared by the seller and serves as proof of the sale made.
- The second document is made by the buyer and serves as proof of the purchase made.
After that, the seller makes all the necessary entries to the sales journal. At the same time, the buyer does the same thing with the purchase journal. It’s necessary to record all the details of the transaction to exclude any possible complaints and objections.
How sales journal format looks
Again, the format depends on each particular company and its nature. Nonetheless, sales journal usually looks the following way:
It’s also necessary to take a look at the columns presented in the table in detail. Here is an explanation of each column:
- The date when the sale is made should be written here. As a rule, this date coincides with the one mentioned in the invoice.
- It’s used to record the name of a customer.
- The sales invoice number should be entered into this field.
- Here, you write an abbreviation to find a particular transaction you need. For instance, if the books are out of balance, you can track the transaction in a general ledger. The abbreviation for this book is “GL”. In the end, the page is added making it look like GL39.
- Here, the net amount that a company gets from customers is written.
- Here, the information concerning the cost of the goods sold is written.
Sales journal example
Below, we present to you the way a sales journal looks when it’s completely filled out. Of course, it may look different, but if we’re using the above-mentioned format, here it is.
As you can see, all the information is put and grouped together. This what makes sales journals a great example of simple accounting. Usually, this saves a lot of time and effort, especially if there’s only one person working on the books.
Sales journal advantages
There are numerous advantages to keep a sales journal. Here are the reasons why every business should have it to be successful:
- When you make a recording of any sale, you analyze the transaction once again to see if there are any mistakes.
- You put the information from a sales invoice together with other information in one journal.
- The information is given in a brief format but contains everything that you need to know about the customer and the transaction in general.
- All sales are gathered in one journal, which saves a lot of time.
This list of advantages isn’t complete, as every type of business can find what suits it more. However, these pluses are indisputable for every company.
Sales journal downsides
Along with that, some disadvantages should be mentioned:
- An accountant needs to spend more time filling out the information.
- It increases the cost of the manpower in the long run.
- A chance of making a mistake is always high, as one person can’t record all the details in one sitting.
As you can see, the list of advantages is much bigger than the one with the disadvantages. Nevertheless, they can be leveled if one tries hard enough.